Bank of Cyprus Group 1 Bank of Cyprus Group Bank of America Merrill Lynch Financial Conference September 2017 The financial information included in this presentation is neither reviewed nor audited by the Group’s external auditors. The Interim Condensed Consolidated Financial Statements for the six months ended 30 June 2017 have not been audited by the Group’ s external auditors. The Group’s external auditors have conducted a review of the interim Condensed Consolidated Financial Statements for the six months ended 30 June 2017 in accordance with the International Standard on Review Engagements 2410 ‘Review of Interim Financial Information performed by the Independent Auditor of the Enti ty ’. They are presented in Euro (€ ) and all amounts are rounded as indicated. A comma is used to separate thousands and a dot is used to separate decimals. (1) The Group Financial Results referred to in this Presentation relate to the consolidated financial results of Bank of Cyprus Holdings Public Limited Company (BOC Holdings), together with its subsidiary the Bank of Cyprus Public Company Limited, the “Bank”, and the Bank’s subsidiaries. On 18 January 2017, BOC Holdings was introduced in the Group structure as the new holding company. On 19 January 2017, the total issued share capital of BOC Holdings was admitted to listing and trading on the London Stock Exchange and the Cyprus Stock Exchange.
Investment highlights 1 • Leading position in a strengthening Cypriot economy 2 • Proven track record of delivery against strategic objectives 3 • Steady improvement in financial indicators 4 • Clear strategy with focus on Cypriot bank and managing legacy portfolio 5 • EPS guidance of c. € 0.40 provided for 2018; on course to deliver medium terms targets 2
Cypriot economy on a sustainable growth path GDP growth of 3.5% in 2Q2017 Falling unemployment rate Real GDP growth (%) Unemployment rate 18.0% 16.1% 15.9% 14.9% 16.0% 2010 2011 2012 2013 2014 2015 2016 1Q2017 2Q2017 2017E 3.7% 3.5% 2.9% 2.8% 13.0% 14.0% 1.7% 1.3% 0.3% 11.8% 11.7% 12.0% (1.5%) (6.0%) 10.0% (3.2%) 8.0% 6.0% Real GDP growth – forecast (MOF) 2012 2013 2014 2015 2016 2017E Real GDP growth – Actual CySTAT Unemployment rate (% of labour force) Credit ratings improving faster than peers… …reflected in reduced government bond yields Moody’s credit ratings Spreads (%) 1.2 A3 A3 Baa2 Baa2 1 Baa2 Ba1 Ba1 0.8 Ba3 Ba3 0.6 B2 0.4 Caa1 Caa2 0.2 Caa3 C 0 Dec 2015 Jan 2016 Feb 2016 Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Cyprus Portgual Italy Spain Greece Ireland Cyprus Portugal Spain Italy Greece 3 SOURCE: Statistical Service of Republic of Cyprus; Bloomberg; European Commission Winter Forecasts 2017; Ministry of Finance; Calculations by BOC Economic Research
Strong delivery against objectives… Phase 1 Phase 2 Phase 3 Recapitalisation, shrink to Normalisation of funding and Growth, capital build up and core strength balance sheet derisking shareholder returns 2013 2014 2015 2016 2017 2018 • Well positioned to capitalise on • Real Estate Management Unit (REMU) set up in 2016 Bail-in and acquisition of certain assets Cyprus growth and liabilities of Laiki • Continued proactive management of Full ELA repayment € 1bn share capital increase NPE reduction Moved listing from ATHEX to LSE • New lending focused on core Sale of non-core assets sectors of economy T2 issuance in Jan-17 – return to capital markets Integration of Laiki • Provision coverage in line with EU peer € 5.2 bn NPE reduction since Dec 14, accounting for Relisting in Cyprus and Greece • Normalised CoR in 2018 to drive 29% of Cyprus' GDP shareholders return Restructuring and Recoveries Division (RRD) set up • Step-up to Premium LSE listing 4
…resulting in steady improvement on KPIs c. € 5 bn balance sheet deleveraging > € 5 bn reduction in RWAs Improving funding structure Total assets ( € bn) RWAs ( € bn) Customer deposits Loans to deposits ratio (%) as % total assets 49% 75% ( € 4.7bn) ( € 5.3bn) (51%) EBA average L/D 1 : 118% 90%- 110% 141% loans to 26.8 22.7 >25.0 22.1 deposits ratio 90% 17.4 Dec Jun Medium Term Dec Jun Dec Jun Medium Term 2014 2017 Target 2014 2017 2014 2017 Target Adequate capital post additional € 5.2 bn reduction in NPEs NPEs coverage approaching 50% provisions NPEs ( € bn) NPEs ratio ` CET1 (fully loaded) (%) CET1 (transitional) (%) NPEs provision coverage 63% 50% 13.4% 11.8% ( € 5.2bn) 50% 48% <30% >13% 14.0% 12.3% 42% 15.0 41% 39% 9.8 34% Dec Jun Medium Term Dec Jun Medium Term Dec Dec Dec Mar Jun Medium 2014 2017 Target 2014 2017 Target 2014 2015 2016 2017 2017 Term Target 5 (1) Based on EBA Risk Dashboard Report, data as at 31 March 2017.
Clear strategy with focus on core Cypriot bank and managing legacy portfolio € mn New lending 1H2017 • Cyprus 845 Redeployment of B/S to core sectors of Cypriot economy and targeted lending in the UK UK 298 Fee income / Total income • Revenue diversification via increasing focus on IBS 1 and WM 2 fee income and insurance Core bank 19% 17% 15% 4 2015 2016 1H17 • Distribution channel cost optimisation • Tangible cost savings initiatives through a targeted cost reduction program • HR policies aimed at productivity enhancement • Comprehensive digital transformation • Roll out of digital strategy programme in collaboration with IBM • 76% of restructured loans have no arrears • Further refining NPE management framework to maintain momentum in deleveraging plan Legacy NPE portfolio • Pre-approved restructuring solutions • Focus shifting towards SME and Retail portfolio workouts – DFAs 3 , write offs & foreclosures • Low value high volume tickets • Manages c. € 1.5bn of property stock • Specialist real estate unit - REMU • > € 300mn sales at above book value (1) International business service. (2) Wealth management. 6 (3) Debt for Asset swaps. Excluding non recurring fees of approximately € 7 mn (4)
Leading position in the Cypriot market… xx% Market share Hellenic Bank 38.7% 4 23% 4 8% 4 Gross loans € bn 19.5 12.0 5.2 4.3 1.9 31.3% 4 27% 4 12% 4 Deposits 16.6 12.6 € bn 6.0 3.8 2.2 246 Branch 121 network 52 # branches 22 8 Life Non-life 18.8% 3 17.0% 3 12.3% 3 13.4% 3 Insurance 21 19 premiums 1 16 15 € mn 2 2 & & 2 Source: CBC, company disclosure as of 1H2017 for BOC, Alpha Bank and Eurobank, 1Q2017 for Hellenic Bank and FY2016 for Cooperative Central Bank (1) 1Q2017 (provisional results). (2) 49,9% owned by BOC. 7 (3) Market shares for insurance premiums as at 31 March 2017 (on provisional results). (4) As of June 2017 for BOC, March 2017 for Hellenic Bank and June 2016 for Cooperative Central Bank.
… with robust new lending supporting the Cypriot economy Cyprus projected to grow faster than most countries in the region Tourism & professional services core sectors Real GDP growth (%) – 2017E Contribution to 2016 Real GDP growth in p.p. (total 2,8%) Tourism & trade 1.2 Professional & admin 0.6 Public, education & health 0.4 Industry 0.4 Construction 0.4 3.5% Other 0.3 2.9% 2.6% 2.4% 2.2% Agriculture 0.0 1.7% 0.8% Information (0.0) Financial (0.5) Ireland Cyprus Spain Euro area Greece Portugal Italy average New lending largely to corporates New lending maps core sectors driving GDP growth New lending Cyprus ( € mn) New lending Cyprus ( € mn) – 1H2017 Composition of 1H2017 lending: € 845 mn Trade 219 1H17: € 845 mn FY16: c. € 1 bn 2% Private individuals 190 14% Professional and other services 94 Construction 94 23% Hotels and restaurants 88 502 61% Real estate 68 340 343 265 240 Other Sectors 53 163 Corporate Consumer Manufacturing 39 SME Other 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 8 SOURCE: Statistical Service of Republic of Cyprus; Ministry of Finance; IMF World Economic Outlook Database, April 2017
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