Bank of Cyprus Group...Group Financial Results for the six months ended 30 June 2020 1H2020 -...

Group Financial Results for the six months ended 30 June 2020

Bank of Cyprus GroupGroup Financial ResultsFor the six months ended 30 June 2020


DISCLAIMER

2

The financial information included in this presentation is neither reviewed nor audited by the

Group’s external auditors.

The Interim Condensed Consolidated Financial Statements for the six months ended 30 June

2020 have not been audited by the Group’s external auditors.

The Group’s external auditors have conducted a review of the Interim Condensed Consolidated

Financial Statements in accordance with the International Standard on Review Engagements

2410 “Review of Interim Financial Information performed by the Independent Auditor of the Entity”

(UK & Ireland).

This financial information is presented in Euro (€) and all amounts are rounded as indicated. A

comma is used to separate thousands and a dot is used to separate decimals.

Important Notice Regarding Additional Information Contained in the Investor Presentation

The presentation for the Group Financial Results for the six months ended 30 June 2020 (the

“Presentation”), available on https://www.bankofcyprus.com/en-GB/investor-relations-new/reports-

presentations/financial-results/, includes additional financial information not presented within the

Group Financial Results Press Release (the “Press Release”), primarily relating to (i) NPE

analysis (movements by segments and customer type), (ii) rescheduled loans analysis, (iii) details

of historic restructuring activity including REMU activity, (iv) analysis of new lending, (v) Income

statement by business line, (vi) NIM and interest income analysis and (vii) Loan portfolio analysis

in accordance with the three-stages model for impairment of IFRS 9. Except in relation to any non-

IFRS measure, the financial information contained in the Investor Presentation has been prepared

in accordance with the Group’s significant accounting policies as described in the Group’s Annual

Financial Report 2019 and updated in the Interim Financial Report 2020. The Investor

Presentation should be read in conjunction with the information contained in the Press Release

and neither the financial information in the Press Release nor in the Investor Presentation

constitutes statutory financial statements prepared in accordance with International Financial

Reporting Standards.

https://www.bankofcyprus.com/en-GB/investor-relations-new/reports-presentations/financial-results/


Highlights

3


1H2020 - Highlights

4

Performance in 2Q2020

Good Capital and StrongLiquidity Position

€1.3 bn NPE reduction in 1H2020, including NPE sales

• Total Capital ratio of 17.9%2 and CET1 ratio of 14.4%2 pro forma for Helix 21

• Deposits at €16.3 bn, broadly flat qoq; significant surplus liquidity of €3.9 bn (LCR at 257%)

• New lending of €238 mn for 2Q2020 (down by 47% qoq), impacted by COVID-19 lockdown

• Underlying result of profit after tax from organic operations of €4 mn for 2Q2020

• Provisions/net loss relating to NPE sales4 of €104 mn for 2Q2020, including Helix 2 loss of €68 mn and loan credit

losses of €21 mn for potential future NPE sales

• Loss after tax of €100 mn for 2Q2020 and €126 mn for 1H2020

• €0.9 bn NPE sale (Helix 2) agreed in August 2020

• Organic NPE reduction of €137 mn in 2Q2020, despite lockdown

• Completion of €133 mn NPE sale (Velocity 2) in 2Q2020

• NPEs reduced to €2.6 bn (€1.1 bn net), pro forma for Helix 21

• Gross NPE ratio reduced to 22% (11% net) and coverage maintained at 58%, pro forma for Helix 21

(1) Calculations on a pro forma basis assume completion of the transaction

(2) Allowing for IFRS 9 transitional arrangements

(3) Excluding Special Levy and contributions to SRF and DGF

(4) Including restructuring expenses

Operational efficiency• Cost to income ratio3 at 57% for 2Q2020, broadly flat on prior quarter

• Total operating expenses3 reduced to €81 mn for 2Q2020, down by 18% yoy and by 3% qoq

• Increased usage of digital channels sustained post lockdown

COVID-19 • Confirmed COVID-19 cases remain amongst the lowest within EU, despite relaxation of measures

• Continue to support colleagues, customers affected by COVID-19 and wider Cypriot economy

• Nascent signs of economic recovery post lockdown


€0.9 bn NPE sale agreed, reducing NPE ratio to 22%1

5

Helix 2

• Agreement for the sale of €886 mn NPEs

• Completion expected in 1H2021

• Gross consideration of 46% of gross book value and 29% of

contractual balance3, payable in cash, of which 65% is deferred

and paid in instalments over 48 months from completion,

without any conditions attached

• The consideration can be increased through an earnout

arrangement, depending on the performance of the Helix 2

portfolio

• NPEs reduced by 26% to €2.6 bn1

• NPE ratio reduced by 6 p.p. to 22%1

• Net NPEs reduced to €1.1 bn1 (-89%1 since peak)

• Loss of €68 mn recorded in 1H2020

• -36 bps CET1 capital impact at completion

• +10 bps CET1 capital impact upon full payment of deferred

consideration

Jun 2020 pro forma for Helix 2

Jun 2020

3.5

2.6

-26%

28%

22%

Jun 2020 Jun 2020 pro forma for Helix 2

-6 p.p.

Jun 2020post DPP payment

Mar 2020 Jun 2020

14.3% 14.4%14.3%

Jun 2020 pro forma for Helix 2

14.9%

26% NPE reduction 6 p.p. reduction in NPE ratio

CET1 ratio at 14.4%2 pro forma for Helix 21

NPEs (€ bn) NPE ratio



(3) As at 30 September 2019

(4) Deferred Purchase Price

1

1

1

Total CET1 impact +10 bps:

-48 bps already included in 2Q2020

+12 bps on completion

+46 bps upon full payment of deferred

consideration

4


Accelerated de-risking: NPE sales of €3.8 bn since 2H2018

6

Sale of €2.7 bn NPEs

• Mainly secured large

Corporate and SME NPEs

• 48 cents on GBV

• c.60 bps capital accretive1

• Bank retained €45 mn of senior bond

• Completed in 2Q2019

Sale of €133 mn NPEs

• Retail unsecured NPEs

• Capital neutral1

• Completed in 2Q2020


•Retail unsecured NPEs

•Capital neutral1

•Completed in 2Q2019


•Mainly secured Retail and

SME NPEs

•46 cents on GBV

• -36 bps capital impact on

completion

•+10 bps capital impact

upon full repayment of

deferred consideration

•Completion expected in

1H2021

Continue to assess acceleration of de-risking through additional NPE sales in the future

Helix 1

✓Completed

Velocity 1

✓Completed

Velocity 2

✓Completed

Helix 2

✓SPA Signed

(1) On completion


>€12 bn or 83% NPE reduction since peak

7

0

20

40

60

8063% 62%

Dec 14 Dec 16

53% 50%

Dec 17Dec 15

42%

55% 47%

32%

47%

30%

Dec 18

30%

17%

Dec 19

29%

15%

Mar 20

28%

14%

Jun 20

22%

11%

Jun 20pro forma for Helix 2

-41 p.p.

Gross NPE ratio Net NPE ratio

• €12.4 bn or 83% NPE reduction since peak

✓ c.€3.8 bn through trades

✓ c.€8.6 bn organic

• NPE ratio reduced to 22% pro forma for Helix 21

(11% on a net basis)

• Helix 2 reduced NPE ratio by 6 p.p.

• 41 p.p. reduction since peak

9.9

1.1

Organic

(3.8)5.1

15.0

Allowance for Expected Loan

Credit Losses

Net NPEs

1.5

31 Dec 14 NPE trades

(8.6)

30 Jun 2020

pro forma for Helix 2

2.6

-€12.4 bn

NPEs (€ bn)

Gross NPE ratio reduced to 22%; 11% on a net basis pro forma for Helix 21


1

1


4.3

2.2 2.2

3.4

3.4

0.3 0.4 1.6

Europe Cyprus

COVID-19 remains contained despite relaxation of measures

8

(1) Based on information up to 26 August 2020 provided by https://www.ecdc.europa.eu/en/publications-data/download-todays-data-geographic-distribution-covid-19-cases-worldwide

14 day moving average of confirmed new cases per 100,000 population1

4

Gradual relaxation of measures

1 Opening of retail shops and gradual return of students to schools

5 Opening of cafes and restaurants

6 Opening of airports and ports

Lockdown period

Fast escalation of measures

to contain pandemic spread

Travel ban & country lockdown

Night curfew introduced

All schools closed

2

7 Mandatory use of masks in indoor crowded spaces

• Remain vigilant to prevent a second wave of infection

as restrictive measures are relaxed through extensive

COVID-19 sample testing

• Introduction of specific measures in July 2020, for the

management of the recent increase in COVID-19 cases,

following the relaxation of the travelling restrictions

3

Lifting of restrictions in a gradual and controlled manner

1 32 4 5 6 7

https://www.ecdc.europa.eu/en/publications-data/download-todays-data-geographic-distribution-covid-19-cases-worldwide


Cypriot economy: nascent signs of recovery appear post lockdown

9

Economic Sentiment starting to improve post lockdown

Source: Cyprus Statistical Service, Economics Research centre of the University of Cyprus and Eurostat

(1) GDP projections under the base scenario of: the Ministry of Finance, the EBRD, the European Commission and the Economics Research centre of the University of Cyprus

Tourism arrivals (mn) impacted by COVID-19 lockdown

0.55

AprFebJan Mar May Jun Jul

0.06

-85% yoy

2019 2020

-8.7%

6.0%

Cypriot economy recorded a drop of 11.9% in 2Q2020 vs 15.0% decline in Euro Area

• Cypriot economy contracted by 11.9% in 2Q2020, reflecting COVID-

19 lockdown

• Restart of the economy as of early May 2020, post lockdown

• Unprecedent policy response to mitigate COVID-19 impact

• Economic sentiment index improved since May 2020, driven by

improvement in confidence in nearly all sectors as well as

improvement in consumer confidence

• Weak international summer tourism arrivals, although partly offset by

domestic tourism

-15.0%

1Q2020

3.2%

1.0%

4Q2020

0.8%

-3.1% -11.9%

2Q2020 2020E12021E1

Cyprus Euro Area

40

60

80

100

120

Fe

b-1

4

Ma

y-1

4

Au

g-1

4

Nov-1

4

Fe

b-1

5

Ma

y-1

5

Au

g-1

5

Nov-1

5

Fe

b-1

6

Ma

y-1

6

Au

g-1

6

Nov-1

6

Fe

b-1

7

Ma

y-1

7

Au

g-1

7

Nov-1

7

Fe

b-1

8

Ma

y-1

8

Au

g-1

8

Nov-1

8

Fe

b-1

9

Ma

y-1

9

Au

g-1

9

Nov-1

9

Fe

b-2

0

Ma

y-2

0

Au

g-2

0

-6.0% to -7.4%

5.0% to 6.1%


Timely and strong response by the European and the Cypriot authorities

10

1) The Cyprus Enterprise Fund

Government measures include:

1. Subsidy of interest rate of new Business Loans (€180 mn)

• Subsidy of interest rate for new loans to self employed and businesses

• Subsidy of interest rate for 4 years

2. Subsidy of interest rate of new Housing Loans (€45 mn)

• Subsidy of interest for 4 years

3. Financing of SMEs through CYPEF1 (€800 mn)

• 50%-50% risk sharing between the Government and the banks

4. Government Guarantee to EIB (€1.0 bn)

• Government additional funding of €500 mn to eligible businesses

For more details on the government measures, pleaser refer to slides 46-47

Comprehensive and far reaching measures to support performing businesses and the wider economy

European Authorities measures-Implications for Cyprus

1. EU Recovery Fund (€2.7 bn)

• Cyprus expects to receive €1.3 bn in grants during the period

2021-23 and additional loans up to €1.4 bn

• The exact amounts will depend on the finalisation of the

allocation criteria and on the government’s national plan that will

be submitted to the European Commission

2. Pan-European Guarantee Fund (PEGF) (€300-€400 mn)

• Liquidity support to eligible businesses through the PEGF of EIB

• Guarantee to the banks of up to 80%

3. EU SURE Programme (€479 mn)

• Financial assistance in the form of loans supporting member

states in their employment preservation schemes

4. Access to ESM’s Pandemic Crisis Support through the Enhanced

Conditions Credit Line, for c.€440 mn (2% of GDP)


Supporting customers and society though COVID-19

11

Loan moratorium

• Payment holidays until end of

2020 (capital & interest) for

customers with arrears <30 days

as at 29 Feb 2020

• €6.0 bn (>25k customers

approved)

- €2.1 bn private individuals

- €3.9 bn businesses

• €689 mn new loans in 1H2020

• Participation in the governmental

schemes for the subsidy of

interest rate to private individuals

and businesses

• Strong pipeline of over €65 mn

for new housing loans, as at 21

August 2020

• Support to ministries, agencies

and authorities in the fight

against COVID-19

• Donations of c.€0.5 mn for the

fight of the pandemic:

• c.€220K for the purchase of

medical equipment

• c.€260K for the support of

educational activities

• Grants covering cost of

repatriation flights

New lending SupportCY

• All branches operating as usual

post lockdown

• Increased usage of digital

channels sustained post

lockdown

• 72% of customers currently

digitally engaged1 (vs 66% in

1H2019)

• 83% of total transactions2 are

performed through digital

channels (vs 75% in 1H2019)

Maintaining Operational

Resilience

(1) This is the ratio of digitally engaged individual customers to the total number of individual customers. Digitally engaged customers are the individuals who use the digital channels of the Bank (mobile banking app, browser and ATMs) to perform banking transactions, as well as digital

enablers such as a bank-issued card to perform online card purchases

(2) This is the ratio of the number of digital transactions performed by individuals and legal entity customers to the total number of transactions. Transactions include deposits, withdrawals, internal and external transfers. Digital channels include mobile, browser and ATMs


Continue to support customers through payment deferrals

12

€ bn# customers

approved

Gross Loans

under

moratorium

30 Jun 2020

% of

Gross loans

(excluding

legacy)1

%

with ≥1 payment

by 30 June 2020

Private

Individuals20,427 2.09 53% 25%

Businesses 4,627 3.91 76% 9%

Total 25,054 6.00 66% 15%

Payment deferrals granted to 25K customers affecting €6.00 bn gross loans

(1) Gross loans as at 30 June 2020: Corporate (incl. IB and W&M and Global Corporate),

SME, Retail, Insurance and H/O

(2) Unlikely to pay criteria

COVID-19 moratorium until the end of 2020, as per

government measures

• Application period ended 30 June 2020

• Moratorium period of up to Dec 2020 to address

seasonality of the Cypriot economy

• Capital plus interest; Interest continues to accrue

• COVID-19 moratorium does not trigger automatic

reclassification due to forbearance

• Continue to monitor the creditworthiness of

customers who applied for the loan moratorium

Businesses

• Individual assessment of businesses was initiated in May 2020, with an initial focus on high

risk customers

• Largest 30 businesses under moratorium amount to €1.7 bn or nearly half of all business

loans under moratorium; over 70% has been reviewed without triggering a change in UTP2

• 9% of businesses under moratorium paid at least 1 instalment, until 30 June 2020

Private Individuals

• Individual assessments of private individuals under moratorium has also commenced with

priority to individuals with low credit scoring and employed in high risk industries, such as

tourism

• One quarter of private individuals under moratorium paid at least 1 instalment until 30 June

2020


Well diversified loan portfolio; close monitoring and set up of strategies to prevent further asset quality deterioration

13

Gross loans (excluding legacy)1 by business sector of €9.15 bn

€ bn

(1) Gross loans as at 30 June 2020 of Corporate (incl. IB and W&M and Global Corporate), SME, Retail, Insurance and H/O

14%

16%

15%

12%

Private individuals

43%

Low

Moderate

Medium

High

€9.15 bn

• High Impact: (12%)

• Tourism (Hotels & Catering)

• Medium Impact: (15%)

• Trade

• Manufacturing

• Moderate Impact: (16%)

• Construction

• Transportation and storage

• Low: (14%)

• Real Estate

• Education

• Health

• Private individuals (43%)

• Refer to slide 14

Breakdown by COVID-19 impact assessment on business sectors

Construction

Trade

PrivateIndividuals

Hotels & Catering

Manufacturing

Real Estate

Other sectors

Professional & Other services

3.97

1.06

0.53

1.02

1.00

0.64

0.60

0.33


Private individuals loan portfolio, highly collateralised

14

Private Individuals: €3.97 bn

1) Loan to Value (LTV) is calculated as the Gross IFRS Balance to the indexed market value of the property. Under Pillar 3 disclosure, LTV is calculated as the Gross IFRS Balance to the indexed market value of collateral. Collateral takes into consideration the mortgage amount

registered in the land registry plus legal interest from registration date to the reference date

• Housing performing loans: €3.28 bn

• Low LTV1 housing portfolio

• 65% of portfolio with LTV1<60%

• Only 15% of portfolio with LTV1>80%

• Other: €0.69 bn

• 61% secured portfolio

• of which 59% with property

• of which 41% with other type of collateral

LTV1 Housing

€3.28 bn

Other

€0.69 bn

< 60% 65% 29%

60%-80% 20% 5%

80-100% 7% 5%

>100% 8% 61%

83%

17%

Housing

Other

12%

7%Other

81%

Personal

Housing

Payment deferrals: €2.09 bn

c.25% with ≥1 payment by

30 June 2020


Business portfolio well diversified, with high quality collateral

15

Breakdown, by

Covid-19 impact


(2) Facilities/limits approved in the reporting period

(3) Loan to Value (LTV) is calculated as the Gross IFRS Balance to the indexed market value of the property. Under Pillar 3 disclosures LTV is calculated as the Gross IFRS Balance to the indexed market value of collateral. Collateral takes into consideration the mortgage amount

registered in the land registry plus legal interest from registration date to the reference date

25%

28%

26%

21%

€5.18 bn

• High Impact: (21%)

• Tourism (Hotels &

Catering)

• Medium Impact:(26%)

• Trade

• Manufacturing

• Moderate Impact: (28%)

• Construction

• Transportation and

storage

• Low: (25%)

• Real Estate

• Education

• Health

Payment deferrals

• High quality origination via prudent underwriting standards

• Strong assessment of repayment capability

• Strict origination standards

• Effective foreclosure law in place, following the amendments

in recent years

• 98% of new exposures2 since 2016 were performing at the start

of the moratorium

• 89% of portfolio secured

• of which 79% with property

• of which 21% other type of collateral

• Low LTV3 business portfolio; 72% of the portfolio with LTV3<80%

LTV3 High Medium Moderate Low Total

< 80% 94% 58% 67% 73% 72%

>80% 6% 42% 33% 27% 28%

Total 100% 100% 100% 100% 100%

25%

29%

20%

26%

€3.91 bn

Business gross loans

(excluding Legacy)1

• 9% with ≥1 payment by

30 June 2020


Portfolio exposure to businesses most impacted by COVID-19

16

Tourism: €1.06 bn

Hotels & Catering31 Mar 2020

€ bn

30 Jun 2020

€ bn

% of

portfolio

Food services 0.06 0.06 5%

Accommodation 0.97 1.00 95%

Total 1.03 1.06 100%

Unutilised Liquidity1 0.34 0.31

- of which deposits 0.28 0.26 25%

• Majority of Accommodation customers entered the crisis with

significant liquidity, following strong performance in recent years

• c.€1.0 bn or 95% under payment deferrals

• Payroll subsidy by the government of up to 60% for hotels whose

turnover was reduced by more than 35%-40%

Trade31 Mar 2020

€ bn

30 Jun 2020

€ bn

% of

portfolio

Supermarkets, pharmacies and

other essential retail businesses0.30 0.29 29%

All other 0.74 0.71 71%

Total 1.04 1.00 100%

Unutilised Liquidity1 0.83 0.88

- of which deposits 0.53 0.56 56%

Trade: €1.00 bn

• c.29% tied up to lower risk essential retail services, not materially

impacted by COVID-19

• €0.6 bn or 59% under for payment deferrals

(1) Unutilised overdraft amounts and deposits


66 47 45 42 6727

81 99 90 9679

69

7947 43 42

62

302325

254214

225

100

35 30

59

4918

1Q2019 2Q2019

25

3Q2019 1Q20204Q2019

17

2Q2020

563548

491

443 451

238

-47%

(1) New disbursements in the reporting period including the average YTD change (if positive) for overdraft facilities

(2) Facilities/limits approved in the reporting period

(3) Gross loans as at 30 June 2020: Corporate (incl. IB and W&M and Global Corporate), SME, Retail, Insurance

and H/O

New lending1 at €238 mn in 2Q2020, reflecting COVID-19 lockdown

17

98% of new exposures2 in Cyprus since 2016 were performing at the

start of the moratoriumNon-legacy gross loans3 by business activity

€ mn

3.95

Other sectors

PrivateIndividuals

Manufacturing

Trade

Professional & Other services

Hotels & Catering

Real Estate

Construction

3.97

0.60

1.06

1.03

1.00

1.04

1.02

1.01

0.60

0.64

0.65

0.53

0.53

0.33

0.34

Jun 2020 Mar 2020

€ bn

0.6%

3.4%

-4.5%

0.8%

-0.7%

-1.1%

0.1%

-2.2%

% change qoq

• Following the outbreak of COVID-19, new lending is focused on supporting the

Cypriot economy

• Strong market share of 52.6% in new housing loans in 1H2020

• High quality origination via prudent underwriting standards

• New lending demand expected to pick up in 2H2020, especially for housing

loans in the context of the government scheme for interest rate subsidy

• Strong pipeline of over €65 mn for new housing loans, as at 21 August 2020

Shipping & Syndicated loans

SME

Corporate

Retail other

Retail Housing


Usage of digital channels sustained post lockdown

18



Digital Transformation Programme

• Digital Transformation Programme that started in 2017 beginning to

clearly deliver an improved customer experience

• Customers’ reorientation towards digital channels:

• Increase in active digital users by 18% since Jun 2019

• 72% of customers currently digitally engaged1(vs 66% in 1H2019)

• Awarded Best Consumer Digital Bank in Cyprus for 2019 by

Global Finance

31%22% 23% 25% 25% 25%

34%

30%32%

35% 37% 37%

35%

48% 45%40% 38% 38%

Jul 2020Mar 2020 Apr 2020 Jun 20208-31 May 2020

1-7 May 2020

OnlineBanking

ATM

Branch

Channel Usage (% of volume of transactions) since COVID-19 outbreak

Lockdown period Gradual relaxation of

measures


Sustained Progress on Digital Transformation

19

Digitally Engaged Customers (Individuals)1

Jun 20: 71%

Apr 20: 70%

Jul 19: 67%

Jul 18: 62%

Digital Transactions2 Ratio (Legal Entities)

Jun 20: 53%

Apr 20: 60%

Jul 19: 30%

Jul 18: 28%

Jul 20: 83%

Digital Transactions2 Ratio (Total Portfolio) Average mobile logins per month

Jun 20: 19.8x

Apr 20: 21.1x

Jul 19: 13.3x

Jul 18: 11.8x

Jun 20: 83%

Apr 20: 85%

Jul 19: 73%

Jul 18: 69%

Jul 20: 72% Jul 20: 52%

Jul 20: 18.5x



(2) This is the ratio of the number of digital transactions performed by individuals and legal entity customers to the total number of transactions. Transactions include deposits, withdrawals, internal and external transfers. Digital channels include mobile, browser and ATMs


Capital and Liquidity

20


0.5%

Other NPE sales related

losses

Amendments to

capital regulations

(0.5%)

Helix 2 CET1 30 Jun2020

CET1 31 Mar2020

Helix 2

1.8%

AT1

14.4%1.7%

T2 Total capital ratio 30 Jun 2020 pro forma for Helix 2

Loan credit losses &

other impairments

Operatingprofit

RWAs

0.2%

CET1 30 Jun2020 pro forma for

Helix 2

0.4% (0.3%) (0.1%) (0.2%)

Other

14.3% 14.3%

17.9%

0.1%

CET1 at 14.4% pro forma for Helix 25

21

min OCR (SREP) requirement for 2020 post ECB Announcement 4

9.7%

14.5%

P&L

Impact

Release

of

RWAs

-36 bps

9.7%

• Helix 2 reduces capital by 36 bps on completion

• c.40 bps organic capital generation from operating profitability

• Loan credit losses and other impairments3 reduced capital by

c.30 bps

• c.50 bps capital benefit from amendments to capital regulations

• Flexibility to operate below Capital Conservation Buffer (CCB)

and P2G, at least until end of 2022

1 1,2

1,2,51,5

3

• Amendments in capital regulations in June 2020

Benefit recorded in 2Q2020

• SME factor: c.+ 40 bps

• Extension of IFRS 9 transitional arrangements: c.+10 bps

Benefit not yet recorded

• Add back to CET1 of unrealised losses on government debt : c.+10 bps

• No full deduction of software assets from CET1: c.+10 bps

• Helix 2 benefit upon full payment of deferred consideration: +46 bps

• Onsite inspection by the SSM on the stock of REMU properties completed

• Findings relating to a possible prudential charge of up to c.50 bps, under review by SSM

• Size and timing of impact, if any, uncertain

+20

bps

1. Allowing for IFRS 9 transitional arrangements

2. The CET1 ratio for 30 June 2020, including the full impact of IFRS 9 amounted to 12.6% and 12.7% pro forma for Helix 2

3. Loan credit losses and other impairments include the net change of the prudential charges relating to specific credits and other items

4. OCR(SREP)- Overall Capital Requirement comprises the Total SREP Capital Requirement (Pillar 1 and Pillar 2 Requirement) plus

combined buffer requirements (capital conservation buffer, countercyclical buffer and systemic buffers)

5. Calculations on a pro forma basis assume completion of the transaction

+50

bps


RWA intensity1 reduced to 55%, pro forma for Helix 23

RWA intensity1 reduced to 55% in 2Q2020, pro forma for Helix 23

22

• RWA intensity1 reduced to 56%, down 6 p.p. qoq,

on lower RWAs and higher Total Assets,

following €1 bn utilisation of TLTRO III

• RWA intensity1 decreased to 55% pro forma for

Helix 23, as the RWA release will be largely offset

by the RWA of the Deferred Purchase Price2

• Upon payment of the DPP2, RWA intensity will

decrease to 54%

Dec 18

56%

62%

Dec 14

85%

Jun 20

pro forma

Helix 2

Dec 19Dec 15 Dec 16 Jun 20Mar 20Dec 17

85% 85%

73%70%

61%

55% -6 p.p.

RWAs reduced by >€10 bn since peak 2014

RWAs Dec 19 Mar 20 Jun 20 Helix 2Helix 2

DPP2

Jun 20

Pro forma for

Helix 23

€ mn 12,890 12,599 11,960 (370) 258 11,848

(1) Risk Weighted Assets over Total Assets

(2) Deferred Purchase Price: 65%of consideration without any conditions attached, payable in three broadly equal instalments over 48 months from completion


3

• c.€640 mn RWA relief qoq

- c.€380 mn (SME factor)

- c.€260 mn balance sheet de-risking


(1) Servicing exclusively international activity companies registered in Cyprus and abroad and not residents

(2) Origin is defined as the country of the passport of the Ultimate Beneficial Owner

(3) The NSFR has not yet been introduced. The NSFR is calculated as the amount of “available stable funding” (ASF) relative to the amount

of “required stable funding” (RSF), on the basis of Basel III standards. Its calculation is a SREP requirement. The EBA NSFR will be

enforced as a regulatory ratio under CRR II in 2021

Deposits at €16.3 bn, broadly flat qoq

23

€ bn

Liquidity ratioMinimum

required30 Jun 2020 Surplus

LCR (Group) 100% 257% €3,949 mn

NSFR3 100% 134% €4,248 mn

1

16.69

3.70

13.14 12.98

Dec 18 Mar 20

3.46

Jun 19

12.92

3.49

Sep 19

3.54

13.15

Dec 19

3.31

12.94

3.32

12.98

Jun 20

16.84 16.38 16.47 16.25 16.30

Cyprus IBU Cyprus non-IBU

67%

20%

3%

4%6%Cyprus

Other EU

Russia

Other European countries, excl. Russia

Other countries

Cyprus deposits by passport origin2

• Significant surplus liquidity of €3.9 bn, up 32% qoq, reflecting €1 bn utilisation

of TLTRO III

• Strong deposit market share of 35.0%

• Flexibility to operate below 100% LCR limit at least until end 2021

Significant surplus liquidity of €3.9 bn


0.46

31 March 2020

Non-legacy net loans

REMU properties

Legacy net loans

30 June 2020

Other assets(including HFS)

Securities

Due from banks

2.00

Cash and balanceswith Central Banks

20.43

21.37

1.46

8.93

4.40

1.95

8.92

1.68

1.48

1.54

5.28

0.62

1.17

1.91

(1) AIEA: Average Interest earning assets. Please refer to slide 75 for the definition

(2) Debt securities, treasury bills and equity investments


Balance sheet composition

24

Total assets

51%

9%

40%

Non- legacy

net loans

Legacy

net loans

Liquids

31 March 2020

1.28

0.390.26

Equity

0.41

Other

16.30

0.26

30 June 2020

WholesaleFunding from Central Bank

2.24

Due to banks

Customerdeposits

20.43

21.37

16.25

1.29

1.00

2.12

Total equity & liabilities

AIEA Mix

2Q2020

AIEA:

€17.7 bn

€ bn € bn

1

1

2

3

3


Profitability

25


(1) The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under ‘Provisions/net loss relating to NPE sales, including restructuring expenses’ since they are considered one-off items

(2) ‘Provisions/net loss relating to NPE sales including restructuring expenses’ refer to the net loss on transactions completed during each period, net loan credit losses on transactions under consideration and for potential further sales at each reporting date, as well as the restructuring

costs relating to these trades

Income Statement

26

€ mn 1H2020 1H20191 2Q2020 1Q20201,2 qoq% yoy%

Net Interest Income 168 170 83 85 -2% -1%

Non interest income 120 163 60 60 0% -26%

Total income 288 333 143 145 -1% -13%

Total expenses (180) (208) (87) (93) -6% -14%

Operating profit 108 125 56 52 7% -13%

Loan credit losses (87) (87) (23) (64) -63% 1%

Impairments of other financial and non-financial assets (29) (10) (25) (4) - -

(Provisions)/reversal of provisions for litigation, claims,

regulatory and other matters(4) 3 (2) (2) 10% -

Total loan credit losses, impairments and provisions (120) (94) (50) (70) -28% 27%

Advisory and other restructuring costs-organic (6) (10) (3) (3) 0% -39%

(Loss)/profit after tax-Organic (attributable to the

owners)(19) 19 4 (23) - -

Provisions/net loss relating to NPE sales, including

restructuring expenses2 (107) (2) (104) (3) - -

Net loss of remeasurement of investment in associate

(CNP) classified as held for sale- (21) - - - -

Reversal of impairment of DTA and impairment of other

tax receivables- 101 - - - -

(Loss)/profit after tax-attributable to owners (126) 97 (100) (26) - -

Net Interest margin (annualised) 1.90% 1.88% 1.88% 1.95% -7 bps +2 bps

Cost to income ratio 62% 63% 61% 64% -3 p.p. -1 p.p.

Cost to income ratio adjusted for the

special levy and contributions to SRF and DGF 57% 59% 57% 58% -1 p.p. -2 p.p.

Cost of Risk (annualised) 1.39% 1.34% 0.76% 2.00% -124 bps +5 bps

EPS – Organic (€ cent) -4.3 4.0 0.8 -5.1 +5.9 -8.3

• NII decreased to €83 mn in 2Q2020, mainly due

to higher cash collections on interest not

previously recognized in 1Q2020, offset by lower

cost of deposits

• Non-interest income of €60 mn for 2Q2020, flat

qoq

• Total expenses reduced to €87 mn in 2Q2020,

compared to €93 mn in 1Q2020, due to COVID-

19 related lower staff costs and seasonality of

Deferred Guarantee Fund contribution

• C/I ratio at 57%, broadly flat qoq

• Loan credit losses of €23 mn in 2Q2020,

reflecting cost of risk of 76 bps

• Other impairments of €25 mn for 2Q2020, on

specific, large, illiquid REMU properties

• Provisions/net loss relating to NPE sales of €104

mn for 2Q2020, including Helix 2 loss of €68 mn

and loan credit losses of €21 mn for potential

future NPE sales

• Profit after tax-organic of €4 mn in 2Q2020

• Loss after tax of €100 mn for 2Q2020 and €126

mn for 1H2020


(1) Cash, placements with banks, balances with central banks and bonds

(2) Other includes funding from central banks and deposits by banks and repurchase agreements. For further details, please see slide 67

(3) Effective yield of liquid assets: Interest income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds)

(4) Effective yield of cost of funding: Interest expense of all interest bearing liabilities after hedging, over average interest bearing liabilities (customer deposits, funding from the central bank, interbank funding, subordinated liabilities)

Drivers of NIM

27

Composition of NII Effective yield on assets & cost of funding

74 76 75 72 75

27 2923 24 18

6

3Q2019

5

2Q2019

110

Non-Legacy

4

4Q2019

Liquids4

1Q2020

2

2Q2020

Legacy

107102 100

95

-3 -3 -3

-3 -3

-6 -6-6 -6 -6

-10 -8-8

-5-3

Net derivative -1-2-2

Subordinated

loan stock

-2 -1Other

Customer

deposits-15

-22-20

-18

-12

335 338 330 324 338

530576

485

560

452

17 7 6 8 4

-43 -39 -38 -30 -25

2Q2019 3Q2019 4Q2019 1Q2020 2Q2020

Non-Legacy Legacy Liquids Cost of funding

2

43

189 199 187 195NIM

(bps)85 90 84 85NII (€ mn)

1

83 188• €5 mn annual potential NII benefit from the

take up of €1 bn TLTRO III

• Challenging interest rate outlook continues to

put pressure on the effective yield of liquids

Loan yields:

• Non-Legacy book yields remain under

pressure mainly due to the continued lower

interest rate environment and intense

competition pressure

• Despite competitive pressures, efforts to

improve credit spreads are underway

• Higher-yielding, higher-risk legacy loans are

reducing as we successfully exit NPEs

• Legacy book yields remain volatile

Cost of funding:

• The reduction of cost of deposits continues

• Cost of deposits reduced by 3 bps in 2Q2020

and by 68 bps since year end 2017


38 36 39 3833

1812

1611 18

12

106 10

24

14 11

10

1Q20202Q2019

(1)

3Q2019 4Q2019

1

60

92

2Q2020

72 72

60

(1) Net FX gains/(losses & Net gains/(losses) on financial instruments, and other income

(2) Gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties


Non interest income flat qoq, despite COVID-19 lockdown

28

Analysis of Non Interest Income (€ mn) – Quarterly

48 5556

Net FX and other income Insurance income net of insurance claimsREMU Net fee & commission Recurring income1 2

Net fee & Commission % of total income

22% 23% 25% 26% 23%

49

3

51

Net fee &

commission (€ mn)

1Q2020 2Q2020

Transactional fees 16 12

Non transactional

fees

22 21

Total 38 33

• Net fee and commission income of €33 mn for

2Q2020, down 13% qoq, negatively impacted by

COVID-19 lockdown

• Transactional fees of €12 mn for 2Q2020, down

22% qoq, mainly due to lower volume of

transactions; transactional fee volumes expected to

recover to pre COVID-19 levels, as the Cypriot

economy continues to recover

• Non transactional fees of €21 mn for 2Q2020, down

5% qoq due to the reduced Project Helix servicing

fee as a result of the transfer of c.100 employees to

the buyer in 1Q2020

• Net Insurance income of €18 mn for 2Q2020,

compared to €11 mn for 1Q2020, primarily due to

the change in the valuation rate and lower motor

vehicle insurance claims

• Recurring income of €51 mn for 2Q2020, compared

to €49 mn in 1Q2020, as the higher Net insurance

income offset the reduction in Net fees and

commission income

• Introduction of liquidity fees to a broader group of

corporate customers that was delayed due to

COVID-19, is under consideration, once market

conditions allow this

• Fees and commission charges review underway


Recurring fees from insurance business

29

• Leading life insurer in Cyprus

• 24% market share2 (Life & Health regular)

• Gross Written Premiums (GWP) up 4% yoy

Product Mix by premium

• Leading non-life insurer in Cyprus

• 17.7% market share2 (excl. motor)

• GWP down 1% yoy

Product Mix by premium

GWP evolution (€ mn) GWP evolution (€ mn) Group Insurance income net of claims (€ mn)

57 59 62

1H2018 1H2019 1H2020

+5% +4%

26 27 26

1H2018 1H2019 1H2020

+4% -1%

25 30 29

1Q2018 1H2019 1H2020

• Comprehensive insurance business package

providing coverage for all financial needs

• Stable contributor to the Bank’s profitability

• Well positioned for growth over medium term

Eurolife

key metrics

1H2020

GWP (€ mn) 62

GWP Investments & Pensions

(€ mn)

6

PAT (€ mn) 9

AUM1 (€ mn) 447

61%21%

18%Unit-linked

Accident &Health

Traditional Life52%

29%

13%

6%

Motor

Property

Liability

Other

GIC

key metrics

1H2020

GWP (€ mn) 26

PAT (€ mn) 6

Contribution

to BOCH

% of total

1H2020

Non interest income 24%

(1) Assets under management

(2) Data based on statistics published on IAC website as at 31 December 2019


Total Operating Expenses down by 18% yoy

30

Cost to Income Ratio (C/I ratio)1

Total operating expenses (€ mn)

FY2019 1Q2020FY2018 1H2019 1H20202Q2020

56%59% 59% 58% 57% 57%

56 56 55 53 49 47

41 43 38 4335 34

8496

1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020

97 99 9381

-18% yoy

Other operating expenses Staff costs

6 6 6 7 96

2Q20201Q20201Q2019 3Q20192Q2019 4Q2019

Special Levy and contributions to SRF and DGF (€ mn)

• Cost to income ratio1 at 57%, broadly flat qoq

• Total operating expenses of €81 mn for 2Q2020, down 3% qoq and

18% yoy

• Staff costs reduced to €47 mn in 2Q2020 relating to mostly one-off cost

savings from special annual leaves to vulnerable groups and the

suspension of the NHS contribution during the COVID-19 lockdown

• Operating expenses for 2Q2020 amounted to €34 mn, broadly flat qoq

• Special levy and contributions to SRF and DGF for 2Q2020 reduced to

€6 mn, due to the seasonality of Deposit Guarantee Fund (DGF)

contribution2

(1) Excluding Special Levy and contributions to SRF and DGF


2


Asset Quality

31


Dec

2019

Mar

2020

Jun

2020

Jun2020

pro forma for

Helix 21

Stage 1 1.2% 1.5% 1.5% 1.5%

Stage 2 2.5% 2.8% 2.7% 2.5%

Stage 3 50.6% 52.0% 54.4% 52.1%

3,468

Dec 19

Stage 3

Stage 1

Mar 20

6,673


2,582

Jun 20

Stage 2 1,998

12,822 12,709 12,491

3,880

11,593

1,733

7,209 7,025

3,738

2,298

1,989

7,022

Gross loans and coverage by IFRS 9 staging

32

Gross loans by IFRS 9 stage (€ mn)

101104

104

2,096 2,043

1,344

Dec 19

9044

1,962

63

49


2,109

1,497

54

1,8851,945

Jun 20Mar 20

Allowance for expected loan credit losses (€ mn) Coverage ratio

• Migration of c.€360 mn gross loans from Stage 2 to Stage 1 during 2Q2020, due to enriched data availability

• Coverage for Stage 3 loans maintained post Helix 2 (52.1%)

• Individual assessment of businesses under moratorium was initiated in May 2020, with an initial focus on high risk customers

• Largest 30 businesses under moratorium amount to €1.7 bn or nearly half of all business loans under moratorium; over 70% has been reviewed

without triggering a change in UTP

• Individual assessments of private individuals under moratorium has also commenced with priority to individuals with low credit scoring and

employed in high risk industries, such as tourism


1 1

61%

17%

22%

% of gross loans


Cost of risk1 reduced to 76 bps for 2Q2020

33

(1) Loan credit losses on customer loans including off-balance sheet exposures, net of gains/(losses) on derecognition of loans and advances to customers and change in expected cash flows over average gross loans

• Cost of risk of 139 bps for 1H2020, of which 59 bps (€38 mn) reflect the initial

impact of IFRS 9 Forward Looking Information (FLI) driven by deterioration of

macroeconomic outlook recognised in 1H2020

• COVID-19 related charge of 30 bps (€10 mn) in 2Q2020

• Cost of risk of 105 bps for 2Q2020, when excluding one-off reversal of 59 bps

and COVID-19 related charge of 30 bps

• In addition,

• Helix 2 loss of €68 mn and loan credit losses of €21 mn for potential

future NPE sales recorded in 2Q2020

• Other impairments of €25 mn on specific, large, illiquid REMU properties

recorded in 2Q2020

• Interest on Net NPEs not received in cash, fully provided (€18 mn in 2Q2020)

bps 123 90 89 200 76

FY2017FY2014 FY2016FY2015

2.80%

FY2018 FY2019

0.80%

1H2020

0.59%

4.30%

1.70%

4.00%

1.00% 1.12%1.39%

Mainly impact of

deterioration of

macroeconomic

outlook in 1H2020

29 48

116

5829 40

56

55

5858 53

3088

7

2Q2019

7

3Q2019 4Q2019

2

5

14

1Q2020

6

2Q2020

152

123111

173200

New lendingCOVID-19

Stage 3Interest on net NPEs not received in cash

Stage 1 & 2

-21

-84 -76

Update of IFRS 9 macroeconomic assumptions for the Bank driving increase in COR

by 59 bps in 1H2020

Base Scenario GDP Unemployment rate

1Q2020 2Q2020 1Q2020 2Q2020

2020 -6.9% -6.3% 9.1% 9.2%

2021 5.4% 5.6% 7.6% 8.0%


Clear strategy for residual NPEs

34

Group NPEs (€ bn)

2.04

0.35

2.58

30 Jun 2020

Corporate

30 Jun 2020


SME

Re-performing

NPEs

Retail

3.47

0.47

0.61

0.35

0.37

1.56

0.30

€2.28 bn

• Close monitoring of redefaults & quality of restructurings

• c.€275 mn re-performing NPEs applied to the loan moratorium scheme, extending

their exit date

• Sale of €886 mn mainly Retail and SME secured NPEs (Helix 2) expected to be

completed in 1H2021

• Completion of sale of €133 mn retail unsecured NPEs (Velocity 2) in 2Q2020

• Following COVID-19 outbreak, focus on arresting any potential asset quality

deterioration and early managing of arrears

• Continue to seek organic solutions, including the realisation of collateral via

consensual and non consensual foreclosures

• Remain committed to assessing the potential to accelerate the decrease in NPEs

through additional sales of NPEs in the future

Core NPEs : €2.28 bn21

Re-performing NPEs1: €0.30 bn2

2

(1) In pipeline to exit NPEs subject to meet all exit criteria; the analysis is performed on a customer basis (formerly called Non-core NPEs)



-65 -72 -59 -42

-107 -89

-71 -84

-87-54 -133

-22-18-5

-23

-17

-2

-886

-158

Curing of restructuring

DFAs & DFEs

Write-offs

Other

-277

-1,164

-237

Net organic

outflows (€ mn)

(1) Other includes interest, cash collections and changes in balances

€145 mn organic NPE outflows in 2Q2020, leading to €137 mn organic NPE reduction

35

Sales of NPEs

1

• €145 mn organic outflows, maintained at similar

levels to 1Q2020, despite COVID-19

• Helix 2 reduces NPEs by €886 mn

• Completion of Velocity 2 reduced NPEs by €133

mn

-227 -205 -142 -137

8 8

33

17

9

69 7

32

3Q2019 4Q2019

43

1Q2020 2Q2020

2

New inflows

Redefaults

Unlikely to pay

50

16

8

Helix 2

SPA Signed

Velocity 2

-€145 mn

Inflows (€ mn)

Outflows (€ mn)


124%

Dec 17

52%

68%

41% 48%

Dec 16

128%

67%70%

Dec 18

68%

59%54%

Dec 19

68%

56%

Mar 20

69%

Jun 20

67%

58%

Jun 20

pro forma

for Helix 2

109%115%

122% 122% 125%

58%

Re-performing NPEs 23%

63%

Jun 20

pro forma

for Helix 2

Core NPEs

(1) Restricted to Gross IFRS balance



(4) Based on EBA Risk Dashboard as at 31 March 2020

Coverage and collateral maintained post Helix 2

36

NPE total coverage at 125% when collateral included pro forma for Helix 22

58%

PT

51%

BOC

54% 51%

IT CY

46%

ESEU Average

45%

GR

43%

NPE coverage remains above EU average4

• Cash coverage increased to 58% pro forma for Helix 22

• Cash coverage of Core NPEs at 63%, pro forma for Helix 22

• Collateral coverage at 67%

1

3

Tangible collateral Allowance for expected loan credit losses

30 Jun 2020

pro forma for

Helix 2

2 2

2


Lower REMU sales due to COVID-19 lockdown

37

280 265

625 619

269 268

183 182

103 98

Mar

2020

Dec

2018

Jun

2020

1,456

Residential

24

Dec

2019

Hotels24

Greece & Romania

Commercial properties

Land & plots

Golf

1,4841,530 1,490

Group BV (€ mn)

Evolution of REMU stock1

27

9

5

13

Total Sales 1H2020 ResidentialCommercial Land

91% 90% 91% 90%

116% 109% 124% 110%

Net Proceeds / BV Gross Proceeds / OMV

• Temporary slowdown of REMU sales due to COVID-19 lockdown

• Visible pipeline for €53 mn (SPAs signed)

• Offers accepted for €15 mn

• Regulatory approval received for the setup of an Additional Investment

Fund (AIF) consisting of properties of up to €45 mn GBV

€27 mn sales in 1H2020

Sales contract prices2 – Organic (€ mn)

(1) In addition to assets held by REMU, properties classified as “Investment properties” with carrying value of €23 mn as at 30 June 2020

relate to legacy properties

(2) Amounts as per Sales purchase Agreements (SPAs)

(3) Based on data from Land of Registry- Sales contracts

766 714896739742766

Jan

825834

Feb

510

Mar

646

1.057

216

Apr

1.423

419

May Jun Jul

-80%-8%

2019

2020

Property market starting to recover post lockdown

Sale contracts (excluding DFA’s)3


Key takeaways

38


Key highlights

39

Continue to deliver on strategic priorities, while supporting customers, colleagues and

communities through COVID-19

Continue to support the recovery of the Cypriot economy via prudent new lending1

Improvement of asset quality

• Arrest asset quality deterioration after the end of the moratorium, monitor and manage early arrears

• Continue the NPE reduction via organic and non organic solutions

2

Further improvement of operating efficiency supported by on-going digital transformation3


Key Information and Contact Details

40

Contacts

Investor RelationsTel: +35722122239, Email: [email protected]

Annita Pavlou Investor Relations Manager

Tel: +357 22 122740, Email: [email protected]

Elena Hadjikyriacou ([email protected]),

Marina Ioannou ([email protected])

Andri Rousou ([email protected]),

Stephanie Koumera ([email protected])

Executive Director Finance

Eliza Livadiotou, Tel: +35722 122128, Email: [email protected]

Visit our website at: www.bankofcyprus.com

Credit Ratings

Standard & Poor’s Global Ratings:

Long-term issuer credit rating: Affirmed at “B+” on 16 July 2020 (stable outlook)

Short-term issuer credit rating: Affirmed at “B” 16 July 2020

Fitch Ratings:

Long-term Issuer Default Rating: Affirmed at “B-" on 29 November 2019 (outlook revised to

negative on 7 April 2020)

Short-term Issuer Default Rating: Affirmed at “B" on 29 November 2019

Viability Rating: Affirmed at “b-” on 29 November 2019

Moody’s Investors Service:

Baseline Credit Assessment: Affirmed at “caa1” on 24 January 2019

Short-term deposit rating: Affirmed at "Not Prime" on 14 June 2019

Long-term deposit rating: Affirmed to “B3” on 14 June 2019 (positive outlook)

Counterparty Risk Assessment: Affirmed at B1(cr) / Not-Prime (cr) on 14 June 2019

Listing:

LSE – BOCH, CSE – BOCH/ΤΡΚΗ, ISIN IE00BD5B1Y92

mailto:[email protected]








APPENDIXMacroeconomic overview

41


SOURCE: Statistical Service of Republic of Cyprus; Bloomberg

(1) Normalised against Germany Government bond with maturity 15/8/2025 except Greece

(2) Due to the Debt swap of the Hellenic Republic, from November 2017 onwards data for the new Hellenic Republic Bond with maturity

30/01/2028 was used and normalised against the closest maturity of German Government bond (DBR) 15/08/2027

Cypriot economy dropped by 11.9% in 2Q2020 reflecting COVID-19 lockdown

42

CY GDP declined 11.9% y-o-y vs 15% decline in Euro Area

COVID-19 pandemic poses serious challenges to sovereign ratings

Dec 1

2

Mar

13

May 1

3

Au

g 1

3

Oct

13

Ja

n 1

4

Mar

14

Ju

n 1

4

Au

g 1

4

Nov 1

4

Ja

n 1

5

Ap

r 15

Ju

n 1

5

Se

p 1

5

Nov 1

5

Ja

n 1

6

Ap

r 16

Ju

n 1

6

Se

p 1

6

Nov 1

6

Feb

17

Ap

r 17

Ju

l 1

7

Se

p 1

7

Dec 1

7

Feb

18

May 1

8

Ju

l 1

8

Oct

18

Dec 1

8

Feb

19

May 1

9

Ju

l 1

9

Oct

19

Dec 1

9

Mar

20

May 2

0

Au

g 2

0

Cyprus Portugal Italy Spain Greece Ireland

0

0.1

0.2

0.3

0.4

0.5

0.6

Ja

n 2

01

8

Feb

20

18

Apr

20

18

May 2

01

8

Ju

l 20

18

Aug

2018

Sep

2018

No

v 2

018

De

c 2

018

Feb

20

19

Mar

20

19

May 2

01

9

Ju

n 2

01

9

Aug

2019

Sep

2019

No

v 2

019

De

c 2

019

Feb

20

20

Mar

20

20

May 2

02

0

Ju

n 2

02

0

Aug

2020

Cyprus - maturity 4/11/2025 Portugal - maturity 15/10/2025 Spain - maturity 31/10/2025

Italy - maturity 01/12/2025 Greece - maturity 30/01/2028

1 1

1

1

2

Unemployment rate increased steeply in 2Q2020

Tightening of spreads post COVID-19 lockdown

BBB-

AA-

BB-

A

BBB

S&

P c

red

it r

ati

ng

s

Sp

read

s (

%)

7.37.7

6.5

9.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Euro Area Cyprus

-15

-10

-5

0

5

3Q2017

-11.9

2Q2017 4Q20184Q2017 1Q2018 3Q2182Q2018 1Q2019 2Q2019 3Q2019 4Q2019

-3.1

1Q2020

-15.0

2Q2020

0.8

Cyprus Euro area


SOURCES; Statistical Service of Republic of Cyprus, Eurostat; Calculations by BOC Economic Research

Economy deeply impacted by Covid-19 in the second quarter

43

Economic sentiment dropped steeply in the second

quarter as Covid-19 infections peaked

Leading indicators reflect the steep decline of 2Q2020 Support from key business enablers

Corporate tax rates - 2019

40.2%

38.5%

21.3%

Upper and post-

secondary, non-

tertiary

Less than

Upper secondary

Tertiary

Level of education 2019, age 15-64

Cyprus has the highest number of

university graduates in the population

in the EU after Ireland, at par with UK

31.0%

30.0%

28.0%

25.0%

24.0%

21.0%

19.0%

12.5%

12.5%

Tourism arrivals for 1H2020 down 84% yoyTourism: % changes yoy

201820172016 2020

Jun yoy

-84.0

19.8

-91.0

11.9

14.6

11.7

7.8

2.7

Total arrivals (% change)

Total receipts (% change)

-0.3

-29.6

-5.4

-33.2-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0Economic Sentiment Indicator (ESI) - % change y-o-y

Cyprus Euro Area

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

12

.11

03

.12

06

.12

10

.12

12

.12

03

.13

06

.13

09

.13

12

.13

03

.14

06

.14

10

.14

12

.14

03

.15

06

.15

10

.15

12

.15

03

.16

06

.16

09

.16

12

.16

03

.17

06

.17

09

.17

12

.17

03

.18

06

.18

09

.18

12

.18

03

.19

06

.19

09

.19

12

.19

03

.20

06

.20

Leading indicators: 3 month moving averages % changes y-o-y

New vehicles Non-food sales Property sales Building permits vol

20122011 2013

3.2

2018

3.9

2014 2015 2016 2017 2019 1H

2019

1H

2020

2.4 2.5 2.4 2.42.7

3.74.0

1.6

0.3

-84%

(mn)


Covid-19 Recent Developments

44


Timely and strong response by the Government of Cyprus

45

(1) For further information, please refer to the Market Update published by the Ministry of Finance: https://www.mof.gov.cy/mof/pdmo/pdmo.nsf/6B8C5026F3AE168BC2258345003BAFEF/$file/Market%20Communication%2006%20April%202020.pdf

(2) For tax periods ending February, March and April, 2020. It involves all companies, without imposing any charges or additional tax. It is noted that arrangements will be made so that the debts will be paid progressively until November 10, 2020 with the exception of companies that do not

have liquidity problems such as pharmacies, supermarkets, etc.

• Immediate introduction of fiscal measures1

• Liquidity support to businesses and households

• Prevention of sharp rise in unemployment

• A large and wide-ranging package of financial

measures

• €3.0 bn of funding raised in April 2020; vote of

confidence to the Cypriot economy

• Issuance of €1.75 bn of 7 year and 30 year Eurobonds

• Issuance of €1.25 bn of 52-week treasury bills

Measures announced in March 2020 include:

• Moratorium of loan instalments for 9 months

• Capital and interest

• Available for all customers (businesses and private

individuals) with less than 30 days past due as at 29

Feb 2020

• Temporary suspension of VAT payments for 3 months2

• Suspension of the added contribution to the National Health System

for 3 months

• Employment compensation schemes for businesses impacted by

COVID-19, to protect jobs and avoid layoffs

• >50% of private sector employees (220,000) and c.40,000 self-

employed workers expected to benefit

Additional measures announced in May 2020 include:

• Liquidity support to small business and self employed

• covering part of the operating expenses like rent, supplier

payments, etc

• >36,000 small businesses and self employed expected to benefit

• Tax incentives for the reduction of rent, on a voluntary basis

• Liquidity support to agricultural businesses

Key Highlights:

https://www.mof.gov.cy/mof/pdmo/pdmo.nsf/6B8C5026F3AE168BC2258345003BAFEF/$file/Market%20Communication%2006%20April%202020.pdf


Subsidy of interest rate on new business and housing loans

46

• Subsidy of interest rate for new loans to self employed and

businesses that were not “problematic”1 as at 31 December

2019 and were negatively impacted by COVID-19

• Subsidised new loans for working capital needs and

investments only (not be used to repay existing ones)

• Subsidy of interest rate for 4 years as follows:

o up to 3.5% in the first two years

o 2% for SMEs and 1.5% for large corporates in years 3-4

• Restriction so that staff reduction shall not exceed 2% of total

employees as at the date of the Plan announcement (28 May

2020)

• Total aid per business must not exceed €800,000

• No ceiling on the loan amount

• Loan amount for which interest rate is subsidized cannot

exceed:

o The double of the annual wage bill of the business or

o 25% of the total turnover of the business in 2019

1. Subsidy of interest rate of new Business Loans

2. Subsidy of interest rate of new Housing Loans

• Government subsidy of interest for 4 years up to 1.5%

• Loan amount for which interest rate is subsidized cannot exceed

€300,000

• Applicable to new housing loans granted between 1 March 2020 and 31

December 2020

• New housing loans cannot be used to repay existing ones

• Applicable to new business loans granted between 1 March 2020 and 31

December 2020

• Scheme subject to approval by European Commission

1) As defined in Article 2 (18) of the Commission Regulation (EU) No 651/2014; Please refer to https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0651

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0651


Additional governmental measures to enhance liquidity

47

3. Pan-European Guarantee Fund

• Liquidity support to businesses that employ up to 3,000 employees,

through the Pan-European Guarantee Fund of EIB Group for an amount

up to €300 mn- €400 mn1

• Fund guarantee to the banks of up to 80%1

• The Fund will become operational once the Member States of EU

accounting for at least 60% of the total EIB capital (€25 bn) have signed

their contribution agreements

5.Government Guarantee to EIB

• Plan already in place since 2014

• Injection for an additional funding of €500 mn

• Businesses with up to 3,000 employees, registered and operating in Cyprus

are eligible

• Reduction of interest rates by at least 0.5% due to EIB participation

• Additional 0.5% reduction in interest rate for businesses in compliance with

“jobs for youth” criteria

• Loan duration of up to 12 years

4. Financing of SMEs through CYPEF2

• Liquidity support of up €800 mn to SMEs via 50%-50% risk sharing

between the Government and the participating banks

• Eligible businesses are SMEs with up to 250 employees

• Loan amount should not exceed €1.5 mn and duration of loan should not

exceed 12 years

• Low Interest rates will vary subject to the risk profile of client:

o 2.55%-3.85% for low risk clients

o 3.375%-4.5% for high risk clients

1) In accordance with the press release of Ministry of Finance dated 28 May 2020

2) The Cyprus Enterprise Fund


APPENDIXAdditional asset quality slides

48



(2) The difference between the contractual balance and the GBV relates to IFRS adjustments/unrecognised income and non-contractual write-offs

(3) DFAs and cash already received by 30 June 2020

€0.9 bn NPE Trade Delivers Accelerated Risk Reduction

49

€898 mn Helix 2 portfolio (€ mn)

• Contractual balance2 of €1.48 bn as at 30 June 2020

• Portfolio comprises 22,224 loans, mainly to Retail and SME clients, secured over 5,616 real estate collaterals

• Completion remains subject to a number of customary regulatory and other approvals, currently estimated to occur in the 1H2021

102

259

475

50

SMEs

12

Retail

Jun 20

Re-performing NPEs

Performing

Corporate

898

€886 mn

NPEs

30 June 2020

Assets sold € mn Receipts € mn

Contractual Loans2 1.478 Consideration 422

Gross Loans 898 of which:

of which NPEs 886 - Cash 148

Provisions Held (479) - Deferred Purchase Price 274

Other3 34 Transaction Costs and other adjustments (37)

Carrying Value of assets being sold 453Consideration net of transaction costs and

other adjustments385

P/L Impact: (68)

1


Foreclosures resume on 1 September 2020

50

• Following COVID-19 outbreak, foreclosure process suspended until 31 August 2020, in line with the latest decision of the Association of Cyprus Banks

• In July 2019 the Parliament has voted through certain changes to the foreclosure law which, in the most part, seek to:

– Provide additional checks and balances where banks are seeking to foreclose small loans (<€350k) secured by a Principal Primary Residence, and

– Extend the foreclosure timetable by extending various notice periods

• These amendments were passed into law in June 2020

• The amendments extend the foreclosure process by c.1 month to c.9 months

Cumulative

2016 – 20181 FY2019 1H2020

Foreclosures

commenced2 1,437 1,829 5933

Auctions held 470 807 1643

1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020

330 527 436 536 5933 -

82 163 189 373 1643 -

(1) Excluding Helix

(2) The foreclosure process is considered to have commenced upon serving notice to the mortgagor

(3) Foreclosures commenced and auctions held up to ACB announcement suspending foreclosures until 31 August 2020


ESTIA- Government scheme for the resolution of NPEs backed by primary residence

51

• Clear definition of socially protected borrowers

• Resolution part of ESTIA- eligible1 portfolio

• Identification of non-viable (vulnerable) customers

• Facilitates resolution of remaining customers mainly through consensual and

non consensual foreclosures

• Application period ended 31 July 2020

Non applicants

330Estia

eligible471

Applicants

€ mn

• Restructured loans will exit NPE definition in accordance with the NPE exit

criteria2

• Government solution under consideration

• Covered by 60% by allowance for expected loan credit losses

• Enforcement measures initiated for non Estia applicants

• Focus on realizing collateral via consensual and non-consensual

foreclosures

• On-board assets in REMU at conservative c.25%-30% discount to open

market value

Participants: €61 mn3

Non viable: €45 mn3

Other: €695 mn3

6145

Participants

224

Incomplete/Under review Non viable

€801 mn

1

Coverage: 60%

(1) ESTIA-eligible portfolio refers to the potentially eligible portfolio based on the Bank’s available data

(2) Please refer to slide 78 for the NPE forborne exit criteria

(3) Data available as at 24 August 2020




Core NPE risk reduced to €2.28 bn pro forma for Helix 22; 63% cash covered

52

Core NPEs reduced to €2.28 bn pro forma for Helix 22

Dec 15 Jun 20

0.43

0.30

Mar 20

3.45

Dec 19

0.36 0.35

Jun 20


Core NPEs

Re-performing NPEs

13.97

3.88 3.74 3.472.58

11.36

3.123.38

2.61

2.28

5.70

Retail

3.07Corporate

2.59

SMEs

1

€ bn

Retail

SMEs0.66

0.47

Corporate

2.25

11.36

Core NPEs € bn

2.04

0.47

SMEs

Corporate

Retail

0.61

0.37

Corporate

0.35 SMEs

1.56

Retail

2

3.123.38 2.28


Continuous progress across all segments

53

Focus shifts to Retail and SME after intense Corporate attention

477

258

151

64

461

2,582

Terminated Retail

Corporate


Terminated Corporate

SME

Terminated SMEs

Retail

1,171

€1,648 mn

€409 mn

€525 mn

Retail

SME

Corporate

722

639

525

Helix 2

Dec 19

4Inflows

Jun 20

(87)Exits

(114)Pro-forma for

Helix 2

727

689

409

Helix 2

(44)

Dec 19

6Inflows

Exits

Jun 20

(280)

Pro forma forHelix 2

Dec 19

14

(172)

Velocity 2

Inflows

(492)

Exits

(133)

Jun 20

Helix 2

1,648Pro forma for

Helix 2

2,431

2,140

Jun 2020

Pro forma1

NPE ratio 11%

NPE coverage 58%

NPE total coverage 112%

Jun 2020

Pro forma1

NPE ratio 26%

NPE coverage 58%


Jun 2020

Pro forma1

NPE ratio 31%

NPE coverage

➢ Retail Housing 53%

➢ Retail Other 66%


€ mn


1

1

1

1



Gross loans and NPEs by Customer Type

54

Gross loans by customer type (€ mn)

Dec 18

12,709

Dec 19

1,508

11,59312,822

2,739

Mar 20

15,900

Jun 20


1,875

Jun 20

12,491

2,541

1,710

7,060

2,671

4,068

1,795

2,209

4,077

1,922

2,186

1,914

4,068

2,203

1,870

2,655

2,203

1,863

3,7624,060

1,579

2,977

Retail other CorporateSMEsRetail Housing Global Corporate

558 503 492 378

727 724 689

982

970

878

678

409

Mar 20 Jun 20Dec 18

1,326

164

Dec 19

159 147

3,880

147

1,262

Jun 20


7,419

3,738

2,582

3,4681,759

3,188

1,490

1,388

1,043 1,026

NPEs by customer type (€ mn)

1

1

1


Tangible Collateral

Allowance for expected loan credit losses

(1) Restricted to Gross IFRS balance


NPE Coverage and Total coverage by segment

55

Coverage and collateral maintained post Helix 22

1

Total €2,582 mnCorporate €378 mn SME €409 mn Retail-Housing €970 mn Retail-Other €678 mnGlobal Corporate: €147 mn

134%

Mar 20

53%

51%

54%

52%

Dec 19

124%

Dec 19

53%

83%

Jun 20

64%

54%

53%

Jun 20

69%71%

79%

50%

Jun 20

pro

forma

63%

Dec 19 Jun 20

pro

forma

65%

69%

Mar 20

63%

79%

107%

Jun 20 Jun 20

70%

63%

68%

53%

Dec 19

54%

Mar 20

54%58%

66%

58%66%

53%

Jun 20

pro

forma

Dec 19

48%

82%

51%

Mar 20

58%

83%

54%

81%

Jun 20

pro

forma

54%

Jun 20

pro

forma

64% 65%

Mar 20

59%

Jun 20

57%

66%

Dec 19

68%

56%

Mar 20

69%

59%50%

Jun 20

67%

Jun 20

pro

forma

104% 106%100%

127%134%

142% 142%

124%118%

124%131% 133%

137%

118%125% 123% 122% 124%

128% 125%127%

2 2 2 2 22


Asset quality- NPE analysis

56

(€ mn) Jun-20 Mar-20 Dec-19 Sep-19 Jun-19 Mar-19 Dec-18

A. Gross Loans after Residual Fair value adjustment on

initial recognition12,243 12,457 12,551 12,757 12,782 15,437 15,438

Residual Fair value adjustment on initial recognition 248 252 271 278 290 445 462

B. Gross Loans 12,491 12,709 12,822 13,035 13,072 15,882 15,900

B1. Loans with no arrears 8,954 8,706 8,820 8,794 8,565 8,402 8,260

B2. Loans with arrears but not NPEs 69 265 122 156 195 207 221

1-30 DPD 54 209 88 119 150 138 166

31-90 DPD 15 56 34 37 45 69 55

B3. NPEs 3,468 3,738 3,880 4,085 4,312 7,273 7,419

With no arrears 603 601 722 802 949 1,356 1,482

Up to 30 DPD 28 52 54 69 89 108 136

31-90 DPD 39 72 76 86 125 183 231

91-180 DPD 48 79 121 159 149 240 178

181-365 DPD 178 255 263 251 225 316 393

Over 1 year DPD 2,572 2,679 2,644 2,718 2,775 5,070 4,999

NPE ratio (NPEs / Gross Loans) 28% 29% 30% 31% 33% 46% 47%

Allowance for expected loan credit losses (including

residual fair value adjustment on initial recognition1)2,043 2,109 2,096 2,086 2,145 3,846 3,852

Gross loans coverage 16% 17% 16% 16% 16% 24% 24%

NPEs coverage 59% 56% 54% 51% 50% 53% 52%

(1) Comprise (i) loan credit losses for impairment of customer loans and advances, (ii) the residual fair value adjustment on initial recognition of loans acquired from Laiki Bank and on loans classified at FVPL, and (iii) loan credit losses on off-balance sheet exposures disclosed on the

balance sheet within other liabilities


Analysis of gross loans and NPE ratio by Economic activity

57

Gross loans by economic activity (€ bn)

2.0

4

0.6

6

1.3

9

2.3

4

3.2

0

6.7

7

1.3

1

1.0

4 1.8

5

0.6

4

1.2

7

1.9

5

1.6

1

6.4

7

1.2

0

0.9

1

1.3

6

0.4

7

1.0

8

0.8

5

1.2

9

6.0

2

1.0

0

0.7

5

1.3

8

0.4

6

1.1

0

0.8

3

1.2

8

6.0

1

0.8

9

0.7

6

1.3

1

0.4

5 1.1

3

0.8

2

1.2

8

5.8

9

0.8

6

0.7

5

Trade Manufacturing Hotels & Restaurant Construction Real Estate Private Individuals Professional andother services

Other sectors

31.12.17 31.12.18 31.12.19 31.03.20 30.06.20

10%11% 47% 7% 6%7%9%3%

NPE ratio by economic activity

45

% 53

%

32

%

76

%

33

%

45

% 52

%

51

%

49

%

52

%

28

%

68

%

53

%

43

%

46

%

34

%

31

%

27

%

7%

34

%

23

%

37

%

31

%

17

%

31

%

27

%

7%

33

%

22

%

36

%

32

%

15

%

31

%

26

%

6%

31

%

21

%

34

%

31

%

14

%

Trade Manufacturing Hotels and Catering Construction Real estate Private individuals Professional and other services

Other sectors

31.12.17 31.12.18 31.12.19 31.03.20 30.06.20

% of total


Balance sheet de-risking results in a smaller but safer loan book

58

Net Loans: Non-legacy2 vs Legacy

• Lower but higher quality income resulting from balance sheet de-risking

• Interest Income of non-legacy book increased by €3 mn qoq, despite the sustained low interest rate environment

• Interest Income of legacy book decreased by €6 mn qoq mainly due to increased cash collections of €4 mn not previously recognized in 1Q2020

• Interest on Net NPEs not received in cash, fully provided

• Lending rates remain under pressure due to the sustained low interest rate environment

Interest Income on Loans: Non-legacy2 vs Legacy

Jun 20Dec 16

10.10

Dec 17 Dec 18 Dec 19

5.64

Mar 20 Jun 20

pro forma

for Helix 2

8.938.92 8.93

10.73

15.6214.55

12.04

10.60

1.17

10.45

9.98 10.15

1.79

4.40

8.65

3.39

8.94

1.68 1.52

36%

88%64%

12%

Legacy Non-legacy

74 76 75 72 75 75

27 29 23 24 18 12

105

2Q2019 3Q2019

98

4Q2019 1Q2020 2Q2020 2Q2020

pro forma

for Helix 2

10196 93

87

€ mn€ bn

Legacy Non-legacy



11


Non-

LegacyLegacy Group

1H2020 1H2020 1H2020

Pro

fita

bil

ity

Interest Income on loans (€ mn) (pre

FTP)147 42 189

Loan credit losses (€ mn) (10) (77) (87)

Interest Income net of loan credit

losses (€ mn)137 (35) 102

Cost of Risk 0.23% 4.39% 1.39%

Effective Yield 3.31% 5.09% 3.59%

Risk adjusted Yield1 3.07% (4.23%) 1.93%

Cap

ita

l &

ba

lan

ce

Sh

ee

t Average Net Loans (€ mn) 8,930 1,661 10,591

RWA Intensity2 48% 106% 56%

(1) Interest Income on loans net of allowance for expected loan credit losses/ Average Net Loans

(2) Risk Weighted Assets over Total Assets

Risk adjusted yield will rise as Legacy book reduces

59

• Non-Legacy Book is expected to grow and to

increasingly drive Group results

• Legacy book revenues predominantly driven

by loan credit losses unwinding (but offset via

loan credit losses)

• Interest on Net NPEs not received in cash,

fully provided (€18 mn in 2Q2020)

• As Legacy book reduces:

• Group risk adjusted yield expected to

rise

• Group Risk intensity expected to fall

supporting CET1 ratio build

RRD

Overseas non

core

REMU

Global corporate,

Corporate

IB, W&M

SME and

Retail Banking

Insurance and

H/O


Rescheduled Loans

60

Rescheduled loans by customer type (€ bn)

0.270.45

Dec 19

0.52

Dec 18

0.47

0.34

Jun 20

2.73

0.16

Mar 20

0.42

4.89

2.58

0.380.50

0.43

2.35

0.532.24

1.01

1.17

0.97

0.44

0.43

0.94 0.88

Retail housing CorporateRetail other Global CorporateSMEs

Rescheduled loans % gross loans by customer type

RetailConsumer

16

%

Corporate

31

%

28

%

GlobalCorporate

SMEs

27

%

RetailHousing

17

%

12

%16

%

15

%

7%

23

%

34

%

27

%

22

%

29

%

26

%

24

%

22

%

23

%

23

%

Dec 18

Dec 19 Jun 20

Mar 20

Rescheduled loans-Asset Quality

30 June 2020 € ‘000

Stage 1 235,719

Stage 2 304,376

Stage 3 1,486,455

POCI 200,944

FVPL 117,543

Total 2,345,037


REMU: €1.28 bn sales of 1,754 properties across all property classes since set-up in Jan 2016

61

(1) Amounts as per Sales purchase Agreements (SPAs)

(2) Number of properties sold include 21 properties from the disposal of Cyreit and 23 properties from NPE sale (Helix)

(3) Legacy properties relate to properties that were on-boarded before REMU set-up in January 2016

(4) The BV of the properties disposed at the date of disposal as a proportion of the: BV of the properties disposed at the time of the disposal

plus the BV of the residual properties managed by REMU as at 30 Jun 2020

Sales since Real Estate Management Unit set-up

Sales contract prices1 (€ mn)

# 99 # 331 # 575 # 5792

179

330

238

345

27

160

20192016 2017

505

2018 1H2020

Cyreit Sales # properties

Sales €1.28 bn

Breakdown of cumulative sales1

by on-boarding year (€ mn)

296 555 326 99 3

2017 201920182016Legacy

€1,279

% Sales

of vintage stock

(BV)458% 46% 49% 28%

36%

23%

11%

10%

13%

7%

Land

CyreitCommercial

Hotels

Residential

Overseas

by property type

• Asset disposal strategy tackles both value and volume of assets

• Asset disposals across all property classes

• 58% of Legacy3 and 46% of 2016 book assets now sold

• 36% of sales (by value) relate to land

3

# 170


REMU – the engine for dealing with foreclosed assets

62

Total Book Value Sales of €10 mn for 2Q2020

Encouraging trends in Real Estate Market;

property prices up 1.8% in 1Q20203

62 6748

160

88

14 10

Nicosia Mall

2Q2019 4Q20193Q2019 Cyreit 1Q2020 2Q2020

112112

Impairment loss &

fair value losses

SalesAdditions

30

Properties

managed by REMU

as at 01 Jan 2020

(24)(29)

(11)

Transfer to non-

current assets and

disposal groups

held for sale

Properties

managed by REMU

as at 30 Jun 2020

1,4901,456

1,378 1,344

Investment Properties

REMU focuses now on sales

78.3 78.6

2.2 1.8

-4.0

-2.0

0.0

2.0

4.0

30.0

50.0

70.0

90.0

110.0

Q42015 Q22016 Q42016 Q22017 Q42017 Q42018 Q22019 Q42019

Central Bank Residential Property Price index

Residential Propert Price index (2010Q1=100) % change y-o-y (RHS)

Sales contracts (excl. DFAs) in 1H2020 down 41% yoy4 reflecting COVID-19 lockdown

2008 20122009 2010 2013 20142011

9.242

2015 2016 2017 2018

5.885

4.481

2019 1H20191H2020

8.734

10.366

5.560

3.272

-41%

Sales to Cypriots Sales to non-Cypriots

BV € mn

(1) In addition to assets held by REMU, properties classified as “Investment properties” with carrying value of €23 mn as at 30 June 2020

relate to legacy properties

(2) Stock of property with a carrying value of €11 mn as at 30 June 2020 was transferred to non-current assets and disposal groups held for

sale as it was included in the Helix 2 portfolio

(3) Based on Residential price index published by Central Bank, dated 19 August 2020

(4) Based on data from Land of Registry- Sales contracts

1

€ mn

2


63

APPENDIXAdditional financial information


Liability and Equity (€ mn) 30.06.2020 31.12.2019

%

change

Deposits by banks 406 533 -24%

Funding from Central Bank 1,000 - -

Repurchase agreements 123 168 -27%

Customer deposits 16,303 16,692 -2%

Subordinated loan stock 261 272 -4%

Other liabilities 1,158 1,169 -1%

Total liabilities 19,251 18,834 2%

Shareholders’ equity 1,875 2,040 -8%

Other equity instruments 220 220 -

Total equity excluding non-

controlling interests2,095 2,260 -7%

Non controlling interests 25 29 -13%

Total equity 2,120 2,289 -7%

Total liabilities and equity 21,371 21,123 1%

Consolidated Balance Sheet

64

Assets (€ mn) 30.06.2020 31.12.2019

%

change

Cash and balances with Central Banks 5,276 5,060 4%

Loans and advances to banks 622 321 94%

Debt securities, treasury bills and equity

investments1,999 1,906 5%

Net loans and advances to customers 10,104 10,722 -6%

Stock of property 1,344 1,378 -2%

Investment properties 134 136 -2%

Other assets 1,519 1,574 -4%

Non current assets and disposal groups

classified as held for sale373 26 -

Total assets 21,371 21,123 1%


Core Cypriot business

65

Average contractual interest rates (bps) (Cy)

37.5% 37.1%

45.4%41.3% 41.1% 41.0% 41.7%

31.1%32.8%

36.0% 34.7%35.1% 34.8% 35.0%

Dec 16 Dec 17 Dec 18 Jun 19after Helix

Dec 19 Mar 20 Jun 20

Loans Deposits

Strong market shares in resident and non-resident deposits

29.5% 31.5% 34.1% 35.3% 34.6% 34.9% 34.7% 34.8%

35.8% 37.3% 38.8% 38.3% 34.7% 35.8% 35.3% 35.7%

Dec 16 Dec 17 Jun 18 Dec 18 Sep 19 Dec 19 Mar 20 Jun 20

Residents Non-residents

7758

4739 33

24 19

1 1 1 11 1 0

4Q2018 1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020

Time & Notice accounts Savings and Current accounts

475 468 460413 402 396 392 384

41 32 24 24 19 16 11 8

434 436 436389 383 380 381 376

4Q2018 1Q2019 2Q2019 2Q2019(excluding

Helix)

3Q2019 4Q2019 1Q2020 2Q2020

Yield on Loans Cost of Deposits Customer spread

Market shares1

Customer deposit rates decline further (bps) (Cy)

(1) The market share on loans was affected as from 30 September 2018 following a decrease in total loans in the banking sector, mainly attributed to €6 bn non-performing loans of Cyprus Cooperative Bank (CyCB) which remained to SEDIPES (a legal entity without license to operate as

a credit institution) as a result of the agreement between CyCB and Hellenic Bank

3241 24 19

Cost of deposits

16 11 8


Income Statement bridge1 for 1H2020

66

€ mnUnderlying

basisNPE sales Other Statutory Basis

Net interest income 168 - - 168

Net fee and commission income 71 - - 71

Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates 12 - 3 15

Insurance income net of claims and commissions 29 - - 29

Net gains from revaluation and disposal of investment properties and on disposal of stock of properties 0 - - 0

Other income 8 - - 8

Total income 288 - 3 291

Total expenses (180) (16) (10) (206)

Operating profit 108 (16) (7) 85

Loan credit losses (87) (91) (3) (181)

Impairments of other financial and non-financial instruments (29) - - (29)

Provisions for litigation, claims, regulatory and other matters (4) - 4 -

Loss before tax and non-recurring items (12) (107) (6) (125)

Tax (5) - - (5)

Profit attributable to non-controlling interests 4 - - 4

Loss after tax and before non-recurring items (attributable to the owners of the Company) (13) (107) (6) (126)

Advisory and other restructuring costs - organic (6) - 6 -

Loss after tax – Organic (attributable to the owners of the Company) (19) (107) - (126)

Provisions/net loss relating to NPE sales, including restructuring expenses (107) 107 - -

Loss after tax - attributable to the owners of the Company (126) - - (126)

(1) Please refer to section B1 “Reconciliation of income statement between statutory and underlying basis of the Group Financial Results for the six months ended 30 June 2020


Analysis of Interest Income and Interest Expense

67


Analysis of Interest Income (€ mn) 2Q20191 3Q2019 4Q2019 1Q2020 2Q2020

Loans and advances to customers 101 105 98 96 93

Loans and advances to banks and central banks 2 1 1 0 0

Investment at amortised costs 3 3 3 3 2

Investments FVOCI 5 6 5 5 4

Investments classified as loans and receivables - - - - -

111 115 107 104 99

Trading Investment - - - - -

Derivative financial instruments 9 9 10 9 9

Other investments at fair value through profit or loss - - - - -

Total Interest Income 120 124 117 113 108

Analysis of Interest Expense (€ mn)

Customer deposits (10) (8) (8) (5) (3)

Funding from central banks and deposits by banks (1) (1) (0) (0) (0)

Subordinated loan stock (6) (6) (6) (6) (6)

Repurchase agreements (2) (2) (2) (1) (1)

Negative interest on loans and advances to banks and central

banks(4) (5) (5) (4) (4)

(23) (22) (21) (16) (14)

Derivative financial instruments (12) (12) (12) (12) (11)

Total Interest Expense (35) (34) (33) (28) (25)


Income Statement by business line for 1H2020

68

€ mnConsumer

Banking

SME

Banking

Corporate

Banking

Global

corporate

International

Banking

Wealth &

MarketsRRD REMU Insurance Treasury Other Overseas Total

Net interest income/(expense) 63 18 31 36 11 1 15 (7) - 0 (1) 1 168

Net fee & commission income (expense) 19 4 5 5 23 1 4 - (3) 1 12 - 71

Other income 1 - - - 3 2 - 4 28 6 6 (1) 49

Total income 83 22 36 41 37 4 19 (3) 25 7 17 0 288

Total expenses (78) (10) (8) (6) (14) (3) (21) (4) (9) (7) (16) (4) (180)

Operating profit/(loss) 5 12 28 35 23 1 (2) (7) 16 0 1 (4) 108

Loan credit losses of customer loans net of

gains/(losses) on derecognition of loans and

changes in expected cash flows

2 (1) (6) (15) 10 - (66) - - - - (11) (87)

Impairment of other financial and non financial

instruments- - - - - - - (26) - - - (3) (29)

Provision for litigation, claims, regulatory and

other matters- - - - - - - - - - (4) - (4)

Profit/(loss) before tax 7 11 22 20 33 1 (68) (33) 16 0 (3) (18) (12)

Tax (1) (1) (3) (3) (4) - 8 4 (2) - (3) - (5)

Profit attributable to non controlling interest - - - - - - - - - - 3 1 4

Profit/(loss) after tax – organic (attributable to

the owners of the Company)16 10 19 17 29 1 (60) (29) 14 0 (3) (17) (13)

(1) Profit/(loss) after tax-organic (attributable to the owners of the Company) does not include provisions/net loss relating to NPE sales, including restructuring expenses (attributable to owners of the Company)


Risk Weighted Assets – Regulatory Capital

69

Risk weighted assets by type of risk (€ mn)

Reconciliation of Group Equity to CET1 Risk weighted assets by Geography (€ mn)

Equity and Regulatory Capital (€ mn)



€ mn 30.06.20

Group Equity per financial statements 2,120

Less: Intangibles (48)

Less: Deconsolidation of insurance and other entities (201)

Add: Regulatory adjustments (IFRS 9 and other items) 85

Less: Revaluation reserves and other unrealised items (249)

CET11 1,707

Risk Weighted Assets 11,960

CET1 ratio1 14.3%

CET1 ratio pro forma for Helix 22 14.4%

31.12.2019 31.03.2020 30.06.20

Total equity excl. non-controlling interests 2.260 2,207 2,095

CET1 capital 1,909 1,807 1,707

Tier I capital 2,129 2,027 1,927

Tier II capital 190 201 199

Total regulatory capital (Tier I + Tier II) 2,319 2,228 2,126

31.12.18 31.12.19 31.03.20 30.06.20 Helix 230.06.20

pro forma2

Cyprus 15,070 12,678 12,395 11,765 (112) 11,653

Russia 24 8 2 5 - 5

United Kingdom 84 48 48 48 - 48

Romania 38 29 28 21 - 21

Greece 144 121 120 115 - 115

Other 13 6 6 6 - 6

Total RWA 15,373 12,890 12,599 11,960 (112) 11,848

RWA intensity 70% 61% 62% 56% 55%

31.12.18 31.12.19 31.03.20 30.06.20 Helix 230.06.20

pro forma2

Credit risk 13,833 11,547 11,256 10,617 (112) 10,505

Market risk 2 - - - -

Operational risk 1,538 1,343 1,343 1,343 - 1,343

Total 15,373 12,890 12,599 11,960 (112) 11,848


SREP requirement for 2020 at 9.7%, post ECB’s capital relaxations for COVID-19

70

SREP requirements for 2020 : Total Capital ratio at 14.5%SREP requirements for 2020: CET1 ratio at 9.7%

• Per EBA final guidelines on SREP and supervisory stress testing and the Single Supervisory Mechanism’s (SSM) 2018 SREP methodology own funds held for the purposes of Pillar

II Guidance cannot be used to meet any other capital requirements (Pillar 1, Pillar II requirement or the combined buffer requirements), and therefore cannot be used twice4

• In May 2020, the Bank received formal notification from the CBC in its capacity as National Resolution Authority, of the final decision by the Single Resolution Board (SRB), for the

binding minimum requirement for own funds and eligible liabilities (MREL) for the Bank, determined as the preferred resolution point of entry. The MREL requirement has been set at

28.36% of risk weighted assets as of 30 June 2019 and must be met by 31 December 2025. This MREL requirement would be equivalent to 18.54% of total liabilities and own funds

(TLOF) as at 30 June 2019. The MREL requirement is in line with the Bank’s expectations, and largely in line with its funding plans5

• The MREL ratio of the Bank as at 30 June 2020, calculated according to SRB’s eligibility criteria currently in effect, and based on our internal estimate stood at 18.21% of RWAs

0.5%

4.5%

2.5%2.5%

1.0%

3.0%

1.0%

3.0%

10.5%

4.5%

2019 2020

2.5%

9.7%

1.7%

4.5%

2020

post ECB

announcement

O-SII

CCB

Pillar 2R

Pillar 1

11.0%

3.0%

2019

0.5%

4.5%

1.5%

2.5%

1.0%

2.0%

2.5%

3.0%

2.0%

14.0%

1.5%

4.5%

Tier 2

2020

O-SII

CCB

Pillar 2R

AT1

Pillar 1

14.5%

Total

Pillar 1

of 8%

1

3

2

1

2

(1) The Central Bank of Cyprus (CBC) set the O-SII buffer for the Group at 2%. This buffer will be phased-in gradually, having started from 1

January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented (2.0%) on 1 January 2022. In April 2020

the CBC, as part of the COVID measures, decided to delay the phasing-in by 12 months (1 January 2023). As a result, the phasing-in of

0.5% on 1 January 2021 has been delayed for 12 months

(2) In accordance with the legislation in Cyprus which has been set for all credit institutions the applicable rate of the CCB was fully phased in

at 2.5% in 2019

(3) Additional Tier 1 Capital

(4) The new provisions are effective from January 2020

(5) This decision is based on the current legislation, it is expected to be updated annually and could be subject to subsequent changes by the

resolution authorities, especially considering the developments of the Bank Recovery and Resolution Directive (BRRD) and its

transposition into the local legislation


Buffer to MDA Restrictions Level & Distributable Items1

71

Maximum Distributable Amount for BOCH

• The Bank and BOCH will proceed with a capital reduction process

which will result in the reclassification of up to c.€619 mn and €700 mn

of share premium to distributable reserves respectively

• Subject to approvals by ECB, Cyprus and Irish High Court

• No prohibition applies to the payment of coupons on any AT1 capital

instruments issued by the Company and the Bank2

• Significant CET1 MDA buffer3 (30 Jun 2020) : ~425 bps (~€508 mn)

• ECB frontloaded the ability to use AT1 and T2 to meet P2R

requirement; increases CET1 and MDA buffer by c.131 bps

11.0%

0.3%

14.3%

CET1 30 Jun 2020 30 Jun 20203

MDA Threshold

CET1 Ratios

Unfilled

AT1 + T2

capacity

425 bps

[ ] bpsDistance

to MDACET1Ratio (%)

CET1Req

Unfilled AT1 &

T2 Bucket

c.10.0%

9.7%

(1) Distributable Items definition per CRR

(2) Based on the SREP decisions of prior years, the Company and the Bank were under a regulatory prohibition for equity dividend distribution and therefore no dividends were declared or paid during years 2019 and 2018. Following the 2019 SREP decision, the Company and the

Bank are still under equity dividend distribution prohibition. This prohibition does not apply if the distributions are made via the issuance of new ordinary shares to the shareholders which are eligible as CET1 capital

(3) Including phasing in of O-SII buffer (+50 bps). The Central Bank of Cyprus (CBC) set the O-SII buffer for the Group at 2%. This buffer will be phased-in gradually, having started from 1 January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented

(2.0%) on 1 January 2022. In April 2020 the CBC, as part of the COVID measures, decided to delay the phasing-in by 12 months (1 January 2023). As a result, the phasing-in of 0.5% on 1 January 2021 has been delayed for 12 months


(1) The reduction relates to the sale of BOC UK in Sep 18

Analysis of Deposits

72

Deposits by Currency (€ bn)

Deposits by customer Sector (€ bn)

Deposits by Type (€ bn)

0.22

Dec 16

16.300.29

1.29

Dec 17

1.31

Dec 18

16.250.29

Dec 19

14.62

0.291.28

16.84

Mar 20

14.96

0.27

Jun 20

16.5117.85

0.10

16.69

12.40

2.201.69

13.83

0.11

1.742.11

1.48

15.01

0.10

14.58

0.100.17

1.35

6.31

1.06

Dec 16

1.54

Dec 17 Dec 18

7.16

1.57

Dec 19

7.53

1.65

16.30

Mar 20

6.18

1.76

Jun 20

16.5117.85

16.2516.84 16.69

9.27 10.00 8.78

6.71 7.59 7.44

6.92

7.62

16.25

4.79

0.80

0.69

Dec 16

0.83

Dec 17

0.91

Dec 18

0.80

10.05

Dec 19

0.77

0.71

8.98

16.51

Mar 20

0.79

0.68

Jun 20

17.85

5.05

16.84 16.69 16.30

6.73 6.63

10.31

5.96

10.15 9.98

4.68

10.15

1

1

1

Current & demand accounts

Savings accounts

Time deposits

Other Currencies

GBP

USD

EUR

Retail

SME

Corporate

Global Corporate

90%

8%2%

11%

42%47%

5%

29%

62%

4%

Jun 20


Reduction in Overseas Non-Core Exposures

73

Overseas non-core exposures (€ mn)

• The Group continues its efforts for further

deleveraging and disposal of non-essential assets and

operations in Greece, Romania and Russia

• In addition as at 30 June 2020, there were €269 mn of

overseas exposures in Greece (€265 mn at 31 March

2020) not identified as non-core exposures

283

193164

139 137 135

42

24 23

149

79

35

25

44

31

23

199

Dec 16

16

Dec 17

174

11

7

Dec 18 Dec 19 Mar 20

16

Jun 20

518

312

240

183 177

Greece UKSerbia Romania Russia


APPENDIXGlossary & Definitions

74


Glossary & Definitions

75

Allowance for expected loan credit

losses (previously ‘Accumulated

provisions’)

Comprises (i) allowance for expected credit losses (ECL) on loans and advances to customers (including allowance for expected credit losses on loans and advances to customers held for sale),

(ii) the residual fair value adjustment on initial recognition of loans and advances to customers, (iii) allowance for expected credit losses for off-balance sheet exposures (financial guarantees and

commitments) disclosed on the balance sheet within other liabilities, and (iv) the aggregate fair value adjustment on loans and advances to customers classified and measured at FVPL.

Advisory and other restructuring costs Comprise mainly: fees of external advisors in relation to: (i) disposal of operations and non-core assets, and (ii) customer loan restructuring activities.

AIEA

This relates to the average of ‘interest earning assets’ as at the beginning and end of the relevant quarter. Average interest earning assets exclude interest earning assets of any discontinued

operations at each quarter end, if applicable. Interest earning assets include: cash and balances with central banks, plus loans and advances to banks, plus net loans and advances to customers

(including loans and advances to customers classified as non-current assets held for sale), plus investments (excluding equities and mutual funds).

AT1 AT1 (Additional Tier 1) is defined in accordance with Articles 51 and 52 of the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

Average contractual interest rates

Interest rates on cost of deposits were previously calculated as the Interest Expense over Average Balance. The current calculation which the Bank considers more appropriate is based on the

weighted average of the contractual rate times the balance at the end of the month. The rates are calculated based on the month end contractual interest rates. The quarterly rates are the average

of the three quarter month end contractual rates

Book Value BV= book value = Carrying value prior to the sale of property

CET1 capital ratio (transitional basis) CET1 capital ratio (transitional basis) is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

CET1 fully loaded (FL) The CET1 fully loaded (FL) ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

Cost of FundingEffective yield of cost of funding: Interest expense of all interest bearing liabilities after hedging, over average interest bearing liabilities (customer deposits, funding from the central bank, interbank

funding, subordinated liabilities). Historical information has been adjusted to take into account hedging.

Contribution to DGF Relates to the contribution made to the Deposit Guarantee Fund.

Contribution to SRF Relates to the contribution made to the Single Resolution Fund.

Cost to Income ratio Cost-to-income ratio comprises total expenses (as defined) divided by total income (as defined).

Cost of RiskLoan credit losses charge (cost of risk) (year to date) is calculated as the annualised ‘loan credit losses’ (as defined) divided by average gross loans (the average balance is calculated as the

average of the opening balance and the closing balance).

CRR DD Default Definition.

DFAs Debt for Asset Swaps.

DFEs Debt for Equity Swaps.

DTA Deferred Tax Assets.



76

Digitally engaged customers ratio

This is the ratio of digitally engaged individual customers to the total number of individual customers. Digitally engaged customers are the individuals who use the digital channels of the Bank (mobile

banking app, browser and ATMs) to perform banking transactions, as well as digital enablers such as a bank-issued card to perform online card purchases, based on an internally developed

scorecard.

Digital transactions ratio This is the ratio of the number of digital transactions performed by individuals and legal entity customers to the total number of transactions. Transactions include deposits, withdrawals, internal and

external transfers. Digital channels include mobile, browser and ATMs.

DTC Deferred Tax Credit

EBA European Banking Authority

ECB European Central Bank

Effective yield Interest Income on Loans/Average Net Loans

Effective yield of liquid assetsInterest Income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds). Historical information has been adjusted to take into

account hedging

ESMA European Securities and Markets Authority

Foreclosures Value of on-boarded assets is set at a conservative 25%-30% discount from open market valuations, by two independent sources; Includes consensual and non consensual DFAs and DFEs

FTP Fund transfer pricing methodologies applied between the business lines to present their results on an arm’s length basis

GBV Gross Book Value

Gross Loans

Gross loans are reported before the residual fair value adjustment on initial recognition relating to loans acquired from Laiki Bank (calculated as the difference between the outstanding contractual

amount and the fair value of loans acquired) amounting to €248 mn at 30 June 2020 (compared to €252 mn at 31 March 2020 and €271 mn at 31 December 2019).

Additionally, gross loans include loans and advances to customers classified and measured at fair value through profit and loss adjusted for the aggregate fair value adjustment of €331 mn at 30

June 2020 (compared to €328 mn at 31 March 2020 and €427 mn at 31 December 2019).

Gross Sales Proceeds Proceeds before selling charge and other leakages

GVA Gross Value Added

Group The Group consists οf Bank of Cyprus Holdings Public Limited Company, “BOC Holdings” or the “Company”, its subsidiary Bank of Cyprus Public Company Limited, the “Bank” and the Bank’s

subsidiaries.

H/O Head Office

IB, W&M International Banking, Wealth and Markets



77

IBU Servicing exclusively international activity companies registered in Cyprus and abroad and not residents

Legacy exposures Legacy exposures are exposures relating to (i) Restructuring and Recoveries Division (RRD), (ii) Real Estate Management Unit (REMU), and (iii) non-core overseas exposures

Loan credit losses (PL) (previously

‘Provision charge’)

Loan credit losses comprise: (i) credit losses to cover credit risk on loans and advances to customers, (ii) net gains on derecognition of financial assets measured at amortised cost and (iii) net gains

on loans and advances to customers at FVPL.

Loan to Value ratio (LTV) Loan to Value (LTV) is calculated as the Gross IFRS Balance to the indexed market value of the property. Under Pillar 3 disclosures LTV is calculated as the Gross IFRS Balance to the indexed

market value of collateral. Collateral takes into consideration the mortgage amount registered in the land registry plus legal interest from registration date to the reference date

Market shares

Both deposit and loan market shares are based on data from the CBC.

The Bank is the single largest credit provider in Cyprus with a market share of 41.7% at 30 June 2020, compared to 41.0% at 31 March 2020, 41.1% at 31 December 2019, 40.8% at 30 September

2019, 41.3% at 30 June 2019, 46.7% at 31 March 2019, 45.4% at 31 December 2018 and as at 30 September 2018, 38.6% at 30 June 2018 and 37.4% at 31 March 2018.

The market share on loans was affected as at 30 June 2019 following the derecognition of the Helix portfolio upon the completion of Project Helix announced on 28 June 2019.

The market share on loans was affected during the quarter ended 31 March 2019 following a decrease in total loans in the banking sector of €1 bn, mainly attributed to reclassification, revaluation,

exchange rate and other adjustments (CBC).

The market share on loans was affected as at 30 September 2018 following a decrease in total loans in the banking sector, mainly attributed to €6 bn non-performing loans of Cyprus Cooperative

Bank (CyCB) which remained to SEDIPES as a result of the agreement between CyCB and Hellenic Bank.

The market share on loans was affected as at 30 June 2018 following a decrease in total loans in the banking sector of €2.1 bn, due to loan reclassifications, revaluations, exchange rate or other

adjustments (CBC).

Net Proceeds Proceeds after selling charges and other leakages

Net fee and commission income over

total incomeFee and commission income less fee and commission expense divided by total income (as defined).

Net interest margin (NIM) Net interest margin is calculated as the net interest income (annualised) divided by the ‘quarterly average interest earning assets’ (as defined).

Net loans and advances to

customersComprise gross loans (as defined) net of allowance for expected loan credit losses (as defined, but excluding credit losses on off-balance sheet exposures).

Net loan to deposit ratio Net loan to deposit ratio is calculated as gross loans (as defined) net of allowance for expected loan credit losses (as defined) divided by customer deposits

New lending New lending includes the average YTD change (if positive) for overdraft facilities.



78

Non-interest income

Non-interest income comprises Net fee and commission income, Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates

(excluding net gains on loans and advances to customers at FVPL), Insurance income net of claims and commissions, Net gains/(losses) from revaluation and disposal of investment properties and

on disposal of stock of properties, and Other income.

Non-recurring items

Non-recurring items as presented in the ‘Consolidated Condensed Interim Income Statement – Underlying basis’ relate to the following items, as applicable: (i) advisory and other restructuring costs -

organic, (ii) restructuring costs – Voluntary Staff Exit Plan (VEP), (iii) Provisions/net loss relating to NPE sales, including restructuring expenses, (iv) Loss on remeasurement of investment in associate

upon classification as held for sale (CNP) net of share of profit from associates, and (v) Reversal of impairment of DTA and impairment of other tax receivables.

NPEs

According to the EBA standards and ECB’s Guidance to Banks on Non-Performing Loans (published in March 2017), NPEs are defined as those exposures that satisfy one of the following conditions:

(i) the borrower is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due amount or of the number of days past due,

(ii) defaulted or impaired exposures as per the approach provided in the Capital Requirement Regulation (CRR), which would also trigger a default under specific credit adjustment, distress

restructuring and obligor bankruptcy, (iii) material exposures as set by the CBC , which are more than 90 days past due, (iv) performing forborne exposures under probation for which additional

forbearance measures are extended, and (v) performing forborne exposures under probation that present more than 30 days past due within the probation period. When a specific part of the

exposures of a customer that fulfils the NPE criteria set out above is greater than 20% of the gross carrying amount of all on balance sheet exposures of that customer, then the total customer

exposure is classified as non-performing; otherwise only the specific part of the exposure is classified as non-performing. The NPEs are reported before the deduction of allowance for expected loan

credit losses (as defined).

The exit criteria of NPE forborne are the following:

1. The extension of forbearance measures does not lead to the recognition of impairment or default

2. One year has passed since the forbearance measures were extended

3. There is not, following the forbearance measures, any past due amount or concerns regarding the full repayment of the exposure according to the post forbearance conditions

NPE coverage ratio (previously

‘NPE Provisioning coverage ratio’)The NPE coverage ratio is calculated as the allowance for expected loan credit losses (as defined) over NPEs (as defined).

NPE ratio NPEs ratio is calculated as the NPEs as per EBA (as defined) divided by gross loans (as defined).

NPEs salesNPE sales refer to sales of NPE portfolios completed in each period and contemplated sale transactions, as well as potential further NPE sales, at each reporting date, irrespective of whether or not

they met the held for sale classification criteria at the reporting dates. They include both Project Helix and Project Helix 2, as well as other portfolios.

NSFRThe NSFR is calculated as the amount of “available stable funding” (ASF) relative to the amount of “required stable funding” (RSF), on the basis of Basel III standards. Its calculation is a SREP

requirement. The EBA NSFR will be enforced as a regulatory ratio under CRR II in 2021.

OMV Open Market Value

Operating profit Comprises profit before Total loan credit losses, impairments and provisions (as defined), tax, (profit)/loss attributable to non-controlling interests and non-recurring items (as defined).

p.p. percentage points

Non-legacy Relates to all business lines excluding Restructuring and Recoveries Division (“RRD”), REMU and non-core overseas exposures

Phased-in Capital Conservation

Buffer (CCB)In accordance with the legislation in Cyprus which has been set for all credit institutions, the applicable rate of the CCB is 1.25% for 2017, 1.875% for 2018 and 2.5% for 2019 (fully phased-in).



79

Loan credit losses for impairment of

customer loans Credit losses for impairment of customer loans and gains/(losses) on derecognition of loans and changes in expected cash flows on acquired loans

Profit/(loss) after tax and before non-

recurring items (attributable to the

owners of the Company)

This refers to the profit or loss after tax (attributable to the owners of the Company), excluding any ‘non-recurring items’ (as defined).

Profit/(loss) after tax – organic

(attributable to the owners of the

Company)

This refers to the profit or loss after tax (attributable to the owners of the Company), excluding any ‘non-recurring items’ (as defined, except for the ‘advisory and other restructuring costs – organic’).

Project Helix 2Project Helix 2 refers to the portfolio of loans with a gross book value of €898 mn as at 30 June 2020 for which an agreement for sale was reached on 3 August 2020. For further information please

refer to section B.2.5 Loan portfolio quality of the press release.

qoq Quarter on quarter change

Restructured loans Restructuring activity within quarter as recorded at each quarter end and includes restructurings of NPEs, performing loans and re-restructurings

Risk adjusted yield Interest Income on Loans net of allowance for expected loan credit losses/Net Loans

RRD Restructuring and Recoveries Division

RWA Risk Weighted Assets

RWA Intensity Risk Weighted Assets over Total Assets

Special levy Relates to the special levy on deposits of credit institutions in Cyprus

Stage 2 & Stage 3 Loans Include purchased or originated credit-impaired

Tangible Collateral Restricted to Gross IFRS balance

Total Capital ratio Total capital ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

Total expenses

Total expenses comprise staff costs, other operating expenses and the special levy and contributions to the Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF). It does not include

‘advisory and other restructuring costs-organic’, or any restructuring costs relating to the Voluntary Staff Exit Plan, or any restructuring costs relating to NPE sales. ‘Advisory and other restructuring

costs-organic’ amounted to €3 mn for 2Q2020 (compared to €3 mn for 1Q2020 and €8 mn for 4Q2019). Restructuring costs relating to NPE sales amounted to €1 mn for 2Q2020 (compared to €3

mn for 1Q2020 and €10 mn for 4Q2019). Restructuring costs relating to the Voluntary Staff Exit Plan amounted to nil for 2Q2020 and 1Q2020, compared to €81 mn for 4Q2019.



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Total income Total income comprises net interest income and non-interest income (as defined).

Total loan credit losses, impairments

and provisions

Total loan credit losses, impairments and provisions comprises loan credit losses (as defined), plus impairments of other financial and non-financial assets, plus (provisions)/reversal of provisions for

litigation, claims, regulatory and other matters.

T2 Tier 2 Capital

Underlying basis This refers to the statutory basis after being adjusted for certain items as explained in the Basis of Presentation.

Write offs

Loans together with the associated loan credit losses are written off when there is no realistic prospect of future recovery. Partial write-offs, including non-contractual write-offs, may occur when it is

considered that there is no realistic prospect for the recovery of the contractual cash flows. In addition, write-offs may reflect restructuring activity with customers and are part of the terms of the

agreement and subject to satisfactory performance.

yoy Year on year change


Disclaimer

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This document contains certain forward-looking statements which can usually be identified by terms used such as “expect”, “should be”, “will be” and similarexpressions or variations thereof or their negative variations, but their absence does not mean that a statement is not forward-looking. Examples of forward-lookingstatements include, but are not limited to, statements relating to the Group’s near term and longer term future capital requirements and ratios, intentions, beliefs orcurrent expectations and projections about the Group’s future results of operations, financial condition, expected impairment charges, the level of the Group’s assets,liquidity, performance, prospects, anticipated growth, provisions, impairments, business strategies and opportunities. By their nature, forward-looking statementsinvolve risk and uncertainty because they relate to events, and depend upon circumstances, that will or may occur in the future. Factors that could cause actualbusiness, strategy and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statementsmade by the Group include, but are not limited to: general economic and political conditions in Cyprus and other European Union (EU) Member States, interest rateand foreign exchange fluctuations, legislative, fiscal and regulatory developments and information technology, litigation and other operational risks. Should any one ormore of these or other factors materialise, or should any underlying assumptions prove to be incorrect, the actual results or events could differ materially from thosecurrently being anticipated as reflected in such forward looking statements. The forward-looking statements made in this document are only applicable as from thedate of publication of this document. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to releasepublicly any updates or revisions to any forward looking statement contained in this document to reflect any change in the Group’s expectations or any change inevents, conditions or circumstances on which any statement is based.

Bank of Cyprus Group...Group Financial Results for the six months ended 30 June 2020 1H2020 -...

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