TIDMBOCH
RNS Number : 6591U
Bank of Cyprus Holdings PLC
26 November 2019
Announcement
Group Financial Results for the nine months ended 30 September
2019
Nicosia, 26 November 2019
Key Highlights for the nine months ended 30 September 2019
Good Capital Position
-- Total Capital ratio of 17.9% pro forma for disposal of
investment in CNP and Voluntary Staff Exit Plan (VEP) (18.2% as
reported)
-- CET1 ratio of 14.9% pro forma for disposal of investment in CNP and VEP (15.2% as reported)
Balance Sheet Repair Continues at Pace
-- NPEs of EUR4.1 bn (EUR2.0 bn net); 73% reduction since 2014
-- Gross NPE ratio reduced to 31%, coverage increased to 51%
-- Organic NPE reduction continued ahead of guidance (EUR227 mn
in 3Q2019; EUR684 mn in 9M2019)
-- REMU sales of EUR355 mn in 9M2019
-- Good momentum in efforts to accelerate de-risking with further portfolio sales
Active Liquidity Management
-- Deposits flat qoq at EUR16.5 bn
-- Loan to deposit ratio at 66%
-- Liquidity surplus reduced to EUR3.0 bn on TLTRO repayment
-- Liquidity management strategy underway for specific customer groups
Positive Performance in 3Q2019
-- New lending of EUR491 mn for 3Q2019 and EUR1.6 bn for 9M2019
-- Total Income of EUR162 mn, Operating profit of EUR63 mn
-- Recurring income from on-going insurance business (EUR12 mn in 3Q2019; EUR42 mn in 9M2019)
-- Cost of risk at 0.90%
-- Underlying profit of EUR18 mn for 3Q2019 and EUR35 mn for 9M2019
-- Profit after tax of EUR19 mn for 3Q2019 and EUR116 mn for 9M2019
Cost Management Actions in 4Q2019 Supported by Digital
Transformation
-- Successful completion of VEP in 4Q2019 at one-off cost of
EUR79 mn, supported by the on-going Digital Transformation
Programme
-- Full time employees reduced by 11%
-- Gross annual savings in staff costs of 13% (EUR28 mn)
-- Branch footprint rationalisation continues; further 8%
reduction in number of branches by the year end
-- 75% of transactions (involving deposits, cash withdrawals and
transfers) through digital channels; 54% increase in active mobile
banking users since June 2017
Group Chief Executive Statement
"Our results this quarter reflect continuing progress against
our core objective of balance sheet repair and normalisation of our
Bank.
Following the completion of the sale of c.EUR2.7 bn
non-performing loans in Project Helix in June, which added 140 bps
of capital in the second quarter, the continued organic NPE
reduction remains ahead of our organic target of c.EUR800 mn for
2019. The organic NPE reduction in the third quarter of the year
amounted to EUR227 mn, bringing the total organic reduction in the
nine months of 2019 to EUR684 mn. This represents the eighteenth
consecutive quarter of organic NPE reductions.
Since the peak in 2014, we have now reduced the stock of NPEs by
73% to EUR4.1 bn. This stock of NPEs is now covered by 51% loan
credit losses. Overall, since 2014 we have managed a reduction in
NPEs of EUR10.9 bn, of which EUR8.2 bn has been through organic
actions.
The Bank's capital position remains good and well in excess of
our regulatory requirements. As at 30 September 2019, pro forma for
the sale of our investment in CNP and the voluntary staff exit
plan, our capital ratios (IFRS 9 transitional) were CET1 of 14.9%
and Total Capital ratio of 17.9%.
During the quarter our deposits remained broadly flat at EUR16.5
bn and we reduced our cost of deposits by a further 5 bps. Overall,
we reduced our cost of deposits by 57 bps since January 2018. In
the third quarter of 2019, our new lending in Cyprus grew 20% from
the prior year to EUR491 mn, helping support the continued growth
in the Cypriot economy. Overall in the first nine months of 2019,
we lent EUR1.6 bn to customers. Our loan to deposit ratio at the
quarter-end stood at 66%.
During the third quarter of the year, the Group generated total
income of EUR162 mn and a positive operating result of EUR63 mn.
The underlying result was a profit after tax of EUR18 mn, whilst
the reported profit after tax for the third quarter was EUR19 mn.
After the net loss from the sale of our investment in CNP of EUR21
mn and the net impact from the reversal of impairments of EUR101
mn, the reported profit after tax for the first nine months of the
year amounted to EUR116 mn.
Our on-going insurance business provides recurring income for
the Group and, following the disposal of our investment in CNP, it
remains well positioned for growth over the medium term.
The changed interest rate environment in Europe continues to
present a challenge to our profitability levels. In response, we
remain focused on actively managing our funding costs and reducing
our cost base. We have made progress in these areas this
quarter.
In September, we decided to early repay ECB funding in the form
of TLTRO of EUR830 mn, given the comfortable liquidity position.
The repayment is expected to result in savings as these funds were
deposited at negative interest rates. The Bank continues to operate
with a significant liquidity surplus, which at the end of the third
quarter amounted to EUR3.0 bn.
In October, we completed a voluntary staff exit plan through
which c.470 applicants were approved to leave at a total one-off
cost of c.EUR79 mn to be recorded in the fourth quarter, reducing
the number of our employees by c.11%, whilst gross annual savings
are estimated at c.EUR28 mn or c.13% of staff costs. In addition,
we continue our branch footprint rationalisation as we expect to
reduce the number of our branches by a further 8% by the year end,
further improving our operating model. We remain focused on further
improvement in efficiency.
These actions have been supported by our on-going Digital
Transformation Programme. The adoption of digital products and
services continues to grow and gain momentum. Today, 75% of
transactions involving deposits, cash withdrawals and transfers,
are performed through digital channels, whilst the number of active
users of mobile banking has increased by 54% since June 2017.
The Bank is returning to strength, through a disciplined
approach to balance sheet repair, the disposal of non-core
businesses and cost rationalisation through digital transformation.
Good progress has been made throughout the year, however there
remains more to do and we are focused on delivering balance sheet
de-risking at pace and further efficiency gains across our cost
base. Our strategy of making the Bank stronger, safer and
future-focused is unchanged. This will enable us to continue to
support the strengthening Cypriot economy, which expanded by 3.1%
during the first nine months of the year.
I am looking forward to sharing my perspectives and vision for
the future of our Bank with the release of the full year financial
results."
Panicos Nicolaou
A. Group Financial Results - Underlying Basis
Unaudited Interim Condensed Consolidated Income Statement
--------------------------------------------------------------------------------------------------------
9M2018(1) qoq
EUR mn 9M2019(1) represented(2) 3Q2019(1) 2Q2019(1) +% yoy +%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Net interest income 260 250 90 85 5% 4%
Net fee and commission
income 111 122 36 38 -5% -9%
Net foreign exchange
gains and net gains on
financial instrument
transactions and
disposal/dissolution
of subsidiaries and
associates 34 52 8 16 -49% -34%
Insurance income net of
claims and commissions 42 38 12 18 -34% 11%
Net gains from
revaluation and
disposal of investment
properties and on
disposal of stock
of properties 26 15 10 12 -25% 65%
Other income 22 17 6 8 -22% 25%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Total income 495 494 162 177 -9% 0%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Staff costs (167) (154) (55) (56) -2% 8%
Other operating
expenses (122) (114) (38) (43) -12% 7%
Special levy and
contribution to Single
Resolution Fund (18) (18) (6) (6) 2% 2%
Total expenses (307) (286) (99) (105) -6% 7%
--------- -------------------- ------------- ----------- -------
Operating profit 188 208 63 72 -13% -10%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Loan credit losses (117) (104) (30) (40) -26% 12%
(Impairments)/reversal
of impairments of
other financial and
non-financial assets (9) (12) 1 (9) -109% -21%
(Provisions)/reversal
of provisions for
litigation, regulatory
and other matters (3) (9) (6) 3 - -62%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Total loan credit
losses, impairments
and provisions (129) (125) (35) (46) -27% 4%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Profit before tax and
non-recurring items 59 83 28 26 15% -29%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Tax (1) (4) (1) 2 - -82%
(Profit)/loss
attributable to
non-controlling
interests (2) 3 0 (2) - -
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Profit after tax and
before non-recurring
items 56 82 27 26 6% -32%
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Advisory and other
restructuring costs -
excluding discontinued
operations and NPE
sale (Helix) (21) (26) (9) (5) 99% -18%
======================= ========= ==================== ============= =========== ======= =========
Profit after tax -
Organic 35 56 18 21 -15% -38%
======================= ========= ==================== ============= =========== ======= =========
Profit from
discontinued
operations (UK) - 4 - - - -
Profit/(loss) relating
to NPE sale (Helix) 1 (105) 1 4 - -
Loss on remeasurement
of investment in
associate classified
as held for sale (CNP)
net of
share of profit from
associates (21) 8 0 (23) - -
Reversal of impairment
of DTA and impairment
of other tax
receivables 101 - - - - -
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Profit/(loss) after tax
- attributable to the
owners of the Company 116 (37) 19 2 - -
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Key Performance qoq
Ratios(2) 9M2019(1) 9M2018(1,2) 3Q2019(1) 2Q2019(1) + yoy +
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Net Interest Margin
(annualised) 1.92% 1.84% 1.99% 1.89% +10 bps +8bps
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Cost to income ratio 62% 58% 61% 59% +2 p.p. +4 p.p.
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Cost to income ratio
excluding special levy
and contribution to
Single Resolution Fund 58% 54% 57% 56% +1 p.p. +4 p.p.
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Operating profit return
on average assets
(annualised) 1.2% 1.3% 1.2% 1.3% -10 bps -10 bps
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Basic earnings per
share attributable to
the owners of the
Company (EUR cent) -
Organic 7.78 12.59 4.06 4.78 -0.72 -4.81
----------------------- --------- -------------------- ------------- ----------- ------- ---------
Basic earnings/(losses)
per share attributable
to the owners of the
Company (EUR cent) 25.92 (8.28) 4.08 0.61 3.47 34.20
----------------------- --------- -------------------- ------------- ----------- ------- ---------
1. The interest income, non-interest income, staff costs, other operating expenses and loan
credit losses related to Project Helix are disclosed under 'Profit/(loss) relating to NPE
sale (Helix)' in the underlying basis. 2. Including the impact from IFRIC Presentation of
unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)).
This resulted in a reclassification between net interest income and loan credit losses, with
no impact on the overall profitability. p.p. = percentage points, bps = basis points, 100
basis points (bps) = 1 percentage point
Unaudited Interim Condensed Consolidated Balance Sheet
======================================================================================================
EUR mn 30.09.2019 31.12.2018 +%
(restated)
================================== ================ ========================== ================
Cash and balances with central
banks 4,413 4,610 -4%
Loans and advances to banks 428 473 -9%
Debt securities, treasury bills
and equity investments 1,975 1,515 30%
Net loans and advances to
customers 10,971 10,922 0%
Stock of property 1,399 1,427 -2%
Investment properties 138 127 8%
Other assets 1,601 1,531 5%
Non-current assets and disposal
groups held for sale 189 1,470 -87%
================================== ================ ========================== ================
Total assets 21,114 22,075 -4%
================================== ================ ========================== ================
Deposits by banks 451 432 4%
Funding from central banks - 830 -
Repurchase agreements 250 249 1%
Customer deposits 16,473 16,844 -2%
Subordinated loan stock 268 271 -1%
Other liabilities 1,190 1,082 10%
================================== ================ ========================== ================
Total liabilities 18,632 19,708 -5%
================================== ================ ========================== ================
Shareholders' equity 2,234 2,121 5%
================================== ================ ========================== ================
Other equity instruments 220 220 -
================================== ================ ========================== ================
Total equity excluding
non-controlling
interests 2,454 2,341 5%
================================== ================ ========================== ================
Non-controlling interests 28 26 9%
================================== ================ ========================== ================
Total equity 2,482 2,367 5%
================================== ================ ========================== ================
Total liabilities and equity 21,114 22,075 -4%
================================== ================ ========================== ================
Key Balance Sheet figures and 31.12.2018 +
ratios 30.09.2019
================================== ==================== ============= =========== ================
Gross loans (EUR mn) 13,035 13,148 -1%
================================== ==================== ============= =========== ================
Allowance for expected loan
credit losses (EUR mn) 2,086 2,254 -7%
================================== ==================== ============= =========== ================
Customer deposits (EUR mn) 16,473 16,844 -2%
================================== ==================== ============= =========== ================
Loans to deposits ratio (net) 66% 65% +1 p.p.
================================== ==================== ============= =========== ================
NPE ratio 31% 36% -5 p.p.
================================== ==================== ============= =========== ================
NPE coverage ratio 51% 47% +4 p.p.
================================== ==================== ============= =========== ================
Leverage ratio 10.9% 10.0% 0.9 p.p.
================================== ==================== ============= =========== ================
Capital ratios and risk weighted 30.09.2019 30.09.2019 31.12.2018 +
assets Pro forma
for CNP
and VEP
================================== ==================== ============= =========== ================
Common Equity Tier 1 (CET1)
ratio (transitional for IFRS
9)(1) 14.9% 15.2% 11.9%(2) +330 bps
================================== ==================== ============= =========== ================
Total capital ratio 17.9% 18.2% 14.9% +330 bps
================================== ==================== ============= =========== ================
Risk weighted assets (EUR mn) 13,520 13,758 15,373 -11%
================================== ==================== ============= =========== ================
1. The CET1 FL ratio as at 30 September 2019 (including the full impact
of IFRS 9) amounts to 13.6% and 13.3% pro forma for CNP and VEP (compared
to 13.3% and 13.5% pro forma for CNP as at 30 June 2019, 11.9% and
13.3% pro forma for Helix as at 31 March 2019, and 10.1% and 13.5%
pro forma for DTC and Helix as at 31 December 2018). 2. The CET1 ratio
transitional also for DTA as at 31 December 2018 stood at 12.1%. p.p.
= percentage points, bps = basis points, 100 basis points (bps) =
1 p.p.
Commentary and Comparative Information
The Group adopted the accounting standard IFRS 16 'Leases' on 1
January 2019. The impact on adoption was an increase in assets of
EUR37 mn and an increase in liabilities of EUR37 mn with no impact
on retained earnings or equity of the Group. The effect of the
adoption of IFRS 16 remains subject to change until the Group
finalises its financial statements for the year ended 31 December
2019, the year of initial application.
Comparative information was restated following the change in the
classification of properties which are leased out under operating
leases as investment properties. In relation to these properties,
an amount of EUR103 mn was reclassified from 'Stock of property' to
'Investment Properties'.
Reclassifications to comparative information were also made for
unrecognised interest on previously credit impaired loans which
have cured during the period amounting to EUR24 mn. This was
reclassified from 'Net interest income' to 'Credit losses to cover
credit risk on loans and advances to customers' in line with an
IFRIC discussion, which has taken place in November 2018
(Presentation of unrecognised interest following the curing of a
credit impaired financial asset (IFRS 9)). The corresponding amount
for the nine months ended 30 September 2019 stood at EUR12 mn.
A.1. Balance Sheet Analysis
A.1.1 Capital Base
Total equity excluding non-controlling interests totalled
EUR2,454 mn at 30 September 2019, compared to EUR2,442 mn at 30
June 2019 and EUR2,341 mn at 31 December 2018. Shareholders' equity
totalled EUR2,234 mn at 30 September 2019, compared to EUR2,222 mn
at 30 June 2019 and EUR2,121 mn at 31 December 2018.
The Common Equity Tier 1 capital (CET1) ratio on an IFRS 9
transitional basis stood at 15.2% at 30 September 2019 (and 14.9%
pro forma for the sale of investment in CNP Cyprus Insurance
Holdings Ltd (CNP) (referred to as "pro forma for CNP") and for the
voluntary staff exit plan (VEP), collectively referred to as "pro
forma for CNP and VEP"), compared to 14.9% at 30 June 2019 (and
15.2% pro forma for CNP) and to 11.9% at 31 December 2018 (adjusted
to take into account the deferred tax assets (DTAs) which were
fully phased in as of 1 January 2019). During 3Q2019 the CET1 ratio
was positively affected mainly by the decrease in risk weighted
assets (RWAs). The CET1 ratio as at 30 September 2019 includes
unreviewed profits for the nine months ended 30 September 2019.
The Group has elected to apply the EU transitional arrangements
for regulatory capital purposes (EU Regulation 2017/2395) where the
impact on the impairment amount from the initial application of
IFRS 9 on the capital ratios is phased-in gradually. The amount
added each year decreases based on a weighting factor until the
impact of IFRS 9 is fully absorbed back to CET1 at the end of the
five years. The impact on the capital ratios for the year 2018 was
5% of the impact on the impairment amounts from the initial
application of IFRS 9, increasing to 15% (cumulative) for the year
2019. The CET1 ratio on a fully-loaded basis amounts to 13.6% at 30
September 2019 and 13.3% pro forma for CNP and VEP, compared to
13.3% at 30 June 2019 (and 13.5% pro forma for CNP) and to 10.1% at
31 December 2018 (and 13.5% pro forma for DTC and Helix). On a
transitional basis and on a fully phased-in basis, after the five
year period of transition is complete, the impact of IFRS 9 is
expected to be manageable and within the Group's capital plans.
As at 30 September 2019, the Total Capital ratio stood at 18.2%
(and 17.9% pro forma for CNP and VEP), compared to 17.8% at 30 June
2019 (and 18.1% pro forma for CNP) and to 14.9% at 31 December
2018.
The Group's capital ratios are above the minimum CET1 regulatory
capital requirement of 10.5% (comprising a 4.5% Pillar I
requirement, a 3.0% Pillar II requirement, the Capital Conservation
Buffer of 2.5% and the Other Systemically Important Institution
Buffer of 0.5%) and the overall Total Capital requirement of 14.0%,
comprising an 8.0% Pillar I requirement (of which up to 1.5% can be
in the form of Additional Tier 1 capital and up to 2.0% in the form
of Tier 2 capital), a 3.0% Pillar II requirement (in the form of
CET1), the Capital Conservation Buffer of 2.5% and the Other
Systemically Important Institution Buffer of 0.5%. The ECB has also
provided non-public guidance for an additional Pillar II CET1
buffer.
Pillar II add-on capital requirements derive from the context of
the Supervisory Review and Evaluation Process (SREP), which is a
point in time assessment, and are therefore subject to change over
time.
In accordance with the provisions of the Macroprudential
Oversight of Institutions Law of 2015, the Central Bank of Cyprus
(CBC) is the responsible authority for the designation of banks
that are Other Systemically Important Institutions (O-SIIs) and for
the setting of the O-SII buffer requirement for these systemically
important banks. The Group has been designated as an O-SII and the
O-SII buffer currently set by the CBC for the Group is 2%. This
buffer is being 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.
Following the annual SREP performed by the ECB in 2019 and based
on the pre-notification received in September 2019, the Group's
minimum phased-in CET1 capital ratio and Total Capital ratio remain
unchanged, when ignoring the phasing-in of the Other Systemically
Important Institution Buffer. The Group's phased-in CET1 capital
ratio is expected to be 11.0%, comprising a 4.5% Pillar I
requirement, a 3.0% Pillar II requirement, the Capital Conservation
Buffer of 2.5% (fully phased-in as of 1 January 2019) and the Other
Systemically Important Institution Buffer of 1.0%. The Group's
Total Capital requirement is expected to be 14.5%, comprising an
8.0% Pillar I requirement, a 3.0% Pillar II requirement, the
Capital Conservation Buffer of 2.5% and the Other Systemically
Important Institution Buffer of 1.0%. The new SREP requirements are
expected to be effective from January 2020 and remain subject to
ECB final confirmation.
The EBA final guidelines on SREP and supervisory stress testing
and the Single Supervisory Mechanism's (SSM) 2018 SREP methodology
provide that 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 twice. Following the Annual Supervisory
Review and Evaluation Process (SREP) performed by the ECB in 2019
and based on the pre-notification received in September 2019, the
new provisions are expected to be effective from January 2020 and
remain subject to ECB final confirmation.
The Group capital ratios remain above the SREP requirements.
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 2018 and 2017. Following the 2018 SREP decision, the
Company and the Bank are still under equity dividend distribution
prohibition. This prohibition does not apply if the distribution is
made via the issuance of new ordinary shares to the shareholders,
which are eligible as CET1 capital. No prohibition applies to the
payment of coupons on any AT1 capital instruments issued by the
Company or the Bank.
Additional Tier 1
In December 2018, the Company proceeded with the issuance of
EUR220 mn of Additional Tier 1 Capital Securities (AT1). AT1
constitutes an unsecured and subordinated obligation of the
Company. The coupon is at 12.50% and is payable semi-annually. The
first coupon payment to AT1 holders was made in June 2019 and was
recognised in retained earnings.
Legislative amendments for the conversion of DTA to DTC
Legislative amendments allowing for the conversion of specific
deferred tax assets (DTA) into deferred tax credits (DTC) were
adopted by the Cyprus Parliament on 1 March 2019 and published in
the Official Gazette of the Republic on 15 March 2019. The law
amendments cover the income tax losses transferred from Laiki Bank
to the Bank in March 2013. The introduction of CRD IV in January
2014 and its subsequent phasing-in led to a more capital intensive
treatment of this DTA for the Bank. The law amendments have
resulted in improved regulatory capital treatment, under Capital
Requirements Regulation (EU) No. 575/2013 ("CRR"), of the DTA
amounting to c.EUR285 mn or a CET1 uplift of c.190 bps.
Project Helix
In June 2019, Project Helix was completed resulting in a
positive impact of c.140 bps on both the Group's CET1 and Total
Capital ratios, mainly from the release of risk weighted assets.
Project Helix had an overall net positive impact on the Group
capital ratios of c.60 bps.
Sale of investment in CNP Cyprus Insurance Holdings Ltd
In October 2019, the sale of the Group's investment in its
associate CNP Cyprus Insurance Holdings Limited ("CNP") was
completed, resulting in a positive impact of c.30 bps on both the
Group's CET1 and Total Capital ratios, mainly from the release of
risk weighted assets. The shareholding had been acquired as part of
the acquisition of certain operations of Laiki Bank in 2013 and was
sold to CNP Assurances S.A. for a cash consideration of EUR97.5
mn.
Voluntary Staff Exit Plan
In October 2019, the Group completed a voluntary staff exit plan
with an estimated cost of EUR79 mn which will be recognised in the
consolidated income statement in the fourth quarter, resulting in a
negative impact of c.60 bps on both the Group's CET1 and Total
Capital ratios.
Pro forma capital ratios
With the completion of the sale of the Group's investment in its
associate CNP and the voluntary staff exit plan (VEP), both of
which took place in 4Q2019, the CET1 ratio (IFRS 9 transitional
basis) of 15.2% as at 30 September 2019 changes to 14.9% pro forma
for CNP and VEP. The Total Capital ratio of 18.2% as at 30
September 2019 changes to 17.9% pro forma for CNP and VEP.
Share premium reduction of the Bank
The Bank will proceed (subject to approvals mainly by the Court
of Cyprus and the ECB) with a capital reduction process which will
result in the reclassification of c.EUR551 mn of the Bank's share
premium account balance as distributable reserves which shall be
available for distribution to the shareholders of the Bank,
resulting in total net distributable reserves of c.EUR1 bn on a pro
forma basis (30 September 2019). The reduction of capital will not
have any impact on regulatory capital or the total equity position
of the Bank or the Group.
The distributable reserves provide the basis for the calculation
of distributable items under the CRR, which provides that coupons
on AT1 capital instruments may only be funded from distributable
items.
A.1.2 Funding and Liquidity
Funding
Funding from Central Banks
At 30 September 2019, the Bank had no funding from central
banks. At 30 June 2019, the Bank's funding from central banks
amounted to EUR830 mn, which related to ECB funding (at the same
level as at 31 March 2019 and 31 December 2018), comprising solely
of funding through the Targeted Longer-Term Refinancing Operations
(TLTRO II).
In September 2019, the Bank decided to early repay the ECB
funding, given its comfortable liquidity position. The repayment is
expected to result in savings for the Bank as these funds were
deposited at negative interest rates.
Deposits
Customer deposits totalled EUR16,473 mn at 30 September 2019,
compared to EUR16,377 mn at 30 June 2019 and EUR16,844 mn at 31
December 2018.
The Bank's deposit market share in Cyprus reached 34.6% as at 30
September 2019, compared to 34.7% as at 30 June 2019. Customer
deposits accounted for 78% of total assets at 30 September
2019.
The Loan to Deposit ratio (L/D) stood at 66% as at 30 September
2019, compared to 67% as at 30 June 2019 and to a peak of 151% as
at 31 March 2014. The L/D ratio was reduced by 7 p.p. upon
completion of Project Helix in 2Q2019, compared to 74% as at 31
March 2019 when ignoring the classification of the Helix portfolio
as a disposal group held for sale (and to 72% at 31 December 2018
on the same basis).
Subordinated Loan Stock
At 30 September 2019 the Bank's subordinated loan stock
(including accrued interest) amounted to EUR268 mn (compared to
EUR261 mn at 30 June 2019 and EUR271 mn as at 31 December 2018) and
relates to unsecured subordinated Tier 2 Capital Notes of nominal
value EUR250 mn, issued by the Bank in January 2017.
Liquidity
At 30 September 2019 the Group Liquidity Coverage Ratio (LCR)
stood at 218% (compared to 253% at 30 June 2019 and 231% at 31
December 2018) and was in compliance with the minimum regulatory
requirement of 100%.
The liquidity surplus at 30 September 2019 decreased to EUR3.0
bn, from EUR3.8 bn at 30 June 2019, following the repayment of ECB
funding amounting to EUR830 mn. At 30 June 2019, the liquidity
surplus had increased to EUR3.8 bn, from EUR2.7 bn at 31 March
2019, reflecting a EUR1.2 bn increase in liquidity on Helix
completion.
The Net Stable Funding Ratio (NSFR) has not yet been introduced.
It will become a regulatory indicator when CRR2 is enforced,
currently expected in 2021, with the limit set at 100%. At 30
September 2019, the Group's NSFR, on the basis of Basel standards,
stood at 122% (compared to 128% at 30 June 2019 and 119% at 31
December 2018).
A.1.3 Loans
Group gross loans totalled EUR13,035 mn at 30 September 2019,
compared to EUR13,072 mn at 30 June 2019, EUR15,882 mn at 31 March
2019 and EUR15,900 mn at 31 December 2018. Gross loans in Cyprus
totalled EUR12,942 mn at 30 September 2019. The reduction in gross
loans by 18% since the beginning of the year is attributed mainly
to the completion of Project Helix (sale of EUR2.8 bn of gross
loans of which EUR2.7 bn related to non-performing loans) and to a
lesser extent to the completion of Project Velocity (sale of EUR30
mn gross loans as at the date of disposal, relating wholly to
non-performing loans) in 2Q2019. New loans granted in 3Q2019
reached EUR491 mn, bringing the new loans granted in 9M2019 to
EUR1,602 mn, exceeding new lending in Cyprus in 9M2018.
At 30 September 2019, the Group net loans and advances to
customers totalled EUR10,971 mn (compared to EUR10,949 mn at 30
June 2019, EUR10,955 mn at 31 March 2019 pro forma for Helix (and
Velocity) and EUR10,922 mn at 31 December 2018 on the same
basis).
The Bank is the single largest credit provider in Cyprus with a
market share of 40.8% at 30 September 2019, compared to 41.3% at 30
June 2019 and 46.7% at 31 March 2019, with the reduction in 2Q2019
reflecting the derecognition of the Helix portfolio on
completion.
A.1.4 Loan portfolio quality
Tackling the Group's loan portfolio quality remains the top
priority for management. The Group continues to make steady
progress across all asset quality metrics and the loan
restructuring activity continues. The Group has been successful in
engineering restructuring solutions across the spectrum of its loan
portfolio.
Non-performing exposures (NPEs) as defined by the European
Banking Authority (EBA) were reduced by EUR227 mn or 5% during
3Q2019, bringing the total organic reduction in NPEs in 9M2019 to
EUR684 mn, ahead of the target for organic NPE reduction of
c.EUR800 mn for 2019. NPEs at 30 September 2019 amounted to
EUR4,085 mn, compared to EUR4,312 mn at 30 June 2019 and EUR7,419
mn at 31 December 2018.
The NPEs account for 31% of gross loans as at 30 September 2019,
compared to 33% as at 30 June 2019, 46% as at 31 March 2019,
ignoring the classification of the Helix (and Velocity) portfolio
as disposal groups held for sale, and 47% at 31 December 2018 (on
the same basis).
The NPE coverage ratio improved to 51% at 30 September 2019,
compared to 50% at 30 June 2019, 48% at 31 March 2019 pro forma for
Helix and 47% at 31 December 2018 on the same basis. Ignoring the
classification of the Helix (and Velocity) portfolios as disposal
groups held for sale, the NPE coverage ratio as at 31 March 2019
stood at 53% and at 31 December 2018 stood at 52%.
When taking into account tangible collateral at fair value, NPEs
are fully covered.
30.09.2019 30.06.2019
% gross % gross
EUR loans EUR mn loans
mn
=============================== ======== ========== ========= ==========
NPEs as per EBA definition 4,085 31.3% 4,312 33.0%
Of which, in pipeline
to exit: 530 4.1% 657 5.0%
-NPEs with forbearance
measures, no arrears(1)
=============================== ======== ========== ========= ==========
1. The analysis is performed on a customer basis.
Overall, the Group has recorded organic NPE reductions for
eighteen consecutive quarters and expects the organic reduction of
NPEs to continue in the next quarter, in line with the target of
c.EUR800 mn for 2019.
The Group remains focused on continuing to improve its asset
quality position and to seek solutions, both organic and inorganic,
to make the Bank a stronger and safer institution, capable of
supporting the local economy.
Project Helix
In June 2019, the Group announced the completion of Project
Helix, that refers to the sale of a portfolio of loans with a gross
book value of EUR2.8 bn (of which EUR2.7 bn related to
non-performing loans) (the "Portfolio") secured by real estate
collateral to certain funds affiliated with Apollo Global
Management LLC, the agreement for which was announced on 28 August
2018.
Upon completion of Project Helix, the Group's gross NPEs were
c.70% lower than its peak in 2014. Project Helix reduced the NPE
ratio by c.11 p.p. to 33% as at 30 June 2019.
Cash consideration of c.EUR1.2 bn was received on completion,
reflecting adjustments resulting from, inter alia, loan repayments
received on the Portfolio since the reference date of 31 March
2018.
The participation of the Bank in the senior debt in relation to
financing the Transaction was syndicated down from the initial
level of EUR450 mn to c.EUR45 mn, representing c.4% of the total
acquisition funding.
ESTIA
In July 2018 the Government announced a scheme aimed at
addressing NPEs backed by primary residence, known as ESTIA (the
'Scheme'). The ESTIA eligible portfolio of c.EUR0.83 bn of retail
core NPEs, refers to the potentially eligible portfolio following
on-going detailed assessment based on the Bank's available data on
Open Market Value (OMV) and NPE status. Eligibility criteria relate
primarily to the OMV of the residence, total income and net wealth
of the household. These will act as a clear definition of socially
protected borrowers, acting as an enabler against strategic
defaulters. In accordance with the Scheme, the eligible loans are
to be restructured to the lower of the contractual balance and the
OMV. The Government will subsidise one third of the instalment of
the restructured loan, subject to the borrowers servicing their
restructured loans.
In July 2019 the Memorandum of Understanding was signed by the
institutions and the Government for participation in the Scheme,
which was officially launched in September 2019. According to the
updated timeline provided by the Government in November 2019,
application submissions will continue until the end of the year,
with evaluation by the institutions running concurrently until
mid-January 2020. The participating institutions will offer
restructuring solutions to the applicants until the end of January
2020 and simultaneously the applications will be reviewed and
approved by the Government, with the process expected to finish by
mid-May 2020. The 1(st) payment of the state subsidy instalment is
expected to occur between December 2019 and June 2020 (please refer
to slide 7 of the Results Presentation for the nine months ended 30
September 2019).
The Scheme is expected to resolve part of the ESTIA-eligible
portfolio (487 applications (c.EUR120 mn) have been received by the
Bank until 22 November 2019), to identify non-viable customers for
which alternative restructuring solutions are being considered and
to facilitate the resolution of the remaining customers mainly by
focusing on realising collateral through consensual and
non-consensual foreclosures.
Project Velocity
In June 2019, the Bank completed the sale of a non-performing
loan portfolio of primarily retail unsecured exposures, with a
contractual balance of EUR245 mn and a gross book value of EUR34 mn
as at 30 September 2018 (known as "Project Velocity" or the "Sale")
to APS Delta s.r.o. This portfolio comprised 9,700 heavily
delinquent borrowers, including 8,800 private individuals and 900
small-to-medium-sized enterprises. The gross book value of this
portfolio as at the date of disposal was EUR30 mn. The Sale was
broadly neutral to both the profit and loss account and to
capital.
Additional strategies to accelerate de-risking
The Group continues to assess the potential to accelerate the
decrease in NPEs on its balance sheet through additional sales of
NPEs. To that extent the Group has, during the second half of 2019,
embarked on a preparation phase to review the feasibility of NPE
reduction structures with the aim of identifying the option that
best meets the Group's strategic objectives. The preparation phase
involves defining the relevant NPE portfolio, evaluation of real
estate collaterals, data remediation and enhancement of data tapes,
borrower information memorandums, legal due diligence and
transaction structuring options. For the purposes of completing the
workstreams outlined above and in order to conclude on the best
possible structure, the Group has engaged international advisors,
and is proceeding to engage in high level discussions via the
signing of confidentiality agreements with various third parties,
including financial investors and investment banks, that may be
interested in pursuing a possible collaboration with the Group. A
range of potential outcomes of this preparation phase is possible,
including outright sales (including the Bank retaining a portion of
the related financing). Any potential transactions are expected to
involve in total a portfolio of NPEs in excess of EUR2 bn by gross
book value. The Group is not committed to any outcome arising from
this preparation phase, which is currently expected to be finalised
in the first half of 2020.
A.1.5 Real Estate Management Unit (REMU)
The Real Estate Management Unit (REMU) on-boarded EUR159 mn of
assets in 9M2019 (down by 49% yoy), via the execution of debt for
asset swaps and repossessed properties. The focus for REMU is
increasingly shifting from on-boarding of assets resulting from
debt for asset swaps towards the disposal of these assets. The
Group completed organic disposals of EUR159 mn in 9M2019 (compared
to EUR154 mn in 9M2018), resulting in a profit on disposal of EUR26
mn for 9M2019. During the nine months ended 30 September 2019, the
Group executed sale-purchase agreements (SPAs) with contract value
of EUR195 mn (433 properties), excluding the sale of the Cyreit. In
addition, the Group signed SPAs for disposals of assets with
contract value of EUR65 mn.
Completion of sale of Cyreit
In November 2018, the Bank signed an agreement for the disposal
of its entire holding in the investment shares of the Cyreit
Variable Capital Investment Company PLC (Cyreit). During 2Q2019,
the Group completed the sale of the Cyreit (21 properties),
recognising a loss on disposal of c.EUR1 mn. The total proceeds
from the disposal of Cyreit were EUR160 mn.
Completion of Project Helix
With the completion of Project Helix in 2Q2019, properties with
carrying value of EUR109 mn, which were included in the portfolio
for the NPE sale (Helix), were derecognised as of 30 June 2019. As
at 31 March 2019, properties with carrying value of EUR98 mn were
included in the portfolio for the NPE sale (Helix), compared to
EUR74 mn as at 31 December 2018.
Change in classification of properties which are leased out
under operating leases
In 2Q2019, the Group decided to classify the leased properties
acquired in exchange of debt and leased out under operating leases
as 'Investment Properties' instead of 'Stock of property'. This
change was applied retrospectively, resulting in the restatement of
comparatives.
As a result of the above change in classification, properties
with carrying value of EUR103 mn as at 31 December 2018 were
reclassified from the stock of properties (measured at the lower of
cost and net realisable value under IAS 2) to investment properties
(measured at fair value under IAS 40). These properties continue to
be managed by REMU. The carrying value of such properties as at 30
June 2019 was EUR118 mn.
This change in classification had no material impact on the
Group's comparative retained earnings and a cumulative impact of
EUR1 mn gain was recognised under 'Net gains from revaluation and
disposal of investment properties and on disposal of stock of
properties' in 2Q2019.
Assets held by REMU
As at 30 September 2019, assets held by REMU had a carrying
value of EUR1,513 mn (comprising properties of EUR1,399 mn
classified as 'Stock of property' and EUR114 mn as 'Investment
Properties'), compared to EUR1,548 mn as at 30 June 2019
(comprising properties of EUR1,430 mn classified as 'Stock of
property' and EUR118 mn as 'Investment Properties') and to EUR1,530
mn as at 31 December 2018 (comprising properties of EUR1,427 mn
classified as 'Stock of property' and EUR103 mn as 'Investment
Properties').
In addition to assets held by REMU, properties classified as
'Investment properties' with carrying value of EUR24 mn as at 30
September 2019, 30 June 2019 and as at 31 December 2018, relate to
legacy properties held by the Bank before the set-up of REMU in
January 2016.
Assets held by REMU (Group) qoq
EUR mn 9M2019 9M2018 3Q2019 2Q2019 +% yoy +%
------ ------ ------ ------ ----
Opening balance 1,530 1,641 1,548 1,542 0% -7%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
On-boarded assets (including construction cost) 159 311 33 81 -59% -49%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Sales (159) (154) (67) (62) 8% 4%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Transfer to investment properties (Cyreit) - (166) - - - -
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Impairment loss (12) (17) (2) (8) -82% -30%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Transfer to non-current assets and disposal groups held for sale (5) (60) 1 (5) - -91%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Foreign exchange and other movements - 3 - - - -
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Closing balance 1,513 1,558 1,513 1,548 -2% -3%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Analysis by type and country Cyprus Greece Romania Total
30 September 2019 (EUR mn)
------------------------------ ------- ------- -------- ------
Residential properties 182 27 0 209
Offices and other commercial
properties 218 30 9 257
Manufacturing and industrial
properties 79 37 0 116
Hotels 28 0 - 28
Land (fields and plots) 893 7 3 903
Total 1,400 101 12 1,513
------- ------- --------
Cyprus Greece Romania Total
31 December 2018 (EUR mn)
------------------------------- ------- ------- -------- ------
Residential properties 164 25 0 189
Offices and other commercial
properties 228 44 7 279
Manufacturing and industrial
properties 80 38 0 118
Hotels 35 0 - 35
Land (fields and plots) 896 8 4 908
Properties under construction 1 - - 1
------------------------------- ------- ------- -------- ------
Total 1,404 115 11 1,530
------------------------------- ------- ------- -------- ------
A.1.6 Non-core overseas exposures
The remaining non-core overseas net exposures (including both
on-balance sheet and off-balance sheet exposures) at 30 September
2019 are as follows:
EUR mn 30 September 2019 31 December 2018
------------------
Greece 138 164
Romania 32 35
Serbia 0 7
Russia 18 23
UK 0 11
--------- ------------------ -----------------
Total 188 240
--------- ------------------ -----------------
The Group continues its efforts for further deleveraging and
disposal of non-essential assets and operations in Greece, Romania
and Russia.
In accordance with the Group's strategy to exit from overseas
non-core operations, the operations of the branch in Romania were
terminated in January 2019, following the completion of
deregistration formalities with respective authorities.
During 3Q2019 the disposal of the overseas exposure in Serbia,
comprising loans and properties, with a carrying value of EUR8 mn
was completed.
In addition to the above, as at 30 September 2019, there were
overseas exposures of EUR279 mn in Greece, relating to both loans
and properties (compared to EUR311 mn at 30 June 2019 and EUR144 mn
at 31 December 2018), not identified as non-core exposures, since
they are considered by management as exposures arising in the
normal course of business.
A.2. Income Statement Analysis
A.2.1 Total income
9M2018(1) qoq
EUR mn 9M2019(1) represented(2) 3Q2019(1) 2Q2019(1) +% yoy +%
--------- --------------- --------- --------- -------
Net interest income 260 250 90 85 5% 4%
---------------------------------------- --------- --------------- --------- --------- ------- ------
Net fee and commission income 111 122 36 38 -5% -9%
Net foreign exchange gains and
net gains on financial instrument
transactions and disposal/dissolution
of subsidiaries and associates 34 52 8 16 -49% -34%
Insurance income net of claims
and commissions 42 38 12 18 -34% 11%
Net gains from revaluation and
disposal of investment properties
and on disposal of stock of properties 26 15 10 12 -25% 65%
Other income 22 17 6 8 -22% 25%
---------------------------------------- --------- --------------- --------- --------- ------- ------
Non-interest income 235 244 72 92 -22% -4%
---------------------------------------- --------- --------------- --------- --------- ------- ------
Total income 495 494 162 177 -9% 0%
---------------------------------------- --------- --------------- --------- --------- ------- ------
Net Interest Margin (annualised) 1.92% 1.84% 1.99% 1.89% +10 bps +8 bps
---------------------------------------- --------- --------------- --------- --------- ------- ------
Average interest earning assets(1)
(EUR mn) 18,103 18,109 17,962 18,149 -1% 0%
---------------------------------------- --------- --------------- --------- --------- ------- ------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses related to Project Helix are disclosed
under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying
basis. 2. Including the impact from IFRIC Presentation of unrecognised
interest following the curing of a credit-impaired financial asset (IFRS
9)). This resulted in a reclassification between net interest income
and loan credit losses, with no impact on the overall profitability.
p.p. = percentage points, bps = basis points, 100 basis points (bps)
= 1 percentage point
Net interest income (NII) and net interest margin (NIM) for
9M2019 amounted to EUR260 mn (up 4% yoy) and 1.92% respectively (up
by 8 bps yoy). NII for 3Q2019 amounted to EUR90 mn (compared to
EUR85 mn for 2Q2019) and increased by 5% qoq, mainly due to
increased interest cash collections not previously recognised. In
addition, the NII was negatively affected by the continued pressure
on lending rates and positively affected by the reduction of cost
of deposits. The NIM for 3Q2019 stood at 1.99% increased by 10 bps
qoq, resulting mainly from the increase in net interest income.
Average interest earning assets for 9M2019 amounted to EUR18,103
mn, flat yoy. Quarterly average interest earning assets for 3Q2019
amounted to EUR17,962 mn compared to EUR18,149 mn for 2Q2019, down
by 1%, primarily driven by the repayment of ECB funding.
Non-interest income for 9M2019 amounted to EUR235 mn, comprising
net fee and commission income of EUR111 mn, net foreign exchange
gains and net gains on financial instrument transactions and
disposal/dissolution of subsidiaries and associates of EUR34 mn,
net insurance income of EUR42 mn, net gains from revaluation and
disposal of investment properties and on disposal of stock of
properties of EUR26 mn and other income of EUR22 mn. Net fee and
commission income for 9M2019 amounted to EUR111 mn, decreased by 9%
yoy (EUR122 mn for 9M2018), mainly due to the decreased volume of
business from the International Business Units (IBUs) in 2019.
Net foreign exchange gains and net gains on financial instrument
transactions and disposal/dissolution of subsidiaries and
associates of EUR34 mn for 9M2019, comprising mainly net foreign
exchange gains of EUR21 mn and net gains on revaluation of
financial instruments of EUR13 mn, decreased by 34% yoy mainly due
to one-off gain on disposal of bonds during 1Q2018 amounting to
EUR19 mn. Net foreign exchange gains and net gains on financial
instrument transactions and disposal/dissolution of subsidiaries
and associates totalled EUR8 mn for 3Q2019, compared to EUR16 mn
for 2Q2019, down by 49% qoq. The decrease qoq is driven mainly by
one-off revaluation gains on financial instruments in 2Q2019.
Net insurance income amounted to EUR42 mn for 9M2019, compared
to EUR38 mn for 9M2018, up by 11% yoy, reflecting increased income
and positive investment returns in 2Q2019. Net insurance income
amounted to EUR12 mn for 3Q2019, compared to EUR18 mn for 2Q2019,
down by 34% qoq mainly due to a one-off amount of c.EUR2.5 mn
arising from the reduction of the discount rate, following an
improvement in the yield of assets, other revaluation gains and
lower insurance claims during 2Q2019.
Net gains from revaluation and disposal of investment properties
and on disposal of stock of properties for 9M2019 amounted to EUR26
mn, comprising a net profit from the disposal of stock properties
of EUR24 mn (REMU gains) and a net gain from revaluation of EUR2 mn
(compared to net gains of EUR15 mn for 9M2018). Net gains from
revaluation and disposal of investment properties and on disposal
of stock of properties for 3Q2019 amounted to EUR10 mn compared to
EUR12 mn in the previous quarter. REMU profit remains volatile.
Total income for 9M2019 amounted to EUR495 mn, at similar levels
to the previous year. Total income for 3Q2019 amounted to EUR162
mn, compared to EUR177 mn in 2Q2019, down by 9% qoq.
A.2.2 Total expenses
9M2018(1) qoq
EUR mn 9M2019(1) represented(2) 3Q2019(1) 2Q2019(1) +% yoy +%
--------- --------------- --------- --------- -------
Staff costs (167) (154) (55) (56) -2% 8%
Other operating expenses (122) (114) (38) (43) -12% 7%
------------------------------- --------- --------------- --------- --------- ------- -------
Total operating expenses (289) (268) (93) (99) -7% 8%
------------------------------- --------- --------------- --------- --------- ------- -------
Special levy and contribution
to Single Resolution Fund
(SRF) (18) (18) (6) (6) 2% 2%
Total expenses (307) (286) (99) (105) -6% 7%
--------- --------------- --------- --------- -------
Cost to income ratio 62% 58% 61% 59% +2 p.p. +4 p.p.
------------------------------- --------- --------------- --------- --------- ------- -------
Cost to income ratio excluding
special levy and contribution
to SRF 58% 54% 57% 56% +1 p.p. +4 p.p.
------------------------------- --------- --------------- --------- --------- ------- -------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses related to Project Helix are disclosed
under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis.
2. Including the impact from IFRIC Presentation of unrecognised interest
following the curing of a credit-impaired financial asset (IFRS 9)). This
resulted in a reclassification between net interest income and loan credit
losses, with no impact on the overall profitability. p.p. = percentage
points, bps = basis points, 100 basis points (bps) = 1 percentage point
Total expenses for 9M2019 were EUR307 mn (compared to EUR286 mn
for 9M2018), 54% of which related to staff costs
(EUR167 mn), 40% to other operating expenses (EUR122 mn) and 6%
(EUR18 mn) to special levy and contribution to Single Resolution
Fund (SRF).
Total operating expenses for 9M2019 were EUR289 mn, increased by
8% yoy, compared to EUR268 mn for 9M2018. Total operating expenses
for 3Q2019 were EUR93 mn, decreased by 7% qoq, compared to EUR99 mn
in 2Q2019.
Staff costs of EUR167 mn for 9M2019 increased by 8% yoy
(compared to EUR154 mn in 9M2018) mainly driven by the increase in
employer's social insurance contributions from the beginning of the
year and the additional contributions to the new general healthcare
system which commenced in March 2019. Staff costs for 3Q2019
amounted to EUR55 mn, at similar levels as the previous
quarter.
The Group employed 4,134 persons as at 30 September 2019
(compared to 4,155 persons as at 30 June 2019 and 4,146 persons as
at 31 December 2018), including 108 persons relating to the Helix
transaction, whilst full migration and transfer to the buyer is
expected to conclude soon after the year end. The staff costs
related to these persons are included under 'Profit/(loss) relating
to NPE sale (Helix)' in the underlying basis.
In October 2019, the Group completed a voluntary staff exit plan
("VEP" or "the Plan"), through which c.470 applicants (including
six persons relating to the Helix transaction) were approved to
leave at a total cost of c.EUR79 mn, expected to be recorded in the
consolidated income statement in the fourth quarter. Following the
completion of the Plan, the overall number of employees is reduced
by c.11%, whilst the gross annual savings are estimated at c.EUR28
mn or c.13% of staff costs (excluding the 108 persons relating to
the Helix transaction). These gross annual savings do not include
any impact from the renewal of the collective agreement for 2019,
which remains under discussion.
Other operating expenses for 9M2019 were EUR122 mn, increased by
7% yoy, mainly due to higher property related costs and higher
depreciation / amortization, resulting from increased capital
expenditure, following the Digital Transformation Programme. Other
operating expenses for 3Q2019 were EUR38 mn, compared to EUR43 mn
for 2Q2019 (down by 12% qoq), mainly due to seasonality and lower
marketing expenses.
The cost to income ratio excluding special levy and contribution
to Single Resolution Fund for 3Q2019 was 57%, compared to 56% for
2Q2019, principally reflecting the increase in non-interest income
in 2Q2019. Cost management, including containment of staff costs,
remains a key focus going forward.
A.2.3 Profit before tax and non-recurring items
9M2018(1) qoq
EUR mn 9M2019(1) represented(2) 3Q2019(1) 2Q2019(1) +% yoy +%
--------- --------------- --------- --------- -----
Operating profit 188 208 63 72 -13% -10%
-------------------------------------- --------- --------------- --------- --------- ----- ------
Loan credit losses (117) (104) (30) (40) -26% 12%
(Impairments)/reversal of impairments
of other financial and non-financial
assets (9) (12) 1 (9) -109% -21%
(Provisions)/reversal of provisions
for litigation, regulatory
and other matters (3) (9) (6) 3 - -62%
-------------------------------------- --------- --------------- --------- --------- ----- ------
Total loan credit losses, impairments
and provisions (129) (125) (35) (46) -27% 4%
-------------------------------------- --------- --------------- --------- --------- ----- ------
Profit before tax and non-recurring
items 59 83 28 26 15% -29%
-------------------------------------- --------- --------------- --------- --------- ----- ------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses related to Project Helix are disclosed
under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying
basis. 2. Including the impact from IFRIC Presentation of unrecognised
interest following the curing of a credit-impaired financial asset
(IFRS 9)). This resulted in a reclassification between net interest
income and loan credit losses, with no impact on the overall profitability.
Operating profit for 9M2019 was EUR188 mn, compared to EUR208 mn
for 9M2018, down by 10% yoy, mainly due to the increase in total
operating expenses.
The loan credit losses for 9M2019 totalled EUR117 mn (compared
to EUR104 mn for 9M2018 up by 12% yoy), reflecting further balance
sheet de-risking. The loan credit losses for 3Q2019 amounted to
EUR30 mn, compared to EUR40 mn for 2Q2019, down by 26% qoq, due to
the IFRS 9 model recalibration in 2Q2019.
The annualised loan credit losses charge (cost of risk) for
9M2019, following the completion of NPE sales which led to the
reduction of gross loans by EUR2.8 bn, accounted for 1.19% of gross
loans, compared to an annualised loan credit losses charge of 1.00%
for 9M2018, on the same basis, reflecting further de-risking and
IFRS 9 model volatility. The annualised loan credit losses charge
(cost of risk) for 3Q2019, accounted for 0.90% of gross loans,
compared to an annualised loan credit losses charge of 1.23% for
2Q2019, on the same basis, due to the IFRS 9 model recalibration in
2Q2019.
At 30 September 2019, the allowance for expected loan credit
losses, including fair value adjustment on initial recognition and
credit losses on off-balance sheet exposures totalled EUR2,086 mn
(compared to EUR2,145 mn at 30 June 2019, EUR2,227 mn at 31 March
2019 pro forma for Helix and EUR2,254 mn at 31 December 2018 on the
same basis) and accounted for 16.0% of gross loans (at similar
levels with 30 June 2019, and also with 31 March 2019 and 31
December 2018 on the same basis).
Impairments of other financial and non-financial assets for
9M2019 amounted to EUR9 mn, compared to EUR12 mn for 9M2018.
Reversal of impairments of other financial and non-financial assets
for 3Q2019 amounted to EUR1 mn (compared to impairments of EUR9 mn
for 2Q2019) mainly relating to a reversal of ECL (expected credit
losses) charge on financial instruments driven by reduction of
certain exposures.
Provisions for litigation, regulatory and other matters for
9M2019 totalled EUR3 mn, compared to EUR9 mn for 9M2018. Provisions
for litigation, regulatory and other matters for 3Q2019 totalled
EUR6 mn, compared to a reversal of EUR3 mn for 2Q2019, which
related to the reversal of provisions of previously provided cases
with a favourable outcome.
A.2.4 Profit/(loss) after tax
9M2018(1) qoq
EUR mn 9M2019(1) represented(2) 3Q2019(1) 2Q2019(1) +% yoy +%
--------- --------------- --------- --------- ----
Profit before tax and non-recurring
items 59 83 28 26 15% -29%
---------------------------------------------- --------- --------------- --------- --------- ---- ------
Tax (1) (4) (1) 2 - -82%
(Profit)/loss attributable to non-controlling
interests (2) 3 0 (2) - -
---------------------------------------------- --------- --------------- --------- --------- ---- ------
Profit after tax and before non-recurring
items 56 82 27 26 6% -32%
---------------------------------------------- --------- --------------- --------- --------- ---- ------
Advisory and other restructuring
costs - excluding discontinued
operations and NPE sale (Helix) (21) (26) (9) (5) 99% -18%
Profit after tax - Organic 35 56 18 21 -15% -38%
--------- --------------- --------- --------- ----
Profit from discontinued operations
(UK) - 4 - - - -
Profit/(loss) relating to NPE sale
(Helix) 1 (105) 1 4 - -
Loss on remeasurement of investment
in associate classified as held
for sale (CNP) net of share of
profit from associates (21) 8 0 (23) - -
Reversal of impairment of DTA and
impairment of other tax receivables 101 - - - - -
---------------------------------------------- --------- --------------- --------- --------- ---- ------
Profit/(loss) after tax - attributable
to the owners of the Company 116 (37) 19 2 - -
---------------------------------------------- --------- --------------- --------- --------- ---- ------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses related to Project Helix are disclosed
under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying
basis. 2. Including the impact from IFRIC Presentation of unrecognised
interest following the curing of a credit-impaired financial asset (IFRS
9)). This resulted in a reclassification between net interest income
and loan credit losses, with no impact on the overall profitability.
The tax charge for 9M2019 is EUR1 mn, compared to a tax charge
of EUR4 mn a year earlier, primarily due to lower taxable profit in
the current period. The tax charge for 3Q2019 amounted to EUR1 mn
compared to a tax credit of EUR2 mn in 2Q2019.
Profit after tax and before non-recurring items for 9M2019 was
EUR56 mn, compared to a profit of EUR82 mn for 9M2018, down by 32%
yoy. Profit after tax and before non-recurring items for 3Q2019 was
EUR27 mn, at similar levels to the previous quarter.
Advisory and other restructuring costs - excluding discontinued
operations and NPE sale (Helix) for 9M2019 amounted to EUR21 mn,
compared to EUR26 mn for 9M2018, down by 18% yoy.
Profit after tax arising from the organic operations of the
Group for 9M2019 amounted to EUR35 mn, compared to EUR56 mn for
9M2018, down by 38% yoy. Profit after tax arising from the organic
operations of the Group for 3Q2019 amounted to EUR18 mn, compared
to a EUR21 mn for the 2Q2019.
The net result of the sale of the Helix portfolio, comprising
the interest income, non-interest income, staff costs, other
operating expenses and loan credit losses related to Project Helix
for 3Q2019 was a profit of EUR1 mn, compared to a profit of EUR4 mn
for the previous quarter, bringing the net result from the Project
for 9M2019 to EUR1 mn, compared to a net loss of EUR105 mn for
9M2018.
Loss on remeasurement of investment in associate classified as
held for sale (CNP) net of share of profit from associates totalled
EUR21 mn for 9M2019, comprising a loss on remeasurement of
investment in associate classified as held for sale of EUR26 mn and
a share of profit from associates of EUR5 mn (compared to a share
of profit from associates of EUR8 mn in 9M2018). In early October
2019, the Group completed the sale of its entire shareholding of
49.9% in its associate CNP Cyprus Insurance Holdings Limited (CNP)
that had been acquired as part of the acquisition of certain
operations of Laiki Bank in 2013, for a cash consideration of
EUR97.5 mn.
Reversal of impairment of DTA and impairment of other tax
receivables totalled EUR101 mn for 9M2019, comprising the positive
impact of EUR109 mn following amendments to the Income Tax
legislation in Cyprus adopted in March 2019, and an impairment of
EUR8 mn relating to Greek tax receivables adversely impacted from
legislative changes. The carrying value of the remaining receivable
at the quarter end was c.EUR5 mn.
Profit after tax attributable to the owners of the Company for
9M2019 was EUR116 mn, compared to a loss of EUR37 mn for 9M2018.
Profit after tax attributable to the owners of the Company for
3Q2019 was EUR19 mn, compared to a profit of EUR2 mn in 2Q2019.
B. Operating Environment
Following robust growth in 2016-2018 averaging about 5%
annually, economic expansion in Cyprus continued into 2019 at a
slowing pace with real Gross Domestic Product (GDP) increasing by
3.1% on average in the first three quarters of the year seasonally
adjusted (3.3% in the first quarter, 3.1% in the second and by 3.0%
in the third quarter - Cyprus Statistical Service). The
deceleration was driven by slowing activity in the traditional
sectors including tourism and construction. From the demand side
the slowdown was driven by a deteriorating external imbalance.
Excluding registrations of ships, net exports have been
contributing negatively to real GDP growth in 2018 and the first
half of 2019. Exports of goods declined in the first half of the
year. Government consumption surged in the first half and fixed
investment other than transport equipment which fluctuates with
ship registrations, increased significantly driven by construction
related activities.
Frequency indicators point to sustained economic activity. In
the labour market total employment increased by 5% in the first
half of the year (Labour Force Survey), driven by full-time
hirings, and the unemployment rate dropped to 6.8% in the third
quarter when seasonally adjusted (Eurostat). Consumer inflation
decelerated in the ten months to October rising by 0.3% compared
with 1.4% in 2018, mainly due to lower transport costs, but also
due to the limited pricing power in most categories of goods and
services with the exception of housing. Tourist arrivals increased
marginally by 0.6% in the year to October despite declines from
traditional source countries like Russia, Germany and Greece. There
was a significant increase in arrivals from non-European sources.
Tourist receipts had dropped by 1.7% in the year to August, which
marks a recovery from a steeper drop earlier in the year. In the
construction sector, building permits remained strong in the year
to July increasing 42% in terms of volume which mainly reflects
developments in the hotel sector. The production index in
construction was up 15% in the first half of the year driven by
building activity that recorded a corresponding increase of 23%. On
the demand side, the volume of retail sales decelerated in the year
to August, rising by 3.2%, compared to a 6.6% in the same period
the year before.
Fiscal performance has been strengthening driven by rising
public revenues and constrained expenditures. The general
government budget surplus rose to 3.0% of GDP in 2018 excluding the
fiscal burden associated with the orderly resolution of the Cyprus
Cooperative Bank. The budget surplus continued to increase in the
first three quarters of 2019. Public debt remains high and rose
further in 2018 to EUR21.3 bn or 100.6% of GDP, as a result of the
fiscal burden noted above. However, a combination of a sustained
budget surplus, rising expected inflation and low debt service
costs, will be supporting an accelerated decline in the public debt
to GDP ratio in the medium term.
In the banking sector, funding conditions remained favourable
and the stock of NPEs continued to decline. Specifically, the stock
of NPEs declined from EUR20.9 bn at the end of December 2017 to
EUR10.4 bn at the end of December 2018 after Bank of Cyprus' loans
sale and the resolution of the Cyprus Cooperative Bank. The stock
of NPEs was EUR9.8 bn at the end of June 2019 and the ratio to
gross loans was 30%, marginally lower than 30.5% at the end of
December 2018, despite a further drop in loans outstanding.
Going forward, downside risks derive from the external
environment and the structure of the domestic economy which is
characterised by a large foreign balance relative to the GDP. The
slowing of global trade, uncertainties over Brexit and fragilities
in the EU are having an impact. Brexit presents downside risks to
the Cyprus economy given close trade and investment links. Economic
growth is expected to remain positive, but to soften. Growth is
expected to average 3.1% in 2019 and slow down further in 2020 and
2021 to 2.6% and 2.3% respectively, according to the European
Commission (Autumn 2019 Forecasts). Employment is expected to
continue to rise, but at a slower pace than in recent years, and
the unemployment rate is expected to continue to drop to slightly
below 6% in 2021 (Autumn 2019 Forecasts). Investment is expected to
be strengthening, but high imports are expected to limit the
contribution to growth from the external sector. Exports growth is
expected to decelerate relative to 2014 - 2018 against a less
favourable international environment. Price inflation will be about
0.2% in 2019 and will remain low in the medium term, expected to
rise in later years as capacity utilisation will be tightening.
The economy will continue to be challenged by legacy problems to
some degree, but the real challenge will be the transformation of
the economy towards higher value added activities that will support
higher productivity growth and improved competitiveness. The
primary challenges therefore will be, to further de-risk the
economy by reducing public debt and the remaining stock of
non-performing loans; to safeguard fiscal space so as to be able to
respond to unforeseen circumstances; and to pursue additional
structural reforms especially in the judiciary and public
administration domains that will improve the investment environment
and in the process induce productivity boosting investments.
The sovereign risk ratings of the Cyprus Government improved
considerably in the recent period reflecting expectations of a
sustained decline in public debt as a ratio to GDP, expected
further declines in non-performing exposures and a more stable
price environment following a protracted period of deflation and
low inflation. In November 2018 Fitch Ratings upgraded its
Long-Term Issuer Default ratings for Cyprus to investment grade
(BBB-) with stable outlook. In October 2019, Fitch affirmed its
rating and upgraded its outlook to positive. In July 2018 Moody's
Investors Service upgraded Cyprus' sovereign rating to Ba2 from Ba3
with a stable outlook. In September 2019 Moody's affirmed its
rating and upgraded its outlook to positive citing improvements in
bank asset quality and fiscal strength. S&P Global Ratings
maintains an investment grade rating (BBB-) with a stable outlook
since September 2018.
C. Business Overview
As the Cypriot operations account for 99% of gross loans and
100% of customer deposits (after the disposal of the UK operations
in 2018), the Group's financial performance is highly correlated to
the economic and operating conditions in Cyprus and is expected to
consequently benefit from the country's recovery. Most recently, at
the end of July 2019, Standard and Poor's affirmed their long-term
issuer credit rating on the Bank of 'B+' (stable outlook). In June
2019, Moody's Investors Service affirmed the Bank's long-term
deposit rating of B3 (positive outlook). In March 2019, Fitch
Ratings affirmed their long-term issuer default rating of B-
(positive outlook). The positive outlook reflects expectations of
further improvements in the Bank's financial fundamentals, mainly
asset quality over the next 12-18 months, in the context of an
improved operating environment in Cyprus. The key drivers for the
rating actions were the improvement in the Bank's financial
fundamentals, mainly in asset quality, and its funding
position.
Tackling the Bank's loan portfolio quality is of utmost
importance for the Group. The Group has been successful in
engineering restructuring solutions across the spectrum of its loan
portfolio, and expects the organic reduction of residual NPEs to
continue ahead of the target of c.EUR800 mn for 2019, as portfolio
size and business line mix has changed radically upon completion of
the Project Helix. In parallel, the Group continues to actively
explore strategies to further accelerate de-risking, including
further portfolio sales. To that extent, the Group is in an
advanced stage of a preparation phase of reviewing NPE reduction
structures. A range of potential outcomes of this preparation phase
is possible, including outright sales (including the Bank retaining
a portion of the related financing). Any potential transactions are
expected to involve in total a portfolio of NPEs in excess of EUR2
bn by gross book value. The Group is not committed to any outcome
arising from this preparation phase, which is currently expected to
be finalised in the first half of 2020.
The July 2018 foreclosure law amendments have expedited the
process and limited options to frustrate execution. In July 2019,
the Cyprus Parliament voted through certain changes to the 2018 law
which, in the most part, seek to (a) provide additional checks and
balances where banks are seeking to foreclose small loans
(<EUR350 thousand) secured by a principal private residence, and
(b) extend the foreclosure timetable by extending various notice
periods. These amendments have not yet passed into law, as the
President of the Republic has referred these to the Supreme Court,
based on legal advice from the Attorney General that elements
thereof are unconstitutional. Discussions are on-going, including,
inter alia, with the Ministry of Finance, the CBC and the Financial
Ombudsman, aiming to introduce amendments to the foreclosure and
loan restructuring framework that are acceptable to all
stakeholders.
The strategic focus of the Group is to reshape its business
model to grow in the core Cypriot market through prudent new
lending. As at 30 September 2019, the Bank's capital position
remains good. The Group expects to continue to be able to support
the recovery of the Cyprus economy through the provision of new
lending. Growth in new lending in Cyprus is focused on selected
industries that are more in line with the Bank's target risk
profile, such as tourism, trade, real estate, professional
services, information/communication technologies, energy, education
and green projects. The Group is currently exploring ways to grow
its new lending, including careful, modest new lending in shipping,
syndicated loans, as well as other initiatives. New lending in the
nine months to 30 September 2019 reached EUR1.6 bn.
Aiming at supporting investments by SMEs and mid-caps to boost
the Cypriot economy, and create new jobs for young people, the Bank
continues to provide joint financed schemes. To this end, the Bank
continues its partnership with the European Investment Bank (EIB),
the European Investment Fund (EIF), the European Bank for
Reconstruction and Development (EBRD) and the Cyprus
Government.
Management is also placing emphasis on diversifying income
streams by optimising fee income from international transaction
services, wealth management and insurance. The Group's insurance
companies, EuroLife Ltd and General Insurance of Cyprus Ltd
operating in the sectors of life and general insurance
respectively, are leading players in the insurance business in
Cyprus, with such businesses providing a recurring income, further
diversifying the Group's income streams. The insurance income net
of claims and commissions for 9M2019 amounted to EUR42 mn, up by
11% yoy, contributing to 18% of non-interest income.
In order to further optimise its funding structure, the Bank
continues to focus on the shape and cost of deposit franchise,
taking advantage of the increased customer confidence towards the
Bank, as well as improving macroeconomic conditions. The cost of
deposits has been reduced by 57 bps to 19 bps over the last 21
months. Consideration of a liquidity management strategy for
specific customer groups is underway.
In common with other European banks, the changed interest rate
environment presents a challenge to the Group's profitability. A
key focus for management this year and going forward is the active
management of funding costs and on-going running expenses,
including the containment of staff costs. The Digital
Transformation Programme that started in 2017 is beginning to
deliver an improved customer experience (see section below) and the
branch network is half the size it was in 2013. Furthermore, the
branch footprint rationalisation continues and it is expected that
the number of branches will be further reduced by 8% by the year
end, further improving the Bank's operating model. The management
remains focused on further improvement in efficiency.
Digital Transformation
As part of its vision to be the leading financial hub in Cyprus,
the Bank continues its Digital Transformation Programme, which
focuses on three strategic pillars: developing digital services and
products that enhance the customer experience, streamlining
internal processes, and introducing new ways of working to improve
the workplace environment.
In the last few months, various new features were introduced on
the new mobile app, such as managing standing orders and direct
debits, the ability to transfer amounts over EUR150 through
QuickPay via the use of Digipass, login through biometric
authentication and viewing own accounts with UK banks. Soon
customers will also be able to keep track of their accounts with
Cypriot banks in the Bank's mobile app. Also, financial management
tools have been introduced that allow clients to use the 1Bank
service to better manage their finances. In addition, Mastercard
holders will soon be able to make secure and fast payments through
Apple Pay (iOS) and later through BoC Wallet (Android).
The launch of the new Cards and Payments systems that will allow
the Group to offer customised solutions and improve the customer
banking experience is being finalised. For example, in 2020 the
Group will be able to offer new features through mobile banking,
such as the ability for the customer to freeze their credit or
debit card in the event of a loss (freeze and unfreeze), and the
ability to determine a maximum limit for specific transactions
(e.g. spend up to EUR500 in supermarkets).
The adoption of digital products and services continues to grow
and gain momentum, compared to two years ago, when the Digital
Transformation Programme began. Today, 75% of transactions
involving deposits, cash withdrawals and internal/external
transfers, are performed through digital channels (with the
corresponding rate two years before reaching 65%). Regarding the
use of mobile banking, the number of active users increased by 54%
from June 2017.
In 2020 there will also be changes in the workplace with the
introduction of new technologies and tools that will drastically
change the employee experience, improving collaboration and
knowledge sharing across the organisation.
D. Strategy and Outlook
The Group remains on track for implementing its strategic
objectives aiming to become a stronger, safer and a more focused
institution capable of supporting the recovery of the Cypriot
economy and delivering appropriate shareholder returns in the
medium term.
The key pillars of the Group's strategy are to:
-- Materially reduce the level of delinquent loans
-- Further optimise the funding structure
-- Maintain an appropriate capital position by internally generating capital
-- Focus on the core Cyprus market
-- Achieve a lean operating model
-- Deliver value to shareholders and other stakeholders
KEY PILLARS PLAN OF ACTION
1. Materially reduce the level of delinquent
loans * Sustain momentum in restructuring and continue
reduction of NPEs
* Focus on terminated portfolios (in Recovery Unit) -
"accelerated consensual foreclosures"
* Real estate management via REMU
* Continue to explore alternative measures for
accelerating NPE reduction, such as NPE sales,
securitisations etc.
----------------------------------------------------------------
2. Further optimise the funding structure * Focus on shape and cost of deposit franchise
----------------------------------------------------------------
3. Maintain an appropriate capital position * Internally generating capital
----------------------------------------------------------------
4. Focus on core Cyprus market
* Targeted lending in Cyprus into growing sectors to
fund recovery
* New loan origination, while maintaining lending
yields
* Revenue diversification via fee and commission income
from international banking, wealth and insurance
which provides recurring income
----------------------------------------------------------------
5. Achieve a lean operating model
* Implementation of digital transformation program
underway, aimed at enhancing productivity through
alternative distribution channels and reducing
operating costs over time, including containment of
staff costs and further branch footprint
rationalisation
* Management remains focused on further improvement in
efficiency
----------------------------------------------------------------
6. Deliver value * Deliver appropriate medium term risk-adjusted returns
----------------------------------------------------------------
E. Statutory Financial Results
Unaudited Interim Consolidated Income Statement
Nine months ended
30 September
-------------------
2019 2018 (represented)
------------------ -------------------
EUR000 EUR000
------------------ -------------------
Continuing operations
------------------ -------------------
Turnover 718,358 724,931
================== ===================
Interest income 363,353 423,397
------------------ -------------------
Income similar to interest income 40,178 38,446
------------------ -------------------
Interest expense (73,082) (111,730)
------------------ -------------------
Expense similar to interest expense (36,440) (34,054)
------------------ -------------------
Net interest income 294,009 316,059
------------------ -------------------
Fee and commission income 131,825 131,291
------------------ -------------------
Fee and commission expense (17,660) (11,062)
------------------ -------------------
Net foreign exchange gains 21,151 28,768
------------------ -------------------
Net gains on financial instrument transactions
and disposal/dissolution of subsidiaries and
associates 14,540 41,618
------------------ -------------------
Insurance income net of claims and commissions 41,731 37,631
------------------ -------------------
Net gains/(losses) from revaluation and disposal
of investment properties 1,473 (14,295)
------------------ -------------------
Net gains on disposal of stock of property 24,180 29,813
------------------ -------------------
Other income 21,639 17,311
------------------ -------------------
532,888 577,134
------------------ -------------------
Staff costs (169,982) (157,918)
------------------ -------------------
Special levy on deposits on credit institutions
in Cyprus and contribution to Single Resolution
Fund (18,715) (18,283)
------------------ -------------------
Other operating expenses (167,809) (168,050)
------------------ -------------------
176,382 232,883
------------------ -------------------
Net gains on derecognition of financial assets
measured at amortised cost 6,298 26,016
------------------ -------------------
Credit losses to cover credit risk on loans and
advances to customers (140,750) (294,388)
================== ===================
Credit (losses)/gains of other financial instruments (5,032) 1,857
================== ===================
Impairment of non-financial instruments (12,993) (17,204)
================== ===================
Profit/(loss) before share of profit from associates
and remeasurement 23,905 (50,836)
------------------ -------------------
Remeasurement of investment in associate classified (25,943) -
as held for sale
------------------ -------------------
Share of profit from associates 5,400 7,966
------------------ -------------------
Profit/(loss) before tax from continuing operations 3,362 (42,870)
------------------ -------------------
Income tax 114,514 (3,887)
------------------ -------------------
Profit/(loss) after tax from continuing operations 117,876 (46,757)
------------------ -------------------
Discontinued operations
------------------ -------------------
Profit after tax from discontinued operations - 7,243
------------------ -------------------
Profit/(loss) for the period 117,876 (39,514)
================== ===================
Attributable to:
Owners of the Company - continuing operations
profit/(loss) 115,614 (44,179)
-------- ---------
Owners of the Company - discontinued operations
profit - 7,243
-------- ---------
Total profit/(loss) attributable to the owners
of the Company 115,614 (36,936)
-------- ---------
Non-controlling interests - continuing operations
profit/(loss) 2,262 (2,578)
-------- ---------
Profit/(loss) for the period 117,876 (39,514)
======== =========
Basic and diluted profit/(loss) per share attributable
to the owners of the Company (EUR cent) - continuing
operations 25.9 (9.9)
===== ======
Basic and diluted profit/(loss) per share attributable
to the owners of the Company (EUR cent) 25.9 (8.3)
===== ======
Unaudited Interim Consolidated Statement of Comprehensive
Income
Nine months ended
30 September
2019 2018
--------- ---------
EUR000 EUR000
--------- ---------
Profit/(loss) for the period 117,876 (39,514)
--------- ---------
Other comprehensive income (OCI)
--------- ---------
OCI that may be classified in the consolidated
income statement in subsequent periods
--------- ---------
Fair value reserve (debt instruments)
--------- ---------
Net gains/(losses) on investments in debt instruments
measured at fair value through OCI (FVOCI) 10,644 (1,497)
--------- ---------
Transfer to the consolidated income statement
on disposal - (21,256)
--------- ---------
10,644 (22,753)
--------- ---------
Foreign currency translation reserve
--------- ---------
(Loss)/profit on translation of net investment
in foreign branches and subsidiaries (8,528) 6,665
--------- ---------
Profit/(loss) on hedging of net investments in
foreign branches and subsidiaries 9,668 (6,285)
--------- ---------
Transfer to the consolidated income statement
on disposal/dissolution of foreign operations (422) (17,431)
--------- ---------
718 (17,051)
--------- ---------
Total OCI that may be classified in the consolidated
income statement in subsequent periods 11,362 (39,804)
--------- ---------
OCI not to be reclassified in the consolidated
income statement in subsequent periods
--------- ---------
Fair value reserve (equity instruments)
--------- ---------
Share of net gains/(losses) from fair value changes
of associates 4,200 (2,251)
--------- ---------
Net gains on investments in equity instruments
designated at FVOCI 188 2,928
--------- ---------
4,388 677
--------- ---------
Property revaluation
--------- ---------
Deferred Tax 29 16
--------- ---------
Actuarial (losses)/gains on the defined benefit
plans
--------- ---------
Remeasurement (losses)/gains on defined benefit
plans (5,022) 4,098
--------- ---------
Total OCI not to be classified in the consolidated
income statement in subsequent periods (605) 4,791
--------- ---------
Other comprehensive income/(loss) for the period
net of taxation 10,757 (35,013)
--------- ---------
Total comprehensive income/(loss) for the period 128,633 (74,527)
========= =========
Attributable to:
--------- ---------
Owners of the Company 126,344 (71,947)
--------- ---------
Non-controlling interests 2,289 (2,580)
--------- ---------
Total comprehensive income/(loss) for the period 128,633 (74,527)
========= =========
Unaudited Interim Consolidated Balance Sheet
30 September 31 December
2019 2018 (restated)
Assets EUR000 EUR000
------------- -----------------
Cash and balances with central banks 4,412,542 4,610,491
------------- -----------------
Loans and advances to banks 427,966 472,532
------------- -----------------
Derivative financial assets 23,248 24,754
------------- -----------------
Investments 1,683,124 777,104
------------- -----------------
Investments pledged as collateral 291,724 737,587
------------- -----------------
Loans and advances to customers 10,970,923 10,921,786
------------- -----------------
Life insurance business assets attributable
to policyholders 446,765 402,565
------------- -----------------
Prepayments, accrued income and other assets 287,906 256,002
------------- -----------------
Stock of property 1,399,288 1,426,857
------------- -----------------
Deferred tax assets 379,126 301,778
------------- -----------------
Investment properties 137,885 128,006
------------- -----------------
Property and equipment 290,487 260,723
------------- -----------------
Intangible assets 171,831 170,411
------------- -----------------
Investments in associates and joint venture 2,281 114,637
------------- -----------------
Non-current assets and disposal groups held
for sale 189,244 1,470,038
------------- -----------------
Total assets 21,114,340 22,075,271
============= =================
Liabilities
------------- -----------------
Deposits by banks 451,276 431,942
------------- -----------------
Funding from central banks - 830,000
------------- -----------------
Repurchase agreements 250,353 248,945
------------- -----------------
Derivative financial liabilities 63,054 38,983
------------- -----------------
Customer deposits 16,472,689 16,843,558
------------- -----------------
Insurance liabilities 634,368 591,057
------------- -----------------
Accruals, deferred income, other liabilities
and other provisions 339,452 285,483
------------- -----------------
Pending litigation, claims, regulatory and other
matters 102,154 116,951
------------- -----------------
Subordinated loan stock 267,502 270,930
------------- -----------------
Deferred tax liabilities 44,554 44,282
------------- -----------------
Non--current liabilities and disposal group
held for sale 6,435 5,812
------------- -----------------
Total liabilities 18,631,837 19,707,943
------------- -----------------
Equity
------------- -----------------
Share capital 44,620 44,620
------------- -----------------
Share premium 1,294,358 1,294,358
------------- -----------------
Revaluation and other reserves 207,913 190,411
------------- -----------------
Retained earnings 687,325 591,941
------------- -----------------
Equity attributable to the owners of the Company 2,234,216 2,121,330
------------- -----------------
Other equity instruments 220,000 220,000
------------- -----------------
Total equity excluding non--controlling interests 2,454,216 2,341,330
------------- -----------------
Non--controlling interests 28,287 25,998
------------- -----------------
Total equity 2,482,503 2,367,328
------------- -----------------
Total liabilities and equity 21,114,340 22,075,271
============= =================
The Group adopted the accounting standard IFRS 16 Leases on 1
January 2019. The impact on adoption was an increase in assets of
EUR37,474 thousand and an increase in liabilities of EUR37,474
thousand with no impact on retained earnings or equity of the
Group. The effect of the adoption of IFRS 16 remains subject to
change until the Group finalises its financial statements for the
year ended 31 December 2019, the year of initial application.
Comparative information was restated following the change in the
classification of properties which are leased out under operating
leases as investment properties. In relation to these properties,
an amount of EUR103,531 thousand was reclassified from 'Stock of
property' to 'Investment properties' relating to balances as at 31
December 2018. The disclosures on the change in accounting policy
are presented in the Consolidated Condensed Interim Financial
Statements for the six months ended 30 June 2019 within the Interim
Financial Report.
Reclassifications to comparative information were also made for
unrecognised interest on previously credit impaired loans which
have cured during the period amounting to EUR24,346 thousand. This
was reclassified from 'Net interest income' to 'Credit losses to
cover credit risk on loans and advances to customers' in line with
an IFRIC discussion, which did not take place until November 2018
(Presentation of unrecognised interest following the curing of a
credit impaired financial asset (IFRS 9)). The corresponding amount
for the nine months ended 30 September 2019 stood at EUR12,337
thousand.
Unaudited Interim Consolidated Statement of Changes in
Equity
Attributable to the owners of the Company Other Non- Total
equity controlling equity
instruments interests
Share Share Treasury Retained Property Financial Life Foreign Total
capital premium shares earnings revaluation instruments insurance currency
reserve fair value in-force translation
reserve business reserve
reserve
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ----------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
1 January 2019 44,620 1,294,358 (21,463) 591,941 79,433 15,289 101,001 16,151 2,121,330 220,000 25,998 2,367,328
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Profit for the
period - - - 115,614 - - - - 115,614 - 2,262 117,876
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Other
comprehensive
(loss)/income
after
tax for the
period - - - (5,022) 22 15,012 - 718 10,730 - 27 10,757
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Total
comprehensive
income after
tax
for the
period - - - 110,592 22 15,012 - 718 126,344 - 2,289 128,633
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Increase in
value
of in-force
life
insurance
business - - - (2,000) - - 2,000 - - - - -
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Tax on
increase
in value of
in-force
life
insurance
business - - - 250 - - (250) - - - - -
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Payment of
coupon
to AT1
holders - - - (13,447) - - - - (13,447) - - (13,447)
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Change in the
holding
of
Undertakings
for
Collective
Investments
in
Transferable
Securities
(UCITS)
Fund - - - (11) - - - - (11) - - (11)
-------- ---------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
30 September
2019 44,620 1,294,358 (21,463) 687,325 79,455 30,301 102,751 16,869 2,234,216 220,000 28,287 2,482,503
======== ========== ========= ========= ============ ============ ========== ============ ========== ============ ============ ==========
Attributable to the owners of the Company Non- Total
controlling equity
interests
Share Share Treasury Accumulated Property Financial Other Life Foreign Total
capital premium shares losses revaluation instruments reserves insurance currency
reserve fair value in-force translation
reserve business reserve
reserve
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ----------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
1 January 2018 44,620 2,794,358 (21,463) (527,128) 92,878 54,485 6,059 105,651 36,098 2,585,558 31,150 2,616,708
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Impact of
adopting
IFRS 9 at 1
January
2018 - - - (299,150) - (8,470) - - - (307,620) - (307,620)
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Restated balance
at 1 January
2018 44,620 2,794,358 (21,463) (826,278) 92,878 46,015 6,059 105,651 36,098 2,277,938 31,150 2,309,088
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Loss for the
period - - - (36,936) - - - - - (36,936) (2,578) (39,514)
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Other
comprehensive
income/(loss)
after
tax for the
period - - - 4,098 16 (22,074) - - (17,051) (35,011) (2) (35,013)
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Total
comprehensive
(loss)/ income
after
tax for the
period - - - (32,838) 16 (22,074) - - (17,051) (71,947) (2,580) (74,527)
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Decrease in
value
of in-force
life
insurance
business - - - 5,794 - - - (5,794) - - - -
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Tax on decrease
in value of
in-force life
insurance
business - - - (724) - - - 724 - - - -
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Transfer of
realised
profits on
disposal
of properties - - - 4,143 (4,143) - - - - - - -
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Transfer of
property
revaluation
reserve
and other
reserve
of subsidiary
to
accumulated
losses - - - 14,014 (7,955) - (6,059) - - - - -
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Loss of control
of subsidiary - - - 1,996 (1,996) - - - - - - -
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Decrease in
share
capital of
subsidiary - - - (722) - - - - - (722) (489) (1,211)
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Transfer of loss
on disposal of
FVOCI
equity
investments
to accumulated
losses - - - (67) - 67 - - - - - -
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
Increase in
non-controlling
interests due
to
change in the
shareholding
of subsidiary - - - 865 - - - - - 865 18,956 19,821
-------- ---------- --------- ------------ ------------ ------------ --------- ---------- ------------ ---------- ------------ ----------
30 September
2018 44,620 2,794,358 (21,463) (833,817) 78,800 24,008 - 100,581 19,047 2,206,134 47,037 2,253,171
======== ========== ========= ============ ============ ============ ========= ========== ============ ========== ============ ==========
F. Notes
F.1 Reconciliation of income statement between statutory and underlying basis
EUR million Underlying Helix Investment Tax Other Statutory
basis portfolio in associate related basis
classified items
as held
for sale
Net interest income 260 34 - - - 294
=========== =========== ============== ========= ====== ==========
Net fee and commission
income 111 9 - (6) - 114
=========== =========== ============== ========= ====== ==========
Net foreign exchange gains
and net gains on financial
instrument transactions 34 - - - 1 35
=========== =========== ============== ========= ====== ==========
Insurance income net of
claims and commissions 42 - - - - 42
=========== =========== ============== ========= ====== ==========
Net gains from revaluation
and disposal of investment
properties and on disposal
of stock of property 26 - - - - 26
=========== =========== ============== ========= ====== ==========
Other income 22 - - - - 22
----------- ----------- -------------- --------- ------ ----------
Total income 495 43 - (6) 1 533
=========== =========== ============== ========= ====== ==========
Total expenses (307) (25) - - (24) (356)
----------- ----------- -------------- --------- ------ ----------
Operating profit 188 18 - (6) (23) 177
=========== =========== ============== ========= ====== ==========
Loan credit losses (117) (17) - - (1) (135)
=========== =========== ============== ========= ====== ==========
Impairments of other financial
and non-financial instruments (9) - - (8) - (17)
=========== =========== ============== ========= ====== ==========
Provisions for litigation,
claims, regulatory and
other matters (3) - - - 3 -
=========== =========== ============== ========= ====== ==========
Remeasurement of investment
in associate classified
as held for sale - - (26) - - (26)
=========== =========== ============== ========= ====== ==========
Share of profit from associates - - 5 - - 5
----------- ----------- -------------- --------- ------ ----------
Profit/(loss) before tax,
and non-recurring items 59 1 (21) (14) (21) 4
=========== =========== ============== ========= ====== ==========
Tax (1) - - 115 - 114
=========== =========== ============== ========= ====== ==========
Profit attributable to
non-controlling interests (2) - - - - (2)
----------- ----------- -------------- --------- ------ ----------
Profit after tax and before
non-recurring items 56 1 (21) 101 (21) 116
=========== =========== ============== ========= ====== ==========
Advisory and other restructuring
costs-excluding NPE sale
(Helix) (21) - - - 21 -
----------- ----------- -------------- --------- ------ ----------
Profit after tax organic* 35 1 (21) 101 - 116
=========== =========== ============== ========= ====== ==========
Profit/(loss) relating
to NPE sale (Helix) 1 (1) - - - -
=========== =========== ============== ========= ====== ==========
Loss on remeasurement
of investment in associate
classified as held for
sale (CNP) net of share
of profit from associates (21) - 21 - - -
=========== =========== ============== ========= ====== ==========
Reversal of impairment
of deferred tax assets
(DTA) and impairment of
other tax receivables 101 - - (101) - -
----------- ----------- -------------- --------- ------ ----------
Profit after tax (attributable
to the owners of the Company) 116 - - - - 116
=========== =========== ============== ========= ====== ==========
*This is the profit after tax, before the loss on remeasurement
of investment in associate classified as held for sale (CNP) net of
share of profit from associates, and the reversal of impairment of
DTA and impairment of other tax receivables.
The reclassification differences between the statutory basis and
underlying basis mainly relate to the impact from 'non-recurring
items' and are explained below:
Helix portfolio
* Net interest income of EUR34 million and fee and
commission income of EUR9 million relating to the NPE
sale (Helix) is disclosed under non--recurring items
within 'Profit/(loss) relating to NPE sale (Helix)'
under the underlying basis.
* Total expenses include staff costs of EUR4 million,
operating expenses of EUR12 million and restructuring
costs of EUR9 million relating to NPE sale (Helix),
and are presented within 'Profit/(loss) relating to
NPE sale (Helix)' under the underlying basis.
* Loan credit losses of EUR17 million are disclosed
under non--recurring items within 'Profit/(loss)
relating to NPE sale (Helix)' under the underlying
basis.
Investment in associate classified as held for sale
* Loss on remeasurement of investment in associate
classified as held for sale (CNP) net of share of
profit from associate of EUR21 million comprises the
share of profit of associate of EUR5 million, which
is reported in the 'Share of profit from associates'
under the statutory basis, and the loss on
remeasurement of EUR26 million, which is classified
as 'Remeasurement of investment in associate
classified as held for sale' under the statutory
basis.
Tax related items
* Reversal of impairment of the deferred tax asset
amounting to EUR115 million included within 'Tax'
under the statutory basis is classified as a
non--recurring item and disclosed within 'Reversal of
impairment of DTA and impairment of other tax
receivables' under the underlying basis. Fee and
commission expense relating to the revised income tax
legislation of EUR6 million, which has been disclosed
within 'Reversal of impairment of DTA and impairment
of other tax receivables' under the underlying basis,
is disclosed within the 'Net fee and commission
income' under the statutory basis.
* Impairment of other financial assets of EUR8 million,
which are included in 'Credit (losses)/gains of other
financial instruments' under the statutory basis,
relate to the impairment of Greek tax receivables and
are classified as a non--recurring item and disclosed
within 'Reversal of impairment of DTA and impairment
of other tax receivables' under the underlying basis.
Other reclassifications
* Advisory and other restructuring costs of
approximately EUR21 million included in 'Other
operating expenses' under the statutory basis are
separately presented under the underlying basis.
* Provisions for litigation, claims, regulatory and
other matters amounting to EUR3 million included in
'Other operating expenses' under the statutory basis,
are separately presented under the underlying basis.
* Net gains on loans and advances to customers at FVPL
of EUR1 million are included in 'Net gains on
financial instrument transaction and
disposal/dissolution of subsidiaries and associates'
under the statutory basis and within 'Loan credit
losses' under the underlying basis.
F.2 Customer deposits
The analysis of customer deposits is presented below:
30 September 31 December
2019 2018
By type of deposit EUR000 EUR000
------------- ------------
Demand 7,066,341 6,708,852
------------- ------------
Savings 1,465,224 1,352,452
------------- ------------
Time or notice 7,941,124 8,782,254
------------- ------------
16,472,689 16,843,558
============= ============
By currency
------------- ------------
Euro 14,750,373 14,961,025
------------- ------------
US Dollar 1,341,875 1,482,867
------------- ------------
British Pound 283,276 292,640
------------- ------------
Russian Rouble 18,123 25,529
------------- ------------
Swiss Franc 6,714 7,994
------------- ------------
Other currencies 72,328 73,503
------------- ------------
16,472,689 16,843,558
By customer sector
------------- ------------
Corporate 1,875,343 1,750,517
------------- ------------
SMEs 764,260 800,671
------------- ------------
Retail 9,869,567 10,032,047
------------- ------------
Restructuring
------------- ------------
- corporate 73,481 69,180
------------- ------------
- SMEs 23,211 29,299
------------- ------------
- retail other 16,157 16,773
------------- ------------
Recoveries
------------- ------------
- corporate 3,946 6,492
------------- ------------
International banking services 3,487,465 3,707,713
------------- ------------
Wealth management 359,259 430,866
------------- ------------
16,472,689 16,843,558
============= ============
All deposits are in Cyprus.
F.3 Loans and advances to customers
30 September 31 December
2019 2018
EUR000 EUR000
------------- ------------
Gross loans and advances to customers at amortised
cost 12,386,404 12,430,367
------------- ------------
Allowance for ECL for impairment of loans
and advances to customers (1,785,991) (1,904,153)
------------- ------------
Loans and advances to customers measured at
amortised cost 10,600,413 10,526,214
------------- ------------
Loans and advances to customers measured at
FVPL 370,510 395,572
------------- ------------
10,970,923 10,921,786
============= ============
F.4 Credit risk concentration of gross loans and advances to customers
Industry and business lines concentrations and geographical
analysis of Group gross loans and advances to customers at
amortised cost are presented in the table below:
30 September 2019 Cyprus Other Total Residual Gross loans
countries fair value at amortised
adjustment cost after
on initial residual
recognition fair value
adjustment
on initial
recognition
By economic activity EUR000 EUR000 EUR000 EUR000 EUR000
----------- ----------- ----------- ------------- --------------
Trade 1,389,823 14,238 1,404,061 (18,056) 1,386,005
----------- ----------- ----------- ------------- --------------
Manufacturing 459,432 5,945 465,377 (5,154) 460,223
----------- ----------- ----------- ------------- --------------
Hotels and catering 930,996 1,108 932,104 (18,055) 914,049
----------- ----------- ----------- ------------- --------------
Construction 883,643 4,475 888,118 (11,693) 876,425
----------- ----------- ----------- ------------- --------------
Real estate 1,135,575 23,940 1,159,515 (15,503) 1,144,012
----------- ----------- ----------- ------------- --------------
Private individuals 6,092,359 960 6,093,319 (117,300) 5,976,019
----------- ----------- ----------- ------------- --------------
Professional and other
services 856,716 41,754 898,470 (27,719) 870,751
----------- ----------- ----------- ------------- --------------
Other sectors 763,508 789 764,297 (5,377) 758,920
----------- ----------- ----------- ------------- --------------
12,512,052 93,209 12,605,261 (218,857) 12,386,404
=========== =========== =========== ============= ==============
By business line
----------- ----------- ----------- ------------- --------------
Corporate 3,688,442 82,637 3,771,079 (34,425) 3,736,654
----------- ----------- ----------- ------------- --------------
SMEs 1,136,289 9,739 1,146,028 (16,510) 1,129,518
----------- ----------- ----------- ------------- --------------
Retail
----------- ----------- ----------- ------------- --------------
- housing 2,850,694 - 2,850,694 (42,177) 2,808,517
----------- ----------- ----------- ------------- --------------
- consumer, credit cards
and other 920,012 833 920,845 2,838 923,683
----------- ----------- ----------- ------------- --------------
Restructuring
----------- ----------- ----------- ------------- --------------
- corporate 386,469 - 386,469 (6,476) 379,993
----------- ----------- ----------- ------------- --------------
- SMEs 355,906 - 355,906 (5,627) 350,279
----------- ----------- ----------- ------------- --------------
- retail housing 399,527 - 399,527 (2,672) 396,855
----------- ----------- ----------- ------------- --------------
- retail other 232,387 - 232,387 (4,331) 228,056
----------- ----------- ----------- ------------- --------------
Recoveries
----------- ----------- ----------- ------------- --------------
- corporate 117,061 - 117,061 (3,349) 113,712
----------- ----------- ----------- ------------- --------------
- SMEs 554,595 - 554,595 (22,248) 532,347
----------- ----------- ----------- ------------- --------------
- retail housing 817,033 - 817,033 (37,323) 779,710
----------- ----------- ----------- ------------- --------------
- retail other 722,635 - 722,635 (42,619) 680,016
----------- ----------- ----------- ------------- --------------
International banking
services 162,545 - 162,545 (1,315) 161,230
----------- ----------- ----------- ------------- --------------
Wealth management 168,457 - 168,457 (2,623) 165,834
----------- ----------- ----------- ------------- --------------
12,512,052 93,209 12,605,261 (218,857) 12,386,404
=========== =========== =========== ============= ==============
31 December 2018 Cyprus Other Total Residual Gross loans
countries fair value at amortised
adjustment cost after
on initial residual
recognition fair value
adjustment
on initial
recognition
By economic activity EUR000 EUR000 EUR000 EUR000 EUR000
----------- ----------- ----------- ------------- --------------
Trade 1,447,623 39,682 1,487,305 (24,096) 1,463,209
----------- ----------- ----------- ------------- --------------
Manufacturing 437,030 7,572 444,602 (6,439) 438,163
----------- ----------- ----------- ------------- --------------
Hotels and catering 877,501 3,806 881,307 (20,354) 860,953
----------- ----------- ----------- ------------- --------------
Construction 991,122 2,552 993,674 (14,661) 979,013
----------- ----------- ----------- ------------- --------------
Real estate 980,152 21,644 1,001,796 (16,231) 985,565
----------- ----------- ----------- ------------- --------------
Private individuals 6,234,765 11,536 6,246,301 (135,603) 6,110,698
----------- ----------- ----------- ------------- --------------
Professional and other
services 866,093 45,758 911,851 (36,551) 875,300
----------- ----------- ----------- ------------- --------------
Other sectors 720,876 4,704 725,580 (8,114) 717,466
----------- ----------- ----------- ------------- --------------
12,555,162 137,254 12,692,416 (262,049) 12,430,367
=========== =========== =========== ============= ==============
By business line
----------- ----------- ----------- ------------- --------------
Corporate 3,363,298 125,138 3,488,436 (49,982) 3,438,454
----------- ----------- ----------- ------------- --------------
SMEs 1,188,456 11,188 1,199,644 (16,537) 1,183,107
----------- ----------- ----------- ------------- --------------
Retail
----------- ----------- ----------- ------------- --------------
- housing 2,871,294 - 2,871,294 (45,016) 2,826,278
----------- ----------- ----------- ------------- --------------
- consumer, credit cards
and other 940,388 904 941,292 2,965 944,257
----------- ----------- ----------- ------------- --------------
Restructuring
----------- ----------- ----------- ------------- --------------
- corporate 531,462 24 531,486 (7,907) 523,579
----------- ----------- ----------- ------------- --------------
- SMEs 560,806 - 560,806 (11,637) 549,169
----------- ----------- ----------- ------------- --------------
- retail housing 498,601 - 498,601 (4,481) 494,120
----------- ----------- ----------- ------------- --------------
- retail other 328,952 - 328,952 (8,588) 320,364
----------- ----------- ----------- ------------- --------------
Recoveries
----------- ----------- ----------- ------------- --------------
- corporate 164,821 - 164,821 (7,439) 157,382
----------- ----------- ----------- ------------- --------------
- SMEs 630,968 - 630,968 (26,178) 604,790
----------- ----------- ----------- ------------- --------------
- retail housing 697,212 - 697,212 (40,577) 656,635
----------- ----------- ----------- ------------- --------------
- retail other 480,733 - 480,733 (39,923) 440,810
----------- ----------- ----------- ------------- --------------
International banking
services 192,646 - 192,646 (2,158) 190,488
----------- ----------- ----------- ------------- --------------
Wealth management 105,525 - 105,525 (4,591) 100,934
----------- ----------- ----------- ------------- --------------
12,555,162 137,254 12,692,416 (262,049) 12,430,367
=========== =========== =========== ============= ==============
The loans and advances to customers in Cyprus include lending
exposures to Greek entities granted by BOC PCL in Cyprus in its
normal course of business with a carrying value of EUR197,765
thousand (31 December 2018: EUR55,789 thousand) and lending
exposures in Cyprus with collaterals in Greece with a carrying
value of EUR80,770 thousand (31 December 2018: EUR76,303
thousand).
Loans and advances to customers classified as held for sale
Industry and business lines concentrations and geographical
analysis of Group loans and advances to customers at amortised cost
classified as held for sale as at 31 December 2018 are presented in
the table below:
31 December 2018 Cyprus Other Total Residual Gross loans
countries fair value at amortised
adjustment cost after
on initial residual
recognition fair value
adjustment
on initial
recognition
By economic activity EUR000 EUR000 EUR000 EUR000 EUR000
---------- ----------- ---------- ------------- --------------
Trade 373,351 - 373,351 (12,213) 361,138
---------- ----------- ---------- ------------- --------------
Manufacturing 202,193 - 202,193 (7,216) 194,977
---------- ----------- ---------- ------------- --------------
Hotels and catering 258,529 - 258,529 (11,960) 246,569
---------- ----------- ---------- ------------- --------------
Construction 995,430 - 995,430 (74,233) 921,197
---------- ----------- ---------- ------------- --------------
Real estate 409,632 55,225 464,857 (11,765) 453,092
---------- ----------- ---------- ------------- --------------
Private individuals 218,531 - 218,531 (9,098) 209,433
---------- ----------- ---------- ------------- --------------
Professional and other
services 140,748 - 140,748 (5,941) 134,807
---------- ----------- ---------- ------------- --------------
Other sectors 191,463 6,011 197,474 (6,727) 190,747
---------- ----------- ---------- ------------- --------------
2,789,877 61,236 2,851,113 (139,153) 2,711,960
========== =========== ========== ============= ==============
By business line
---------- ----------- ---------- ------------- --------------
Corporate 15,249 - 15,249 (584) 14,665
---------- ----------- ---------- ------------- --------------
SMEs 2,841 - 2,841 - 2,841
---------- ----------- ---------- ------------- --------------
Retail
---------- ----------- ---------- ------------- --------------
- consumer, credit cards
and other 128 - 128 (1) 127
---------- ----------- ---------- ------------- --------------
Restructuring
---------- ----------- ---------- ------------- --------------
- corporate 859,214 - 859,214 (24,379) 834,835
---------- ----------- ---------- ------------- --------------
- SMEs 216,866 - 216,866 (4,858) 212,008
---------- ----------- ---------- ------------- --------------
- retail housing 272 - 272 - 272
---------- ----------- ---------- ------------- --------------
- retail other 5,773 - 5,773 (210) 5,563
---------- ----------- ---------- ------------- --------------
Recoveries
---------- ----------- ---------- ------------- --------------
- corporate 1,274,835 61,236 1,336,071 (86,644) 1,249,427
---------- ----------- ---------- ------------- --------------
- SMEs 374,336 - 374,336 (17,991) 356,345
---------- ----------- ---------- ------------- --------------
- retail housing 635 - 635 (115) 520
---------- ----------- ---------- ------------- --------------
- retail other 39,720 - 39,720 (4,371) 35,349
---------- ----------- ---------- ------------- --------------
International banking
services 8 - 8 - 8
---------- ----------- ---------- ------------- --------------
2,789,877 61,236 2,851,113 (139,153) 2,711,960
========== =========== ========== ============= ==============
There were no loans and advances to customers at amortised cost
classified as held for sale as at 30 September 2019.
F.5 Analysis of loans and advances to customers by staging
The following tables present the Group's loans and advances to
customers at amortised cost by staging and by business line
concentration:
30 September 2019 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- ---------- -----------
Gross loans at amortised cost
before residual fair value
adjustment on initial recognition 6,112,798 2,435,184 3,372,040 685,239 12,605,261
---------- ---------- ---------- ---------- -----------
Residual fair value adjustment
on initial recognition (64,404) (31,084) (21,800) (101,569) (218,857)
---------- ---------- ---------- ---------- -----------
Gross loans at amortised cost
after residual fair value
adjustment on initial recognition 6,048,394 2,404,100 3,350,240 583,670 12,386,404
========== ========== ========== ========== ===========
Gross loans at amortised cost Stage Stage Stage POCI Total
before residual fair value 1 2 3
adjustment on initial recognition
30 September 2019
By business line EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- -------- -----------
Corporate 2,534,813 922,313 234,172 79,781 3,771,079
---------- ---------- ---------- -------- -----------
SMEs 689,079 388,277 57,676 10,996 1,146,028
---------- ---------- ---------- -------- -----------
Retail
---------- ---------- ---------- -------- -----------
- housing 1,996,838 644,450 197,857 11,549 2,850,694
---------- ---------- ---------- -------- -----------
- consumer, credit cards and
other 616,682 202,431 81,941 19,791 920,845
---------- ---------- ---------- -------- -----------
Restructuring
---------- ---------- ---------- -------- -----------
- corporate 20,921 112,532 219,022 33,994 386,469
---------- ---------- ---------- -------- -----------
- SMEs 31,006 64,047 235,389 25,464 355,906
---------- ---------- ---------- -------- -----------
- retail housing 4,722 5,911 377,032 11,862 399,527
---------- ---------- ---------- -------- -----------
- retail other 2,893 1,010 216,030 12,454 232,387
---------- ---------- ---------- -------- -----------
Recoveries
---------- ---------- ---------- -------- -----------
- corporate - - 94,939 22,122 117,061
---------- ---------- ---------- -------- -----------
- SMEs - - 448,927 105,668 554,595
---------- ---------- ---------- -------- -----------
- retail housing - - 644,565 172,468 817,033
---------- ---------- ---------- -------- -----------
- retail other 82 - 545,167 177,386 722,635
---------- ---------- ---------- -------- -----------
International banking services 63,536 81,041 17,255 713 162,545
---------- ---------- ---------- -------- -----------
Wealth management 152,226 13,172 2,068 991 168,457
---------- ---------- ---------- -------- -----------
6,112,798 2,435,184 3,372,040 685,239 12,605,261
========== ========== ========== ======== ===========
Residual fair value adjustment Stage Stage Stage POCI Total
on initial recognition 1 2 3
30 September 2019
By business line EUR000 EUR000 EUR000 EUR000 EUR000
--------- --------- --------- ---------- ----------
Corporate (21,678) (12,237) 340 (850) (34,425)
--------- --------- --------- ---------- ----------
SMEs (9,324) (6,123) (460) (603) (16,510)
--------- --------- --------- ---------- ----------
Retail
--------- --------- --------- ---------- ----------
- housing (34,360) (7,648) 91 (260) (42,177)
--------- --------- --------- ---------- ----------
- consumer, credit cards and
other 2,458 333 176 (129) 2,838
--------- --------- --------- ---------- ----------
Restructuring
--------- --------- --------- ---------- ----------
- corporate (7) (2,068) (3,802) (599) (6,476)
--------- --------- --------- ---------- ----------
- SMEs (4) (959) (1,494) (3,170) (5,627)
--------- --------- --------- ---------- ----------
- retail housing (39) (35) (1,527) (1,071) (2,672)
--------- --------- --------- ---------- ----------
- retail other 10 4 (1,801) (2,544) (4,331)
--------- --------- --------- ---------- ----------
Recoveries
--------- --------- --------- ---------- ----------
- corporate - - (478) (2,871) (3,349)
--------- --------- --------- ---------- ----------
- SMEs - - (1,700) (20,548) (22,248)
--------- --------- --------- ---------- ----------
- retail housing - - (3,667) (33,656) (37,323)
--------- --------- --------- ---------- ----------
- retail other - - (7,357) (35,262) (42,619)
--------- --------- --------- ---------- ----------
International banking services (310) (984) (15) (6) (1,315)
--------- --------- --------- ---------- ----------
Wealth management (1,150) (1,367) (106) - (2,623)
--------- --------- --------- ---------- ----------
(64,404) (31,084) (21,800) (101,569) (218,857)
========= ========= ========= ========== ==========
Gross loans at amortised cost Stage Stage Stage POCI Total
after residual fair value 1 2 3
adjustment on initial recognition
30 September 2019
By business line EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- -------- -----------
Corporate 2,513,135 910,076 234,512 78,931 3,736,654
---------- ---------- ---------- -------- -----------
SMEs 679,755 382,154 57,216 10,393 1,129,518
---------- ---------- ---------- -------- -----------
Retail
---------- ---------- ---------- -------- -----------
- housing 1,962,478 636,802 197,948 11,289 2,808,517
---------- ---------- ---------- -------- -----------
- consumer, credit cards and
other 619,140 202,764 82,117 19,662 923,683
---------- ---------- ---------- -------- -----------
Restructuring
---------- ---------- ---------- -------- -----------
- corporate 20,914 110,464 215,220 33,395 379,993
---------- ---------- ---------- -------- -----------
- SMEs 31,002 63,088 233,895 22,294 350,279
---------- ---------- ---------- -------- -----------
- retail housing 4,683 5,876 375,505 10,791 396,855
---------- ---------- ---------- -------- -----------
- retail other 2,903 1,014 214,229 9,910 228,056
---------- ---------- ---------- -------- -----------
Recoveries
---------- ---------- ---------- -------- -----------
- corporate - - 94,461 19,251 113,712
---------- ---------- ---------- -------- -----------
- SMEs - - 447,227 85,120 532,347
---------- ---------- ---------- -------- -----------
- retail housing - - 640,898 138,812 779,710
---------- ---------- ---------- -------- -----------
- retail other 82 - 537,810 142,124 680,016
---------- ---------- ---------- -------- -----------
International banking services 63,226 80,057 17,240 707 161,230
---------- ---------- ---------- -------- -----------
Wealth management 151,076 11,805 1,962 991 165,834
---------- ---------- ---------- -------- -----------
6,048,394 2,404,100 3,350,240 583,670 12,386,404
========== ========== ========== ======== ===========
31 December 2018 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- ---------- -----------
Gross loans at amortised cost
before residual fair value
adjustment on initial recognition 6,035,781 1,921,255 3,915,591 819,789 12,692,416
---------- ---------- ---------- ---------- -----------
Residual fair value adjustment
on initial recognition (77,738) (20,673) (40,432) (123,206) (262,049)
---------- ---------- ---------- ---------- -----------
Gross loans at amortised cost
after residual fair value
adjustment on initial recognition 5,958,043 1,900,582 3,875,159 696,583 12,430,367
========== ========== ========== ========== ===========
Gross loans at amortised cost Stage Stage Stage POCI Total
before residual fair value 1 2 3
adjustment on initial recognition
31 December 2018
By business line EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- -------- -----------
Corporate 2,215,264 793,249 387,093 92,830 3,488,436
---------- ---------- ---------- -------- -----------
SMEs 739,166 346,148 103,384 10,946 1,199,644
---------- ---------- ---------- -------- -----------
Retail
---------- ---------- ---------- -------- -----------
- housing 2,259,976 300,101 300,584 10,633 2,871,294
---------- ---------- ---------- -------- -----------
- consumer, credit cards and
other 591,242 199,099 130,816 20,135 941,292
---------- ---------- ---------- -------- -----------
Restructuring
---------- ---------- ---------- -------- -----------
- corporate 48,943 92,537 303,955 86,051 531,486
---------- ---------- ---------- -------- -----------
- SMEs 55,295 52,573 406,369 46,569 560,806
---------- ---------- ---------- -------- -----------
- retail housing 6,883 3,745 473,444 14,529 498,601
---------- ---------- ---------- -------- -----------
- retail other 5,140 1,226 304,076 18,510 328,952
---------- ---------- ---------- -------- -----------
Recoveries
---------- ---------- ---------- -------- -----------
- corporate - - 120,234 44,587 164,821
---------- ---------- ---------- -------- -----------
- SMEs - - 515,542 115,426 630,968
---------- ---------- ---------- -------- -----------
- retail housing - - 512,175 185,037 697,212
---------- ---------- ---------- -------- -----------
- retail other 89 - 313,529 167,115 480,733
---------- ---------- ---------- -------- -----------
International banking services 69,620 78,109 41,352 3,565 192,646
---------- ---------- ---------- -------- -----------
Wealth management 44,163 54,468 3,038 3,856 105,525
---------- ---------- ---------- -------- -----------
6,035,781 1,921,255 3,915,591 819,789 12,692,416
========== ========== ========== ======== ===========
Residual fair value adjustment Stage Stage Stage POCI Total
on initial recognition 1 2 3
31 December 2018
By business line EUR000 EUR000 EUR000 EUR000 EUR000
--------- --------- --------- ---------- ----------
Corporate (25,159) (11,564) (12,282) (977) (49,982)
--------- --------- --------- ---------- ----------
SMEs (10,652) (4,150) (1,113) (622) (16,537)
--------- --------- --------- ---------- ----------
Retail
--------- --------- --------- ---------- ----------
- housing (43,528) (97) (1,246) (145) (45,016)
--------- --------- --------- ---------- ----------
- consumer, credit cards and
other 3,248 352 (375) (260) 2,965
--------- --------- --------- ---------- ----------
Restructuring
--------- --------- --------- ---------- ----------
- corporate (199) (1,988) (2,687) (3,033) (7,907)
--------- --------- --------- ---------- ----------
- SMEs 28 (580) (3,931) (7,154) (11,637)
--------- --------- --------- ---------- ----------
- retail housing (119) (3) (2,796) (1,563) (4,481)
--------- --------- --------- ---------- ----------
- retail other 34 (40) (3,971) (4,611) (8,588)
--------- --------- --------- ---------- ----------
Recoveries
--------- --------- --------- ---------- ----------
- corporate - - (1,654) (5,785) (7,439)
--------- --------- --------- ---------- ----------
- SMEs - - (2,073) (24,105) (26,178)
--------- --------- --------- ---------- ----------
- retail housing - - (3,200) (37,377) (40,577)
--------- --------- --------- ---------- ----------
- retail other - - (4,695) (35,228) (39,923)
--------- --------- --------- ---------- ----------
International banking services (303) (1,164) (195) (496) (2,158)
--------- --------- --------- ---------- ----------
Wealth management (1,088) (1,439) (214) (1,850) (4,591)
--------- --------- --------- ---------- ----------
(77,738) (20,673) (40,432) (123,206) (262,049)
========= ========= ========= ========== ==========
Gross loans at amortised cost Stage Stage Stage POCI Total
after residual fair value 1 2 3
adjustment on initial recognition
31 December 2018
By business line EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- -------- -----------
Corporate 2,190,105 781,685 374,811 91,853 3,438,454
---------- ---------- ---------- -------- -----------
SMEs 728,514 341,998 102,271 10,324 1,183,107
---------- ---------- ---------- -------- -----------
Retail
---------- ---------- ---------- -------- -----------
- housing 2,216,448 300,004 299,338 10,488 2,826,278
---------- ---------- ---------- -------- -----------
- consumer, credit cards and
other 594,490 199,451 130,441 19,875 944,257
---------- ---------- ---------- -------- -----------
Restructuring
---------- ---------- ---------- -------- -----------
- corporate 48,744 90,549 301,268 83,018 523,579
---------- ---------- ---------- -------- -----------
- SMEs 55,323 51,993 402,438 39,415 549,169
---------- ---------- ---------- -------- -----------
- retail housing 6,764 3,742 470,648 12,966 494,120
---------- ---------- ---------- -------- -----------
- retail other 5,174 1,186 300,105 13,899 320,364
---------- ---------- ---------- -------- -----------
Recoveries
---------- ---------- ---------- -------- -----------
- corporate - - 118,580 38,802 157,382
---------- ---------- ---------- -------- -----------
- SMEs - - 513,469 91,321 604,790
---------- ---------- ---------- -------- -----------
- retail housing - - 508,975 147,660 656,635
---------- ---------- ---------- -------- -----------
- retail other 89 - 308,834 131,887 440,810
---------- ---------- ---------- -------- -----------
International banking services 69,317 76,945 41,157 3,069 190,488
---------- ---------- ---------- -------- -----------
Wealth management 43,075 53,029 2,824 2,006 100,934
---------- ---------- ---------- -------- -----------
5,958,043 1,900,582 3,875,159 696,583 12,430,367
========== ========== ========== ======== ===========
The following table presents the Group's loans and advances to
customers at amortised cost before residual fair value adjustment
on initial recognition by staging and geographical
concentration.
30 September 2019 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- -------- -----------
Cyprus 6,111,535 2,435,184 3,280,094 685,239 12,512,052
---------- ---------- ---------- -------- -----------
Other countries 1,263 - 91,946 - 93,209
---------- ---------- ---------- -------- -----------
6,112,798 2,435,184 3,372,040 685,239 12,605,261
========== ========== ========== ======== ===========
31 December 2018 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- ---------- -------- -----------
Cyprus 6,023,870 1,921,234 3,790,269 819,789 12,555,162
---------- ---------- ---------- -------- -----------
Other countries 11,911 21 125,322 - 137,254
---------- ---------- ---------- -------- -----------
6,035,781 1,921,255 3,915,591 819,789 12,692,416
========== ========== ========== ======== ===========
Loans and advances to customers classified as held for sale
The following tables present the staging of the Group's loans
and advances at amortised cost classified as held for sale as at 31
December 2018 by business line concentration.
31 December 2018 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
------- -------- ---------- ---------- ----------
Gross loans at amortised cost
before residual fair value
adjustment on initial recognition 7,148 94,600 2,222,931 526,434 2,851,113
------- -------- ---------- ---------- ----------
Residual fair value adjustment
on initial recognition (195) (3,261) (24,571) (111,126) (139,153)
------- -------- ---------- ---------- ----------
Gross loans at amortised cost
after residual fair value
adjustment on initial recognition 6,953 91,339 2,198,360 415,308 2,711,960
======= ======== ========== ========== ==========
Gross loans at amortised cost Stage Stage Stage POCI Total
before residual fair value 1 2 3
adjustment on initial recognition
31 December 2018
By business line EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- ---------- -------- ----------
Corporate 165 - 14,343 741 15,249
------- ------- ---------- -------- ----------
SMEs 2,835 - 6 - 2,841
------- ------- ---------- -------- ----------
Retail
------- ------- ---------- -------- ----------
- consumer, credit cards and
other - - 125 3 128
------- ------- ---------- -------- ----------
Restructuring
------- ------- ---------- -------- ----------
- corporate 2,110 85,783 722,631 48,690 859,214
------- ------- ---------- -------- ----------
- SMEs 2,038 8,817 187,831 18,180 216,866
------- ------- ---------- -------- ----------
- retail housing - - 231 41 272
------- ------- ---------- -------- ----------
- retail other - - 5,575 198 5,773
------- ------- ---------- -------- ----------
Recoveries
------- ------- ---------- -------- ----------
- corporate - - 967,761 368,310 1,336,071
------- ------- ---------- -------- ----------
- SMEs - - 300,509 73,827 374,336
------- ------- ---------- -------- ----------
- retail housing - - 484 151 635
------- ------- ---------- -------- ----------
- retail other - - 23,427 16,293 39,720
------- ------- ---------- -------- ----------
International banking services - - 8 - 8
------- ------- ---------- -------- ----------
7,148 94,600 2,222,931 526,434 2,851,113
======= ======= ========== ======== ==========
Loans and advances to customers classified as held for sale
(continued)
Residual fair value adjustment Stage Stage Stage POCI Total
on initial recognition 1 2 3
31 December 2018
By business line EUR000 EUR000 EUR000 EUR000 EUR000
------- -------- --------- ---------- ----------
Corporate - - (584) - (584)
------- -------- --------- ---------- ----------
Retail
------- -------- --------- ---------- ----------
- consumer, credit cards and
other - - - (1) (1)
------- -------- --------- ---------- ----------
Restructuring
------- -------- --------- ---------- ----------
- corporate - (2,722) (13,730) (7,927) (24,379)
------- -------- --------- ---------- ----------
- SMEs (195) (539) (1,470) (2,654) (4,858)
------- -------- --------- ---------- ----------
- retail other - - (132) (78) (210)
------- -------- --------- ---------- ----------
Recoveries
------- -------- --------- ---------- ----------
- corporate - - (4,900) (81,744) (86,644)
------- -------- --------- ---------- ----------
- SMEs - - (3,473) (14,518) (17,991)
------- -------- --------- ---------- ----------
- retail housing - - - (115) (115)
------- -------- --------- ---------- ----------
- retail other - - (282) (4,089) (4,371)
------- -------- --------- ---------- ----------
(195) (3,261) (24,571) (111,126) (139,153)
======= ======== ========= ========== ==========
Gross loans at amortised cost Stage Stage Stage POCI Total
after residual fair value 1 2 3
adjustment on initial recognition
31 December 2018
By business line EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- ---------- -------- ----------
Corporate 165 - 13,759 741 14,665
------- ------- ---------- -------- ----------
SMEs 2,835 - 6 - 2,841
------- ------- ---------- -------- ----------
Retail
------- ------- ---------- -------- ----------
- consumer, credit cards and
other - - 125 2 127
------- ------- ---------- -------- ----------
Restructuring
------- ------- ---------- -------- ----------
- corporate 2,110 83,061 708,901 40,763 834,835
------- ------- ---------- -------- ----------
- SMEs 1,843 8,278 186,361 15,526 212,008
------- ------- ---------- -------- ----------
- retail housing - - 231 41 272
------- ------- ---------- -------- ----------
- retail other - - 5,443 120 5,563
------- ------- ---------- -------- ----------
Recoveries
------- ------- ---------- -------- ----------
- corporate - - 962,861 286,566 1,249,427
------- ------- ---------- -------- ----------
- SMEs - - 297,036 59,309 356,345
------- ------- ---------- -------- ----------
- retail housing - - 484 36 520
------- ------- ---------- -------- ----------
- retail other - - 23,145 12,204 35,349
------- ------- ---------- -------- ----------
International banking services - - 8 - 8
------- ------- ---------- -------- ----------
6,953 91,339 2,198,360 415,308 2,711,960
======= ======= ========== ======== ==========
There were no loans and advances to customers at amortised cost
classified as held for sale as at 30 September 2019.
Loans and advances to customers classified as held for sale
(continued)
The following table presents the Group's gross loans and
advances before residual fair value adjustment on initial
recognition at amortised cost classified as held for sale as at 31
December 2018 by staging and geographical concentration.
31 December 2018 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- ---------- -------- ----------
Cyprus 7,148 94,600 2,161,695 526,434 2,789,877
------- ------- ---------- -------- ----------
Other countries - - 61,236 - 61,236
------- ------- ---------- -------- ----------
7,148 94,600 2,222,931 526,434 2,851,113
======= ======= ========== ======== ==========
F.6 Credit losses to cover credit risk on loans and advances to customers
Nine months ended
30 September
2019 2018 (represented)
--------- -------------------
EUR000 EUR000
--------- -------------------
Impairment loss net of reversals on loans and
advances to customers 164,952 459,303
--------- -------------------
Recoveries of loans and advances to customers
previously written off (18,096) (125,329)
--------- -------------------
Changes in expected cash flows (798) (32,882)
--------- -------------------
Financial guarantees and commitments (5,308) (6,704)
--------- -------------------
Credit losses to cover credit risk on loans and
advances to customers 140,750 294,388
========= ===================
The movement in ECL of loans and advances, including the loans
and advances to customers held for sale, and the closing balance
analysis by staging, is as follows:
30 September 2019 Cyprus Other countries Total
EUR000 EUR000 EUR000
------------ ---------------- ------------
1 January 3,315,259 146,746 3,462,005
------------ ---------------- ------------
Foreign exchange and other adjustments 6,624 3,732 10,356
------------ ---------------- ------------
Write offs (314,988) (34,978) (349,966)
------------ ---------------- ------------
Interest provided not recognised in the
income statement 96,513 4,956 101,469
------------ ---------------- ------------
Disposal of Helix and Velocity portfolios (1,548,060) (54,765) (1,602,825)
------------ ---------------- ------------
Charge for the period 165,069 (117) 164,952
------------ ---------------- ------------
30 September 1,720,417 65,574 1,785,991
============ ================ ============
Stage 1 20,561 3 20,564
------------ ---------------- ------------
Stage 2 40,500 - 40,500
------------ ---------------- ------------
Stage 3 1,449,622 65,571 1,515,193
------------ ---------------- ------------
POCI 209,734 - 209,734
------------ ---------------- ------------
Total 1,720,417 65,574 1,785,991
============ ================ ============
The allowance for ECL of loans and advances to customers
classified as held for sale as at 31 December 2018 included in the
table above, amounts to EUR1,557,852 thousand.
There were no loans and advances to customers held for sale as
at 30 September 2019.
30 September 2018 Cyprus Other Total
countries
EUR000 EUR000 EUR000
------------ ----------- ------------
1 January 3,205,177 247,673 3,452,850
------------ ----------- ------------
Change in the basis of calculation of
gross carrying values (IFRS 9 grossing
up adjustment) 1,632,322 57,175 1,689,497
------------ ----------- ------------
Impact of adopting IFRS 9 at 1 January
2018 313,928 5,174 319,102
------------ ----------- ------------
Restated balance at 1 January 2018 5,151,427 310,022 5,461,449
------------ ----------- ------------
Transfer from Romanian branch 19,258 (19,258) -
------------ ----------- ------------
Foreign exchange and other adjustments 5,779 (6,915) (1,136)
------------ ----------- ------------
Write offs (2,371,936) (82,904) (2,454,840)
Interest provided not recognised in the
income statement 121,817 (4,667) 117,150
Charge/(credit) for the period - continuing
operations 473,881 (14,578) 459,303
------------ ----------- ------------
Credit for the period - discontinued operations - (624) (624)
------------ ----------- ------------
Loss of control of UK operations - (3,594) (3,594)
------------ ----------- ------------
30 September 3,400,226 177,482 3,577,708
============ =========== ============
Stage 1 20,912 138 21,050
------------ ----------- ------------
Stage 2 101,583 3,736 105,319
------------ ----------- ------------
Stage 3 2,836,405 170,845 3,007,250
------------ ----------- ------------
POCI 441,326 2,763 444,089
------------ ----------- ------------
Total 3,400,226 177,482 3,577,708
============ =========== ============
The credit losses of loans and advances to customers include
credit losses relating to loans and advances to customers
classified as held for sale. Their balance at 30 September 2018 by
staging and geographical area is presented in the table below:
30 September 2018 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- ---------- -------- ----------
Cyprus 853 53,487 1,228,062 188,662 1,471,064
------- ------- ---------- -------- ----------
Other countries - - 48,254 - 48,254
------- ------- ---------- -------- ----------
853 53,487 1,276,316 188,662 1,519,318
======= ======= ========== ======== ==========
Collectively assessed 853 53,487 1,276,316 188,662 1,519,318
======= ======= ========== ======== ==========
The above tables do not include the residual fair value
adjustments on initial recognition of loans acquired from Laiki
Bank and ECL on financial guarantees which are part of other
liabilities on the balance sheet.
As from 1 January 2018, to comply with the requirements of IFRS
9, relating to the measurement and presentation of the gross
carrying amount and accumulated allowance for impairment as
impacted from interest income on impaired loans and advances to
customers, the gross carrying amounts of the loans have been
increased by an amount of EUR1,689,497 thousand and an equivalent
adjustment was effected on the accumulated allowance for
impairment. There was no impact on the net carrying amount of the
customer loans and advances to customers from this change in the
presentation.
During the nine months ended 30 September 2019 the total
non--contractual write--offs recorded by the Group amounted to
EUR185,700 thousand (nine months ended 30 September 2018:
EUR2,229,691 thousand).
Assumptions have been made about the future changes in property
values, as well as the timing for the realisation of the
collateral, taxes and expenses on the repossession and subsequent
sale of the collateral as well as any other applicable haircuts.
Indexation has been used to estimate updated market values of
properties, while assumptions were made on the basis of a
macroeconomic scenario for future changes in property values.
At 30 September 2019 the weighted average haircut (including
liquidity haircut and selling expenses) used in the collectively
assessed provision calculation for loans and advances to customers
is c.32% under the baseline scenario (31 December 2018: c.32%,
other than those classified as held for sale).
The timing of recovery from real estate collaterals used in the
collectively assessed provision calculation for loans and advances
to customers has been estimated to be on average seven years under
the baseline scenario (31 December 2018: average seven years, other
than those classified as held for sale).
For the calculation of individually assessed allowances for ECL,
the timing of recovery of collaterals as well as the haircuts used
are based on the specific facts and circumstances of each case.
For Stage 3 customers, the calculation of individually assessed
allowances for ECL, is the weighted average of three scenarios;
base, adverse and favourable. The base scenario focuses on the
following variables, which are based on the specific facts and
circumstances of each customer: the operational cash flows, the
timing of recovery of collaterals and the haircuts from the
realisation of collateral. The base scenario is used to derive
additional scenarios for either better or worse cases. Under the
adverse scenario operational cash flows are decreased by 50%,
applied haircuts on real estate collateral are increased by 50% and
the timing of recovery of collaterals is increased by one year with
reference to the baseline scenario. Under the favourable scenario,
applied haircuts are decreased by 5%, with no change in the
recovery period with reference to the baseline scenario.
Assumptions used in estimating expected future cash flows
(including cash flows that may result from the realisation of
collateral) reflect current and expected future economic conditions
and are generally consistent with those used in the Stage 3
collectively assessed exposures. In the case of loans and advances
to customers held for sale at 31 December 2018, the Group has taken
into consideration the timing of expected sale and the estimated
sale proceeds in determining the ECL. Amounts previously written
off which are expected to be recovered through sale are presented
in 'Recoveries of loans and advances to customers previously
written off'.
For the calculation of expected credit losses three scenarios
were used; base, adverse and favourable with 50%, 30% and 20%
probability respectively.
Any positive cumulative average future change in forecasted
property values was capped to zero for the nine months ended 30
September 2019 and the year 2018. This applies to all
scenarios.
The above assumptions are also influenced by the ongoing
regulatory dialogue BOC PCL maintains with its lead regulator, the
ECB, and other regulatory guidance and interpretations issued by
various regulatory and industry bodies such as the ECB and the EBA,
which provide guidance and expectations as to relevant definitions
and the treatment/classification of certain parameters/assumptions
used in the estimation of allowance for ECL.
Any changes in these assumptions or differences between
assumptions made and actual results could result in significant
changes in the amount of required allowance for credit losses of
loans and advances to customers.
F.7 Rescheduled loans and advances to customers
Cyprus Other Total
countries
30 September 2019 EUR000 EUR000 EUR000
---------- ----------- ----------
Stage 1 268,761 114 268,875
---------- ----------- ----------
Stage 2 489,556 - 489,556
---------- ----------- ----------
Stage 3 1,716,474 37,279 1,753,753
---------- ----------- ----------
POCI 215,411 - 215,411
---------- ----------- ----------
2,690,202 37,393 2,727,595
========== =========== ==========
31 December 2018
---------- ------- ----------
Stage 1 508,664 120 508,784
---------- ------- ----------
Stage 2 376,794 24 376,818
---------- ------- ----------
Stage 3 2,001,947 48,662 2,050,609
---------- ------- ----------
POCI 266,263 - 266,263
---------- ------- ----------
3,153,668 48,806 3,202,474
========== ======= ==========
F.8 Credit risk disclosures
According to the EBA standards and European Central Bank's (ECB)
Guidance to Banks on Non-Performing loans (which was published in
March 2017), Non-Performing Exposures (NPEs) are defined as those
exposures that satisfy one of the following conditions:
(i) The debtor 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 Requirements Regulation (CRR) (Article
178).
(iii) Material exposures (as defined below) which are more than 90 days past due.
(iv) Performing forborne exposures under probation for which
additional forbearance measures are extended.
(v) Performing forborne exposures under probation that present
more than 30 days past due within the probation period.
Exposures include all on and off balance sheet exposures, except
those held for trading, and are categorised as such for their
entire amount without taking into account the existence of
collateral.
The following materiality criteria are applied:
-- When the problematic exposures of a customer that fulfil the
NPE criteria set out above are 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 problematic part of the exposure is classified
as non-performing.
-- Material arrears/excesses are defined as follows:
- Retail exposures:
- Loans: Arrears amount greater than EUR500 or number of
instalments in arrears is greater than one.
- Overdrafts: Excess amount is greater than EUR500 or greater than 10% of the approved limit.
- Exposures other than retail: Total customer arrears/excesses
are greater than EUR1,000 or greater than 10% of the total customer
funded balances.
NPEs may cease to be considered as non-performing only when all
of the following conditions are met:
(i) The extension of forbearance measures does not lead to the
recognition of impairment or default.
(ii) One year has passed since the forbearance measures were extended.
(iii) Following the forbearance measures and according to the
post-forbearance conditions, there is no past due amount or
concerns regarding the full repayment of the exposure.
(iv) No unlikely-to-pay criteria exist for the debtor.
(v) The debtor has made post-forbearance payments of a
not-insignificant amount of capital (different capital thresholds
exist according to the facility type).
The tables below present the analysis of loans and advances to
customers in accordance with the EBA standards.
30 September Gross loans and advances to customers Provision for impairment and fair value
2019 adjustment
on initial recognition
Group gross Of which Of which exposures Total Of which Of which exposures
customer NPEs with forbearance provision NPEs with
loans measures for forbearance measures
and impairment
advances(1) and fair
value
adjustment
on initial
recognition
------------ ---------- ------------------------ ------------ ---------- -----------------------
Total Of which Total Of which
exposures on NPEs exposures on NPEs
with with
forbearance forbearance
measures measures
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Loans and
advances to
customers
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
General
governments 64,831 1 1,232 - 3,582 - 459 -
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Other financial
corporations 136,523 29,279 5,979 2,518 18,281 15,068 892 849
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Non-financial
corporations 6,424,495 1,527,145 1,385,406 803,315 851,458 762,317 366,048 349,675
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Of which: Small
and
Medium sized
Enterprises(2)
(SMEs) 4,834,350 1,199,854 900,616 609,257 714,880 639,270 273,193 261,323
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Of which:
Commercial
real estate(2) 4,333,316 948,912 889,440 537,308 498,141 429,374 223,618 213,675
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Non-financial
corporations
by sector
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Construction 853,776 298,473 152,163
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Wholesale and
retail
trade 1,348,463 405,569 210,918
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Accommodation
and food
service
activities 1,053,409 63,378 54,568
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Real estate
activities 1,284,041 305,526 162,801
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Professional,
scientific
and technical
activities 435,585 97,026 59,493
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Other sectors 1,449,221 357,173 211,515
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Households 6,418,054 2,528,492 1,697,775 1,351,375 1,199,659 1,135,261 499,609 488,672
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Of which:
Residential
mortgage
loans(2) 4,871,501 1,912,090 1,363,925 1,081,850 782,707 726,589 349,607 341,464
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Of which:
Credit for
consumption(2) 860,536 357,173 205,604 177,597 207,628 206,327 82,072 80,641
------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------
Total
on-balance
sheet 13,043,903 4,084,917 3,090,392 2,157,208 2,072,980 1,912,646 867,008 839,196
============ ========== ============ ========== ============ ========== ============ =========
1. Excluding loans and advances to central banks and credit institutions.
2. The analysis shown in lines 'non-financial corporations' and
'households' is non-additive across categories as certain customers
could be in both categories.
Gross loans and advances to customers Provision for impairment and fair value
adjustment on initial recognition
Group gross Of which Of which exposures Total Of which Of which exposures
customer NPEs with forbearance provision NPEs with forbearance
loans measures for measures
and impairment
advances(3) and fair
value
adjustment
on initial
recognition
------------ ---------- ------------------------ ------------ ---------- ------------------------
Total Of which Total Of which
exposures on NPEs exposures on NPEs
with with
31 December forbearance forbearance
2018 measures measures
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Loans and
advances to
customers
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
General
governments 70,638 3 1,595 - 3,681 - 468 -
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Other financial
corporations 167,910 21,338 28,028 5,621 13,378 8,471 3,374 2,076
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Non-financial
corporations 6,331,381 1,941,479 1,682,997 1,042,164 947,857 864,983 367,235 347,924
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Of which: Small
and
Medium sized
Enterprises(4) 4,573,824 1,488,289 1,108,153 793,579 759,484 692,343 280,675 266,736
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Of which:
Commercial
real estate(4) 4,473,159 1,284,145 1,124,078 742,839 569,351 501,842 231,694 216,486
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Non-financial
corporations
by sector
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Construction 972,059 382,697 184,282
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Wholesale and
retail
trade 1,431,706 522,151 254,823
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Accommodation
and food
service
activities 1,005,691 96,702 58,563
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Real estate
activities 1,140,596 406,226 174,269
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Manufacturing 428,828 134,950 74,884
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Other sectors 1,352,501 398,753 201,036
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Households 6,588,202 2,805,496 1,924,928 1,486,583 1,271,429 1,208,624 481,701 471,184
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Of which:
Residential
mortgage
loans(4) 5,022,617 2,112,152 1,552,445 1,180,705 828,205 774,656 336,651 327,956
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Of which:
Credit for
consumption(4) 891,964 397,747 234,572 195,422 225,505 221,996 79,417 77,930
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
13,158,131 4,768,316 3,637,548 2,534,368 2,236,345 2,082,078 852,778 821,184
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Loans and
advances to
customers
classified
as held for
sale 2,851,113 2,749,301 1,492,083 1,437,851 1,697,005 1,646,091 825,977 797,692
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Total
on-balance
sheet 16,009,244 7,517,617 5,129,631 3,972,219 3,933,350 3,728,169 1,678,755 1,618,876
============ ========== ============ ========== ============ ========== ============ ==========
3. Excluding loans and advances to central banks and credit institutions.
4. The analysis shown in lines 'non-financial corporations' and
'households' is non-additive across categories as certain customers
could be in both categories.
F.9 Pending litigation, claims regulatory and other matters
The Group in the ordinary course of business, is subject to
enquiries and examinations, requests for information, audits,
investigations and legal and other proceedings by regulators,
governmental and other public bodies, actual and threatened,
relating to the suitability and adequacy of advice given to clients
or the absence of advice, lending and pricing practices, selling
and disclosure requirements, record keeping, filings and a variety
of other matters. In addition, as a result of the deterioration of
the Cypriot economy and banking sector in 2012 and the subsequent
Restructuring of BOC PCL in 2013 as a result of the bail-in
Decrees, BOC PCL is subject to a large number of proceedings and
investigations that either precede, or result from the events that
occurred during the period of the bail-in Decrees. Most ongoing
investigations and proceedings of significance relate to matters
arising during the period prior to the issue of the bail-in
Decrees. Provisions have been recognised for those cases where the
Group is able to estimate probable losses. Where an individual
provision is material, the fact that a provision has been made is
stated. Any provision recognised does not constitute an admission
of wrongdoing or legal liability. While the outcome of these
matters is inherently uncertain, management believes that, based on
the information available to it, appropriate provisions have been
made in respect of legal proceedings and regulatory matters.
F.10 Liquidity regulation
The Group has to comply with requirements on the Liquidity
Coverage Ratio (LCR) under CRD IV/CRR (as supplemented by the
Commission Delegated Regulation (EU) No 2015/61 which prescribes
the criteria for liquid assets and methods of calculation as from 1
October 2015 and the Commission Implementing Regulation (EU) No
2016/322 which prescribes supervisory reporting requirements and is
applicable since 10 September 2016). It also monitors its position
against the Net Stable Funding Ratio (NSFR) as proposed under Basel
III. The LCR is designed to promote short-term resilience of a
Group's liquidity risk profile by ensuring that it has sufficient
high quality liquid resources to survive an acute stress scenario
lasting for 30 days. The NSFR has been developed to promote a
sustainable maturity structure of assets and liabilities.
In October 2014, the Basel Committee on Banking Supervision
proposed the methodology for calculating the NSFR. It is noted that
the NSFR will become a regulatory indicator when Capital
Requirements Regulation 2 (CRR2) is enforced with the limit set at
100%.
As at 30 September 2019 the Group was in compliance with all
regulatory liquidity requirements. As at 30 September 2019 the LCR
stood at 218% for the Group (compared to 231% at 31 December 2018)
and was in compliance with the minimum regulatory requirement of
100% applicable as from 1 January 2018. The main reason for the
reduction in the LCR ratio from 31 December 2018 to 30 September
2019 is the change in the tenor and mix of deposits. As at 30
September 2019 the Group's NSFR, on the basis of the Basel
standards, was 122% (compared to 119% at 31 December 2018).
F.11 Liquidity reserves
The below table sets out the Group's liquidity reserves:
Composition of 30 September 2019 31 December 2018
the liquidity
reserves
Internal Liquidity reserves Internal Liquidity reserves
Liquidity as per LCR Delegated Liquidity as per LCR Delegated
reserves Reg (EU) reserves Reg (EU)
2015/61 LCR eligible 2015/61 LCR eligible
----------- ------------------------ ----------- ------------------------
Level 1 Level Level Level
2A 1 2A
----------- ------------- --------- ----------- ------------- ---------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
----------- ------------- --------- ----------- ------------- ---------
Cash and balances
with central banks 4,253,608 4,253,608 - 4,447,511 4,447,511 -
----------- ------------- --------- ----------- ------------- ---------
Nostro and overnight
placements with
banks 60,645 - - 281,383 - -
----------- ------------- --------- ----------- ------------- ---------
Other placements 144,644 - - - - -
with banks
----------- ------------- --------- ----------- ------------- ---------
Liquid investments 1,233,604 1,146,394 128,312 881,091 929,380 93,165
----------- ------------- --------- ----------- ------------- ---------
Available ECB
Buffer 1,184,708 - - 108,374 - -
----------- ------------- --------- ----------- ------------- ---------
Total 6,877,209 5,400,002 128,312 5,718,359 5,376,891 93,165
=========== ============= ========= =========== ============= =========
Internal Liquidity Reserves show the total liquid assets as
defined in BOC PCL's Liquidity Policy. Liquidity reserves as per
LCR Delegated Regulation (EU) 2015/61 show the liquid assets as per
the definition of the aforementioned regulation i.e. High Quality
Liquid Assets (HQLA).
Under Liquidity reserves as per LCR, Nostro and placements with
banks are not included, as they are not considered HQLA (they are
part of the LCR Inflows).
Liquid investments under the Liquidity reserves as per LCR are
shown at market values reduced by standard weights as prescribed by
the LCR regulation. Liquid investments under Internal Liquidity
reserves include all LCR and/or ECB eligible investments and are
shown at market values net of haircut based on ECB haircuts and
methodology.
Finally, available ECB buffer is not part of the Liquidity
reserves as per LCR, since the collateralised assets in the ECB
pool are not LCR eligible but only ECB eligible.
F.12 Capital management
The primary objective of the Group's capital management is to
ensure compliance with the relevant regulatory capital requirements
and to maintain strong credit ratings and healthy capital adequacy
ratios in order to support its business and maximise shareholders'
value.
With the exception of certain specified provisions, the CRR and
Capital Requirements Directive IV (CRD IV) came into effect on 1
January 2014. The CRR and CRD IV transposed the new capital,
liquidity and leverage standards of Basel III into the European
Union's legal framework. CRR establishes the prudential
requirements for capital, liquidity and leverage for credit
institutions and investment firms. It is directly applicable in all
EU member states. CRD IV governs access to deposit-taking
activities and internal governance arrangements including
remuneration, board composition and transparency. Unlike the CRR,
member states were required to transpose the CRD IV into national
laws and it allowed national regulators to impose additional
capital buffer requirements. CRR introduced significant changes in
the prudential regulatory regime applicable to banks including
amended minimum capital adequacy ratios, changes to the definition
of capital and the calculation of risk weighted assets and the
introduction of new measures relating to leverage, liquidity and
funding. CRR permits a transitional period for certain of the
enhanced capital requirements and certain other measures, which are
largely fully effective in 2019.
In addition, the Regulation (EU) 2016/445 of the ECB on the
exercise of options and discretions available in Union law
(ECB/2016/4) provides certain transitional arrangements which
supersede the national discretions unless they are stricter than
the EU Regulation 2016/445.
The CET1 ratio of the Group at 30 September 2019 stands at 15.2%
and the total capital ratio at 18.2% on a transitional basis. The
ratios as at 30 September 2019 includes unreviewed profits for the
nine months ended 30 September 2019.
The minimum Pillar I total capital requirement is 8.0% and may
be met, in addition to the 4.5% CET1 requirement, with up to 1.5%
by Additional Tier 1 capital and with up to 2.0% by Tier 2
capital.
The Group is also subject to additional capital requirements for
risks which are not covered by the Pillar I capital requirements
(Pillar II add-ons).
Following the annual Supervisory Review and Evaluation Process
(SREP) performed by the ECB in 2019 and based on the
pre-notification received in September 2019, the Group's minimum
phased-in CET1 capital ratio and Total Capital ratio remain
unchanged, when ignoring the phasing-in of the Other Systemically
Important Institution Buffer. The Group's phased-in CET1 capital
ratio is expected to be 11.0%, comprising a 4.5% Pillar I
requirement, a 3.0% Pillar II requirement, the Capital Conservation
Buffer of 2.5% (fully phased-in as of 1 January 2019) and the Other
Systemically Important Institution Buffer of 1.0%. The Group's
Total Capital requirement is expected to be 14.5%, comprising an
8.0% Pillar I requirement, a 3.0% Pillar II requirement, the
Capital Conservation Buffer of 2.5% and the Other Systemically
Important Institution Buffer of 1.0%. The new SREP requirements are
expected to be effective from January 2020 and remain subject to
ECB final confirmation.
The EBA final guidelines on SREP and supervisory stress testing
and the Single Supervisory Mechanism's (SSM) 2018 SREP methodology
provide that 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 twice. Following the Annual Supervisory
Review and Evaluation Process (SREP) performed by the ECB in 2019
and based on the pre-notification received in September 2019, the
new provisions are expected to be effective from January 2020 and
remain subject to ECB final confirmation.
Following the annual Supervisory Review and Evaluation Process
(SREP) performed by the ECB in 2018 and based on the final 2018
SREP decision received on 27 March 2019, the Group's minimum
phased-in CET1 capital ratio and Total capital ratio for 2019
remained unchanged when ignoring the phasing-in of the Capital
Conservation Buffer (CCB) and the Other Systemically Important
Institution Buffer. The Group's phased-in CET1 capital ratio
requirement is 10.5%, comprising of a 4.5% Pillar I requirement, a
3.0% Pillar II requirement, the CCB of 2.5% and the Other
Systemically Important Institution Buffer of 0.5%. The Group's
Total capital ratio requirement is 14.0%, comprising of a 8.0%
Pillar I requirement, a 3.0% Pillar II requirement, the Capital
Conservation Buffer of 2.5% and the Other Systemically Important
Institution Buffer of 0.5%. The final 2018 SREP decision applies
from 1 April 2019. The ECB has also provided non-public guidance
for an additional Pillar II CET1 buffer.
The Group's minimum phased-in CET1 capital ratio for 2018 was
9.375%, comprising of a 4.50% Pillar I requirement, a 3.00% Pillar
II requirement and the CCB of 1.875%. The ECB had also provided
non-public guidance for an additional Pillar II CET1 buffer. The
overall Total Capital Ratio Requirement for 2018 was 12.875%
comprising of 8.00% Pillar I requirement (of which up to 1.50%
could be in the form of Additional Tier 1 capital and up to 2.00%
in the form of Tier 2 capital), a 3.00% Pillar II requirement (in
the form of CET1) and the CCB of 1.875% applicable for 2018.
The above minimum ratios apply for both, BOC PCL and the Group.
BOC PCL is 100% subsidiary of the Company and its principal
activities are the provision of banking, financial services and
management and disposal of property predominately acquired in
exchange of debt.
The capital position of the Group and BOC PCL at 30 September
2019 exceeds both their Pillar I and their Pillar II add-on capital
requirements. However, the Pillar II add-on capital requirements
are a point-in-time assessment and therefore are subject to change
over time.
Based on the provisions of the Macroprudential Oversight of
Institutions Law of 2015 which came into force on 1 January 2016,
the CBC is the designated Authority responsible for setting the
macroprudential buffers that derive from the CRD IV.
In accordance with the provisions of the above law, the CBC
sets, on a quarterly basis, the Countercyclical Capital Buffer
(CCyB) level in accordance with the methodology described in this
law. The CCyB is effective as from 1 January 2016 and is determined
for all the countries in the European Economic Area (EEA) by their
local competent authorities ahead of the beginning of each quarter.
The CBC has set the level of the CCyB for Cyprus at 0% for the
years 2018 and 2019.
In accordance with the provisions of this law, the CBC is also
the responsible authority for the designation of banks that are
Other Systemically Important Institutions (O-SIIs) and for the
setting of the O-SII buffer requirement for these systemically
important banks. The Group has been designated as an O-SII and the
CBC set the O-SII buffer for the Group at 2.0%. This buffer is
being 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.
The Capital Conservation Buffer (CCB) was gradually phased-in at
0.625% in 2016, 1.25% in 2017, 1.875% in 2018 and has been fully
implemented on 1 January 2019 at 2.5%.
The Bank Recovery and Resolution Directive (BRRD) requires that
from January 2016 EU member states shall apply the BRRD's
provisions requiring EU credit institutions and certain investment
firms to maintain a minimum requirement for own funds and eligible
liabilities (MREL), subject to the provisions of the Commission
Delegated Regulation (EU) 2016/1450. Although the precise
calibration and ultimate designation of the Group's MREL has not
yet been finalised, BOC PCL is monitoring developments in this area
very closely.
The insurance subsidiaries of the Group comply with the
requirements of the Superintendent of Insurance including the
minimum solvency ratio. The regulated investment firms of the Group
comply with the regulatory capital requirements of the CySEC laws
and regulations.
F.12.1 Capital position
The capital position of the Group and the BOC PCL under CRD
IV/CRR basis (after applying the transitional arrangements) is
presented below:
Regulatory capital Group BOC PCL
30 September 31 December 30 September 31 December
2019 2018(5) 2019 2018
------------- ------------ ------------- ------------
EUR000 EUR000 EUR000 EUR000
------------- ------------ ------------- ------------
Transitional Common Equity
Tier 1 (CET1)(6&7) 2,097,985 1,864,000 2,120,751 1,861,098
------------- ------------ ------------- ------------
Transitional Additional
Tier 1 capital (AT1) 220,000 220,000 220,000 220,000
------------- ------------ ------------- ------------
Tier 2 capital (T2) 187,780 212,000 250,000 250,000
------------- ------------ ------------- ------------
Transitional total regulatory
capital(7) 2,505,765 2,296,000 2,590,751 2,331,098
============= ============ ============= ============
Risk weighted assets -
credit risk(8) 12,219,112 13,832,589 12,247,267 13,820,385
------------- ------------ ------------- ------------
Risk weighted assets - - 2,182 - -
market risk
------------- ------------ ------------- ------------
Risk weighted assets -
operational risk 1,538,588 1,538,588 1,411,788 1,411,788
------------- ------------ ------------- ------------
Total risk weighted assets 13,757,700 15,373,359 13,659,055 15,232,173
============= ============ ============= ============
% % % %
------------- ------------ ------------- ------------
Transitional Common Equity
Tier 1 ratio 15.2 12.1 15.5 12.2
------------- ------------ ------------- ------------
Transitional total capital
ratio 18.2 14.9 19.0 15.3
------------- ------------ ------------- ------------
Fully loaded Group BOC PCL
30 September 31 December 30 September 31 December
2019(9) 2018(10) 2019(9) 2018(10)
------------- ------------ ------------- ------------
EUR000 EUR000 EUR000 EUR000
------------- ------------ ------------- ------------
Common Equity Tier 1 ratio
(%) 13.6 10.1 13.9 10.2
------------- ------------ ------------- ------------
Total capital ratio (%) 16.8 13.2 17.4 13.4
------------- ------------ ------------- ------------
During the period ended 30 September 2019, the CET1 was
negatively affected by the phasing-in of transitional adjustments,
mainly the IFRS 9, and it was positively affected by the profit(11)
for the period of EUR123,832 thousand, in line with the prudential
consolidation, primarily driven by legislative changes. Moreover,
on 1 March 2019 the Cyprus Parliament adopted legislative
amendments allowing for the conversion of deferred tax assets into
deferred tax credits for regulatory purposes, under the CRR. For
more details refer to Note 11 of the Consolidated Condensed Interim
Financial Statements for the period ended 30 June 2019.
The Group has elected to apply the EU transitional arrangements
for regulatory capital purposes (EU Regulation 2017/2395) where the
impact on the impairment amount from the initial application of
IFRS 9 on the capital ratios is phased-in gradually over a five
year period. The Group has notified its regulator about its
election to adopt the transitional arrangements. The amount added
back over the transitional period decreases based on a weighting
factor of 95% in 2018, 85% in 2019, 70% in 2020, 50% in 2021 and
25% in 2022. The impact of IFRS 9 is fully absorbed after the five
year transitional period.
5. As per the Annual Report 2018 and Pillar 3 Disclosures 2018
6. CET1 includes regulatory deductions, comprising intangible
assets amounting to EUR43,383 thousand as at 30 September 2019 (31
December 2018: EUR43,364 thousand). As at 31 December 2018 CET1
included regulatory deductions comprising deferred tax assets
amounting to EUR163,082 thousand.
7. Following the Regulation (EU) 2016/445 of the ECB of 14 March
2016 on the exercise of options and discretions available in Union
law (ECB/2016/4), the deferred tax asset was phasing-in for 5
years, with effect as from the reporting of 31 December 2016, and
fully phased-in on 1 January 2019.
8. Includes Credit Valuation Adjustments (CVA).
9. IFRS 9 fully loaded.
10. IFRS 9 & Deferred Tax Asset fully loaded.
11. No permission has been requested by the ECB for the
inclusion of interim profits in capital regulatory submissions. The
regulatory capital and the respective ratios as at 30 September
2019 include unreviewed profits for the nine months ended 30
September 2019.
F.12.2 Overview of RWA
RWAs Minimum capital
requirements
30 September 30 June 30 September
2019 2019 2019
----- ------------------------------------ ------------- ----------------
EUR000 EUR000 EUR000
---------------------------------------- ------------- ----------- ----------------
Credit risk (excluding counterparty
1 credit risk (CCR)) 11,837,609 11,974,850 947,009
---------------------------------------- ------------- ----------- ----------------
Of which the Standardised
2 Approach 11,837,609 11,974,850 947,009
---------------------------------------- ------------- ----------- ----------------
6 CCR 16,583 19,194 1,327
---------------------------------------- ------------- ----------- ----------------
7 Of which mark to market 11,795 12,881 944
---------------------------------------- ------------- ----------- ----------------
11 Of which risk exposure amount - - -
for contributions to the
default fund of a CCP
---------------------------------------- ------------- ----------- ----------------
Of which Credit Valuation
12 Adjustment (CVA) 4,788 6,313 383
---------------------------------------- ------------- ----------- ----------------
13 Settlement risk - - -
---------------------------------------- ------------- ----------- ----------------
Securitisation exposures
in the banking book (after
14 the cap) 49,700 52,504 3,976
---------------------------------------- ------------- ----------- ----------------
18 Of which Standardised Approach 49,700 52,504 3,976
---------------------------------------- ------------- ----------- ----------------
19 Market risk - 61,712 -
---------------------------------------- ------------- ----------- ----------------
Of which the Standardised
20 Approach - 61,712 -
---------------------------------------- ------------- ----------- ----------------
22 Large exposures - - -
---------------------------------------- ------------- ----------- ----------------
23 Operational risk 1,538,588 1,538,588 123,087
---------------------------------------- ------------- ----------- ----------------
25 Of which Standardised Approach 1,538,588 1,538,588 123,087
---------------------------------------- ------------- ----------- ----------------
Amounts below the thresholds
for deduction (subject to
27 250% risk weight) 315,220 315,220 25,218
---------------------------------------- ------------- ----------- ----------------
29 Total 13,757,700 13,962,068 1,100,617
---------------------------------------- ============= =========== ================
The overall decrease in total RWA was mainly driven from 'Credit
Risk ((excluding Counterparty Credit Risk (CCR))' observed in line
1 from the (a) the improved overall RW efficiency of customer
advances mainly from curing and repayments/settlements in
regulatory high risk and NPEs which attract higher RWs, and (b) the
decreased balance sheet values of properties held for sale and
other assets. Further analysis can be observed in table F.12.3
below. The decrease in CCR RWA observed in line 6 is the result of
decreased derivative and securities financing transactions exposure
values. The decrease in line 19 results from the reversal of the
forex position created from the sale of Helix and Velocity
portfolio of loans in June 2019. The decrease in RWA in line 14,
Securitisation exposures in the banking book, is the result of the
decreased balance sheet position held in the Helix transaction.
There were no large exposures for institutions that exceeded the
relevant limits.
F.12.3 Standardised approach - Credit risk exposure and Credit Risk Mitigation (CRM) effects
The table below illustrates the analysis of RWA and RWA density
of all exposure classes that comprise the RWA reported in lines 1
and 27 of table F.12.2.
30 September 2019 31 December 2018
RWAs and RWA density RWAs and RWA density
------------------------- -------------------------
Exposure classes RWAs RWA density RWAs RWA density
----------- ------------ ----------- ------------
EUR000 % EUR000 %
----------- ------------ ----------- ------------
Central governments
or central banks 382,627 6.8% 333,243 6.1%
----------- ------------ ----------- ------------
Regional government
or local authorities 1,395 2.0% 701 1.2%
----------- ------------ ----------- ------------
Public sector entities 8 0,0% 7 0.0%
----------- ------------ ----------- ------------
Multilateral development
banks - 0.0% - 0.0%
----------- ------------ ----------- ------------
International organisations - 0.0% - 0.0%
----------- ------------ ----------- ------------
Institutions 197,146 28.9% 177,904 29.8%
----------- ------------ ----------- ------------
Corporates 3,294,637 99.4% 3,016,593 98.8%
----------- ------------ ----------- ------------
Retail 971,652 71.1% 987,312 71.1%
----------- ------------ ----------- ------------
Secured by mortgages
on immovable property 1,160,936 37.5% 1,077,148 37.4%
----------- ------------ ----------- ------------
Exposures in default 2,293,058 108.9% 3,695,591 110.8%
----------- ------------ ----------- ------------
Higher-risk categories 1,452,932 150.0% 2,032,341 150.0%
----------- ------------ ----------- ------------
Covered bonds 16,776 10.0% 14,153 10.0%
----------- ------------ ----------- ------------
Collective investment
undertakings (CIUs) 191 100.0% 172 100.0%
----------- ------------ ----------- ------------
Equity 330,164 234.1% 254,220 229.9%
----------- ------------ ----------- ------------
Other items 2,051,307 93.7% 2,220,345 92.4%
----------- ------------ ----------- ------------
Total 12,152,829 60.5% 13,809,730 65.6%
=========== ============ =========== ============
The main driver behind the overall decrease in the RWA density
is the sale of projects Helix and Velocity whereby the exposures in
exposure classes 'Exposures in default', 'Higher-risk categories'
and 'Other items' which carry high risk weights materially
decreased. On 1 March 2019 the Cyprus Parliament adopted
legislative amendments allowing for the conversion of deferred tax
assets into deferred tax credits for regulatory capital purposes,
under the CRR. The law amendment increased the RWA density in
exposure classes 'Central governments or central banks' which
include the deferred tax asset amounts converted to deferred tax
credits carrying a Risk Weight of 100% and 'Equity' which include
the FSE amounts carrying a Risk Weight of 250%. The law amendment
and the increased exposure values from Balance Sheet line 'Other
assets' that take a 100% Risk Weight included in exposure class
'Other items' resulted in the overall increased RWA density. The
slight decrease in the RWA density at individual class level
observed in 'Institutions' derives from improved ratings and
decreases in residual maturities whilst the RWA increased from
increased carrying amounts with 'Institutions'. New lending and
curing, mainly to customers, which do not benefit from the SME
supporting factor under article 501 of the CRR led to increased RWA
and RWA density in exposure class 'Corporates'. The decrease
observed in the RWA density in "Exposures in default' is the result
of more eligible real estate collateral covering the NPE and
increased credit adjustments ratio for their unsecured part.
The RWA density of all other exposure classes remained
stable.
F.13 Leverage ratio
According to CRR Article 429, the leverage ratio, expressed as a
percentage, is calculated as the capital measure divided by the
total exposure measure of the Group.
The leverage ratio of the Group is presented below:
30 September 31 December
2019 2018
Transitional basis EUR000 EUR000
------------- ------------
Capital measure (Tier 1) 2,317,985 2,084,000
============= ============
Total exposure measure 21,088,020 22,052,298
============= ============
Leverage ratio (%) 10.99% 9.45%
============= ============
IFRS 9 fully loaded
------------- ------------
Capital measure (Tier 1) 2,055,530 1,745,473
============= ============
Total exposure measure 20,871,880 21,893,785
============= ============
Leverage ratio (%) 9.85% 7.97%
============= ============
The decrease in the 'Total exposure measure' follows the
movements in the Group's balance sheet assets.
For the 'Capital measure' the increase in Tier1 is primarily
driven by the tax legislation amendments relating to the conversion
of deferred tax assets into deferred tax credits.
The leverage ratio, including the profit (prudential
consolidation) of EUR123,832 thousand for the nine month period
ended 30 September 2019, is calculated at 10.99% on a transitional
basis and 9.85% on IFRS 9 fully loaded basis.
F.14 Internal Capital Adequacy Assessment Process (ICAAP),
Internal Liquidity Assessment Process (ILAAP), Pillar II and
SREP
The Group prepares the ICAAP and ILAAP reports annually. Both
reports for 2018 were approved by the Board of Directors and
submitted to the ECB on 25 April 2019.
The Group also undertakes a quarterly review of its ICAAP
results (as at the end of June and as at the end of September)
considering the latest actual and forecasted information. During
the quarterly review, the Group's risk profile and risk management
policies and processes are reviewed and any changes since the
annual ICAAP exercise are taken into consideration. The ICAAP
process demonstrates that the Group has sufficient capital under
both the base case and stress scenarios under the Normative
internal perspective. Under the Economic internal perspective there
are shortfalls in the adverse scenario, which however can be
largely neutralised by the available mitigants.
The Group also undertakes a quarterly review for the ILAAP
through quarterly stress tests submitted to the ALCO and RC. During
the quarterly review, the liquidity risk drivers are assessed and,
if needed, the stress test assumptions are amended accordingly. The
quarterly review identifies whether the Group has an adequate
liquidity buffer to cover the stress outflows. The Group's ILAAP
analysis demonstrates that the volume and capacity of liquidity
resources available to the Group are adequate.
The ECB, as part of its supervisory role, has been conducting
the SREP and onsite inspections on the Group. SREP is a holistic
assessment of, amongst other things, the Group's business model,
internal governance and institution-wide control arrangements,
risks to capital and adequacy of capital to cover these risks and
risks to liquidity and adequacy of liquidity resources to cover
these risks. The objective of the SREP is for the ECB to form an
up-to-date supervisory view of the Group's risks and viability and
to form the basis for supervisory measures and dialogue with the
Group. Additional capital and other requirements could be imposed
on the Group as a result of these supervisory processes, including
a revision of the level of Pillar II add-ons as the Pillar II
add-ons capital requirements are a point-in-time assessment and
therefore subject to change over time. Following the annual
Supervisory Review and Evaluation Process (SREP) performed by the
ECB in 2019 , the Group received a pre-notification in September
2019 that the Group's minimum phased-in CET1 capital ratio and
Total Capital ratio remain unchanged, when ignoring the phasing-in
of the Other Systemically Important Institution Buffer.
The EBA final guidelines on SREP and supervisory stress testing
and the Single Supervisory Mechanism's (SSM) 2018 SREP methodology
provide that 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 twice. Following the annual Supervisory
Review and Evaluation Process (SREP) performed by the ECB in 2019
and based on the pre-notification received in September 2019, the
new provisions are expected to be effective from January 2020 and
remain subject to ECB final confirmation.
The Group has been informed that it has been selected to
participate in the ECB SREP stress test of 2020 which is expected
to be launched by end of January 2020 and be concluded by end of
July 2020.
G. Definitions & Explanations
Reconciliations
1. Reconciliation of Gross loans and advances to customers
30 September 31 December
2019 2018
EUR000 EUR000
============= ============
Gross loans and advances to customers (as defined
below) 13,034,814 15,900,427
============= ============
Reconciling items:
============= ============
Fair value adjustment on initial recognition
(Section F.4)* (277,900) (322,375)
============= ============
Loans and advances to customers classified
as non-current assets held for sale - (2,711,960)
============= ============
Fair value adjustment on initial recognition
on loans and advances to customers classified
as non-current assets held for sale - (139,153)
============= ============
Reclassification between gross loans and allowance
for expected credit losses on loans and advances
to customers classified as held for sale - 99,000
============= ============
Loans and advances to customers measured at
fair value through profit and loss (Section
F.3) (370,510) (395,572)
------------- ------------
Gross loans and advances to customers at amortised
cost as per section F.3 12,386,404 12,430,367
============= ============
* Including fair value adjustment on initial recognition of
loans and advances to customers measured at fair value through
profit and loss amounting to EUR59,043 thousand (31 December 2018:
EUR60,326 thousand).
2. Reconciliation of Allowance for expected credit losses on
loans and advances to customers (ECL)
30 September 31 December
2019 2018
EUR000 EUR000
============= ============
Allowance for expected credit losses on loans
and advances to customers (as defined below) 2,086,268 3,852,218
============= ============
Reconciling items:
============= ============
Fair value adjustment on initial recognition* (277,900) (322,375)
============= ============
Loans and advances to customers classified
as non-current assets held for sale - (1,557,852)
============= ============
Fair value adjustment on initial recognition
on loans and advances to customers classified
as non-current assets held for sale - (139,153)
============= ============
Reclassification between gross loans and allowance
for expected credit losses on loans and advances
to customers classified as held for sale - 99,000
============= ============
Provisions for financial guarantees and commitments (22,377) (27,685)
------------- ------------
Allowance for ECL of loans and advances to
customers as per section F.3 1,785,991 1,904,153
============= ============
* Including fair value adjustment on initial recognition of
loans and advances to customers measured at fair value through
profit and loss amounting to EUR59,043 thousand (31 December 2018:
EUR60,326 thousand).
3. Reconciliation of NPEs
30 September 31 December
2019 2018
EUR000 EUR000
============= ============
NPEs (as defined below and as per Section F.8) 4,084,917 7,418,613
============= ============
Reconciling items:
============= ============
Loans and advances to customers classified
as non-current assets held for sale - (2,613,603)
============= ============
Fair value adjustment on initial recognition
on loans and advances to customers classified
as non-current assets held for sale - (135,697)
============= ============
Reclassification between gross loans and allowance
for expected credit losses on loans and advances
to customers classified as held for sale - 99,000
============= ============
Loans and advances to customers measured at
fair value through profit and loss (NPE) (144,288) (160,907)
============= ============
POCI (NPE) (568,589) (691,815)
------------- ------------
Stage 3 loans and advances to customers as
per section F.5 3,372,040 3,915,591
============= ============
NPE ratio
============= ============
NPEs (as per table above) (EUR000) 4,084,918 7,418,613
============= ============
Gross loans and advances to customers (as per
table above) (EUR000) 13,034,814 15,900,427
============= ============
Ratio of NPE/Gross loans (%) 31.3% 46.7%
============= ============
Ratios Information
1. Net Interest Margin
Reconciliation of the various components of net interest margin
from the underlying basis to the statutory basis is provided
below:
Nine months ended
30 September
2019 2018
(represented)
======== ===============
1.1. Reconciliation of Net interest income EUR000 EUR000
======== ===============
Net interest income as per the underlying basis 260,047 249,744
======== ===============
Reclassifications for:
======== ===============
Net interest income relating to the NPE sale
(Helix), disclosed under non-recurring items
within 'Profit/(loss) relating to NPE sale
(Helix)' under the underlying basis 33,962 66,315
-------- ---------------
Net interest income as per the Unaudited Interim
Consolidated Income Statement 294,009 316,059
======== ===============
Net interest income (annualised) 347,682 333,907
======== ===============
1.2. Interest earning assets 30 September 30 June 31 March 31 December
2019 2019 2019 2018
EUR000 EUR000 EUR000 EUR000
============= =========== =========== ============
Cash and balances with central
banks 4,412,542 5,261,896 3,913,391 4,610,491
============= =========== =========== ============
Loans and advances to banks 427,966 403,041 448,043 472,532
============= =========== =========== ============
Loans and advances to customers 10,970,923 10,949,002 10,954,529 10,921,786
============= =========== =========== ============
Loans and advances to customers
held for sale - 5,891 1,108,440 1,154,108
============= =========== =========== ============
Investments
============= =========== =========== ============
Debt securities 1,808,891 1,720,231 1,556,668 1,364,743
============= =========== =========== ============
Less: Investment which is
not interest bearing (22,345) (13,563) (10,181) (8,606)
------------- ----------- ----------- ------------
Total interest earning assets 17,597,977 18,326,498 17,970,890 18,515,054
============= =========== =========== ============
1.3. Quarterly average interest
earning assets (EUR000)
============= =========== =========== ============
* as at 30 September 2019 18,102,605
============= =========== =========== ============
* as at 30 September 2018 18,109,088
============= =========== =========== ============
2. Operating profit return on average assets
The various components used in the determination of the
operating profit return on average assets are provided below:
30 September 30 June 31 March 31 December
2019 2019 2019 2018
EUR000 EUR000 EUR000 EUR000
============= =========== =========== ============
Total assets used in the
computation of the operating
profit return on average
assets/per the Unaudited
Interim Consolidated Balance
Sheet 21,114,340 21,887,186 21,745,438 22,075,271
============= =========== =========== ============
30 September 30 September
2019 2018
(represented)
EUR000 EUR000
============= ===============
Annualised operating profit 251,676 278,323
============= ===============
Quarterly average total assets 21,705,559 21,575,953
============= ===============
Accelerated Following the Regulation (EU) 2016/445 of the ECB
phase-in period of 14 March 2016 on the exercise of options and discretions,
the DTA was phasing-in by 60% for 2017, 80% for 2018
and 100% for 2019 (fully phased-in).
Allowance for Comprise (i) allowance for expected credit losses
expected loan (ECL) on loans and advances to customers, (ii) the
credit losses fair value adjustment on initial recognition of loans
(previously and advances to customers, (iii) allowance for expected
'Accumulated credit losses for off-balance sheet exposures (financial
provisions') guarantees and commitments) disclosed on the balance
sheet within other liabilities, and (iv) accumulated
fair value adjustments on loans and advances to customers
classified at FVPL.
Advisory and Comprise mainly: fees of external advisors in relation
other restructuring to: (i) disposal of operations and non-core assets,
costs and (ii) customer loan restructuring activities
AT1 AT1 (Additional Tier 1) is defined in accordance with
Articles 51 and 52 of the Capital Requirements Regulation
(EU) No 575/2013.
CET1 capital CET1 capital ratio (transitional basis) is defined
ratio (transitional in accordance with the Capital Requirements Regulation
basis) (EU) No 575/2013.
CET1 fully loaded The CET1 fully loaded (FL) ratio is defined in accordance
(FL) with the Capital Requirements Regulation (EU) No 575/2013.
Contribution Relates to the contribution made to the Single Resolution
to SRF Fund.
Cost to Income Cost-to-income ratio comprises total expenses (as
ratio defined) divided by total income (as defined).
Data from the The latest data from the Statistical Service of the
Statistical Republic of Cyprus, Cyprus Statistical Service, was
Service published on 18 November 2019.
ECB European Central Bank
Gross loans Gross loans are reported before the 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 EUR278 mn at 30 September
2019 (compared to EUR290 mn at 30 June 2019 and EUR462
mn at 31 December 2018).
Additionally, gross loans (i) include loans and advances
to customers measured at fair value through profit
and loss of EUR430 mn at 30 September 2019 (compared
to EUR454 mn at 30 June 2019 and EUR456 mn as at 31
December 2018), and (ii) are reported after the reclassification
between gross loans and expected credit losses on
loans and advances to customers classified as a disposal
group held for sale of Nil as at 30 September 2019
and 30 June 2019 (compared to EUR99 mn at 31 December
2018).
Group The Group consists f 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.
Leverage ratio The leverage ratio is the ratio of tangible total
equity (including Other equity instruments) to total
assets as presented on the balance sheet.
Loan credit Loan credit losses comprise: (i) credit losses to
losses (PL) cover credit risk on loans and advances to customers,
(previously (ii) net gains on derecognition of financial assets
'Provision charge') measured at amortised cost and (iii) net gains on
loans and advances to customers at FVPL.
Loan credit Loan credit losses charge (cost of risk) (year to
losses charge date) is calculated as the annualised 'loan credit
(previously losses' (as defined) divided by average gross loans
'Provisioning (the average balance is calculated as the average
charge') (cost of the opening balance and the closing balance).
of risk)
Market Shares Both deposit and loan market shares are based on data
from the Central Bank of Cyprus.
The Bank is the single largest credit provider in
Cyprus with a market share of 40.8% at 30 September
2019, compared to 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 EUR1 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 EUR6 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 EUR2.1 bn, due to loan reclassifications,
revaluations, exchange rate or other adjustments (CBC).
Net fee and Fee and commission income less fee and commission
commission income expense divided by total income (as defined).
over total income
Net Interest Net interest margin is calculated as the net interest
Margin income (annualised) divided by the quarterly average
interest earning assets. 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, plus investments
(excluding equities and mutual funds).
Net loans and Comprise gross loans (as defined) net of allowance
advances to for expected loan credit losses (as defined, but excluding
customers credit losses on off-balance sheet exposures).
Net loan to Net loan to deposit ratio is calculated as gross loans
deposit ratio (as defined) net of allowance for expected loan credit
losses (as defined) divided by customer deposits.
Net Stable Funding The NSFR is calculated as the amount of "available
Ratio (NSFR) 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 European
Banking Authority (EBA) is working on finalising the
NSFR and enforcing it as a regulatory ratio under
CRR2, currently expected in 2021.
New lending New lending includes the average YTD change (if positive)
for overdraft facilities.
Non-interest Non-interest income comprises Net fee and commission
income 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-performing According to the EBA reporting standards on forbearance
exposures (NPEs) and non-performing exposures (NPEs), published in
2014, ECB's Guidance to Banks on Non-Performing Loans
published in March 2017 and EBA Guidelines on management
of non-performing and forborne exposures published
in October 2018 and applicable from June 2019, a loan
is considered an NPE if: (i) the debtor 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, or (ii) the exposures are
impaired, or (iii) there are material exposures which
are more than 90 days past due, or (iv) there are
performing forborne exposures under probation for
which additional forbearance measures are extended,
or (v) there are performing forborne exposures under
probation that present more than 30 days past due
within the probation period. The NPEs are reported
before the deduction of allowance for expected loan
credit losses (as defined).
Non-recurring Non-recurring items as presented in the 'Interim Condensed
items Consolidated Income Statement - Underlying basis'
relate to: (i) advisory and other restructuring costs,
(ii) discontinued operations (UK sale), (iii) profit/(loss)
relating to NPE sale (Helix), (iv) loss on remeasurement
of investment in associate classified 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.
NPE coverage The NPE coverage ratio is calculated as the allowance
ratio (previously for expected loan credit losses (as defined) over
'NPE Provisioning NPEs (as defined).
coverage ratio')
NPE ratio NPEs ratio is calculated as the NPEs as per EBA (as
defined) divided by gross loans (as defined).
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).
Operating profit Operating profit return on average assets is calculated
return on average as the annualised operating profit (as defined) divided
assets by the quarterly average of total assets for the relevant
period. Average total assets exclude total assets
of discontinued operations at each quarter end, if
applicable.
Phased-in Capital In accordance with the legislation in Cyprus which
Conservation has been set for all credit institutions, the applicable
Buffer (CCB) rate of the CCB is 1.25% for 2017, 1.875% for 2018
and 2.5% for 2019 (fully phased-in).
Pro forma for Includes the impact from the completion of the sale
CNP of the investment in CNP
Pro forma for Includes the impact from the completion of the sale
CNP and VEP of the investment in CNP and the Voluntary Staff Exit
Plan (VEP)
Pro forma for Includes the impact from the completion of Project
Helix Helix, as well as the impact from the agreement for
the sale of a portfolio of retail unsecured NPEs,
with gross book value EUR33 mn as at 31 March 2019,
known as Project Velocity.
Profit/(loss) Excludes non-recurring items (as defined)
after tax and
before non-recurring
items
Profit/(loss) Profit/(loss) after tax and before 'non-recurring
after tax - items' as defined, except for the "Advisory and other
Organic restructuring costs - excluding discontinued operations
and NPE sale (Helix)".
Quarterly average Average of interest earning assets as at the beginning
interest earning and end of the relevant quarter. Interest earning
assets assets include: cash and balances with central banks,
plus loans and advances to banks, plus net loans and
advances to customers, plus investments (excluding
equities and mutual funds).
Qoq Quarter on quarter change
Special levy Relates to the special levy on deposits of credit
institutions in Cyprus.
Total Capital Total capital ratio is defined in accordance with
ratio the Capital Requirements Regulation (EU) No 575/2013.
Total expenses Total expenses comprise staff costs, other operating
expenses and the special levy and contribution to
the Single Resolution Fund. It does not include 'advisory
and other restructuring costs-excluding discontinued
operations and NPE sale (Helix)' or any restructuring
costs relating to NPE sale (Helix).
'Advisory and other restructuring costs-excluding
discontinued operations and NPE sale (Helix)' for
3Q2019 were EUR9 mn, compared to EUR5 mn for 2Q2019.
'Advisory and other restructuring costs-excluding
discontinued operations and NPE sale (Helix)' for
9M2019 were EUR21 mn, compared to EUR26 mn for 9M2018.
Restructuring costs relating to NPE sale (Helix) for
3Q2019 were EUR1 mn, compared to EUR7 mn for 2Q2019.
Restructuring costs relating to NPE sale (Helix) for
9M2019 were EUR9 mn, compared to EUR17 mn for 9M2018.
Total income Total income comprises net interest income and non-interest
income (as defined).
Total loan credit Total loan credit losses, impairments and provisions
losses, impairments comprises loan credit losses (as defined), plus (provisions)/reversal
and provisions of provisions for litigation, regulatory and other
matters plus (impairments)/reversal of impairments
of other financial and non-financial assets.
Underlying basis Statutory basis 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
Basis of Presentation
This announcement covers the results of Bank of Cyprus Holdings
Public Limited Company, "BOC Holdings" or "the Company", its
subsidiary Bank of Cyprus Public Company Limited, the "Bank" or
"BOC PCL", and together with the Bank's subsidiaries, the "Group",
for the nine months ended 30 September 2019.
At 31 December 2016, the Bank was listed on the Cyprus Stock
Exchange (CSE) and the Athens Exchange. On 18 January 2017, BOC
Holdings, incorporated in Ireland, was introduced in the Group
structure as the new holding company of the Bank. On 19 January
2017, the total issued share capital of BOC Holdings was admitted
to listing and trading on the LSE and the CSE.
Financial information presented in this announcement is being
published for the purposes of providing an overview of the Group
financial results for the nine months ended 30 September 2019. The
financial information in this announcement does not constitute
statutory financial statements of BOC Holdings within the meaning
of section 340 of the Companies Act 2014. The Group statutory
financial statements for the year ended 31 December 2018, upon
which the auditors have given an unqualified report, were published
on 28 March 2019 and have been annexed to the annual return and
delivered to the Registrar of Companies of Ireland. The Board of
Directors approved the Group financial results for the nine months
ended 30 September 2019 on 25 November 2019.
Statutory basis: Statutory information is set out on pages
22-52. However, a number of factors have had a significant effect
on the comparability of the Group's financial position and results.
Accordingly, the results are also presented on an underlying
basis.
Underlying basis: The statutory results are adjusted for certain
items (as described on pages 28-29) to allow a comparison of the
Group's underlying performance, as set out on pages 4-5.
The financial information included in this announcement is
neither reviewed nor audited by the Group's external auditors.
This announcement and the presentation for the Group Financial
Results for the nine months ended 30 September 2019 have been
posted on the Group's website www.bankofcyprus.com (Investor
Relations/Financial Results).
Definitions: The Group uses a number of definitions in the
discussion of its business performance and financial position which
are set out in section G.
The Group Financial Results for the nine months ended 30
September 2019 are presented in Euro (EUR) and all amounts are
rounded as indicated. A comma is used to separate thousands and a
dot is used to separate decimals.
Forward Looking Statements
This document contains certain forward-looking statements which
can usually be identified by terms used such as "expect", "should
be", "will be" and similar expressions or variations thereof or
their negative variations, but their absence does not mean that a
statement is not forward-looking. Examples of forward-looking
statements include, but are not limited to, statements relating to
the Group's near term and longer term future capital requirements
and ratios, intentions, beliefs or current 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 statements involve
risk and uncertainty because they relate to events, and depend upon
circumstances, that will or may occur in the future. Factors that
could cause actual business, strategy and/or results to differ
materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements made by the
Group include, but are not limited to: general economic and
political conditions in Cyprus and other European Union (EU) Member
States, interest rate and foreign exchange fluctuations,
legislative, fiscal and regulatory developments and information
technology, litigation and other operational risks. Should any one
or more of these or other factors materialise, or should any
underlying assumptions prove to be incorrect, the actual results or
events could differ materially from those currently being
anticipated as reflected in such forward looking statements. The
forward-looking statements made in this document are only
applicable as from the date of publication of this document. Except
as required by any applicable law or regulation, the Group
expressly disclaims any obligation or undertaking to release
publicly 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 in events, conditions or circumstances
on which any statement is based.
Contacts
For further information please contact:
Investor Relations
+ 357 22 122239
investors@bankofcyprus.com
The Bank of Cyprus Group is the leading banking and financial
services group in Cyprus, providing a wide range of financial
products and services which include retail and commercial banking,
finance, factoring, investment banking, brokerage, fund management,
private banking, life and general insurance. The Bank of Cyprus
Group operates through a total of 108 branches in Cyprus, of which
11 operate as cash offices. Bank of Cyprus also has representative
offices in Russia, Ukraine and China. The Bank of Cyprus Group
employs 4,134* staff worldwide. At 30 September 2019, the Group's
Total Assets amounted to EUR21.1 bn and Total Equity was EUR2.5 bn.
The Bank of Cyprus Group comprises Bank of Cyprus Holdings Public
Limited Company, its subsidiary Bank of Cyprus Public Company
Limited and its subsidiaries.
*The Bank of Cyprus Group employed 4,134 staff worldwide as at
30 September 2019. The number of staff has been reduced by c.470
employees following the completion of a voluntary staff exit plan
in October 2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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