Bank of Cyprus Group Investor presentation January 2017
Key messages GDP growth in Cyprus • BOC is the largest bank in Cyprus 2.8% 2.2% 1.7% • Dominant position in a recovering Cypriot economy Strong market 2015 2016E 2017E position with a clear strategy Market share in Cyprus 1 going forward • Strategic focus on core Cypriot business and 41.1% 30.1% expansion of UK operations Loans Deposits ELA ( € bn) • Full repayment of € 11,4 bn of ELA Peak 11.4 0.0 • Funding structure normalised Apr 2013 Jan 2017 CET1 ratio Significant Transitional Fully loaded progress achieved • Strong capital position 14.6% 13.5% 13.8% 13.0% in normalising the BOC Peer avg² BOC Peer avg² Bank Asset quality ( € bn) 14.8 12.7 • Significant reduction in 90+DPD 3 and NPEs 11.9 Jun 2015 8.8 Sep 2016 90+DPD NPE • World class Board of Directors • Strong local market insight • Strong leadership Turnaround experience • Experienced management team • Proven track record of delivering results Source: IMF, MOF (1) As of October 2016 (2) Based on EBA Risk Dashboard Report, data as at 30 June 2016 2 (3) 90+DPD: defined as loans past-due for more than 90 days and those that are impaired (impaired loans are those which are not considered fully collectable and for which a provision for impairment has been recognised on an individual basis or for which incurred losses exist at their initial recognition or customers in Debt Recovery)
Introduction: The journey so far…
Decisive actions and deleveraging have put the Bank on a firm path to normalisation Mar 2016: Sep 2013: Nov 2013: Jun 2014: Jan 2015: November 2016: • Announcement • AGM and • Appointment • Laiki • Announcement that • Share capital of intention to election of of new CEO integration the Bank is applying increase: list on the LSE new BoD completion completion of for a standard listing Retail Offer on LSE; Sep 2015: Dec 2015: • Publication of • Sale of • Changes to ECB Feb 2015: Dec 2014: May 2014: Shareholder circular Uniastrum provisioning • Listing of the Retail Oct 2013: • Relisting • Sale of and prospectus and other assumptions leading Offer Shares and • Sale of in Cyprus Serbian relating to the Russian to enhanced commencement of and Kyprou Asset exposure transaction assets coverage Greece trading Management 2013 2014 2015 2016 2017 Sep 2014: Nov 2014: Jun 2016: Oct 2015: Aug 2016: March 2013: Apr 2014: Jan 2017: • € 1,0 bn • Election of • Covered bond • Completion • Cancellation • Sale of Greek • Sale of • ELA fully share of € 1bn new BoD becomes eligible of voluntary operations Ukrainian repaid capital asset for exit plan for Government operations increase 354 Eurosystem credit Guaranteed • Sale of 10% personnel 3 operations; ELA Bonds Nov 2014: March 2013: stake in reduced to € 4,5 bn • Sale of UK Banca • Placed under Sep 2014: loan book 2 Dec 2016: Transilvania Jun 2016: Resolution: • Sale of • ELA reduced to € 0,2 bn • Completion – absorption of various Apr 2015: of the sale of • EGM approval of Laiki Bank Romanian Kermia • Sale of resolutions in relation to assets (including Hotels Ltd creation of new holding 95% stake € 9,1 bn of and adjacent company in Marfin ELA) land for Diversified • New holding company Oct 2014: € 26,5 mn – Strategy bail-in of scheme of arrangement • Successfully Fund uninsured sanctioned by court passes the depositors Nov 2015: 2014 ECB • Extension of • Suspension of CA 1 CEO trading on CSE appointment and ATHEX (1) ECB Comprehensive Assessment (2) Ex Laiki UK Loan portfolio (3) Total VEP amounted to 429 (1 st VEP: 75, 2 nd VEP: 354) 4
Share capital increase in 2014 attracted reputed international investors and a world class Board Current shareholding of BOC (Oct-2016) Current Board composition Name Designation Chairman Dr. Josef Ackermann Independent 9.9% 13.2% Vice Chairman 9.6% Mr. Wilbur Ross Independent 1 5.2% Vice Chairman Mr. Maksim Goldman 5.0% Non Executive 1.6% CEO 55.4% Mr. John Patrick Hourican Executive Deputy CEO and COO Dr. Christodoulos Patsalides Executive Board member Mr. Arne Berggren Independent Lamesa Holding S.A. (an affiliate of Renova Group) Cyprus Popular Bank Public Co Ltd Board member Mr. Marios Kalochoritis Independent TD Asset Management S.A. EBRD Board member Mr. Michalis Spanos Senior Independent WL Ross Other: Institutional investors and legal persons Board member Mr. Ioannis Zographakis Other: Individuals Independent Board member Dr. Michael Heger Independent Board member Ms. Lyn Grobler Independent 2 (1) On 30 Nov 2016, representatives of the President-elect of the United States of America, Donald Trump, announced that the President-elect intends to nominate Wilbur L. Ross, Jr. to serve as United States Secretary of Commerce. Such nomination would be subject to confirmation by the Senate of United States of America. If such nomination and confirmation were to take place, Mr. Ross would be expected to be appointed United States Secretary of Commerce on 20 January 2017. In that event Mr. Ross may be required to resign from his current positions as a director and vice-chairman of BOCH and the Bank 5 (2) Subject to ECB approval
Turnaround of the bank since 2014 has translated into improving financial indicators c. € 8 bn (or c.25%) balance sheet 90+ DPD formation reversed; Full repayment of € 11,4 bn of ELA reduction of over € 2,5 bn in 9M2016 deleveraging since 2013 ELA ( € bn) Total assets ( € bn) Change in 90+ DPD 2 ( € bn) RWA ( € bn) ELA as % of total assets 5.3 34% 2014: 2015: 31% 31% ( € 0,4 bn) ( € 1,3 bn) 30.3 2.7 28% 28.6 26.8 1.3 1.4 25.4 23% 0.9 23.3 22.7 22.4 0.1 11.4 11.1 16% 9.6 23.5 22.7 (0.0) 22.5 8.8 21.5 11% (0.4) 19.7 7.4 19.0 18.8 (1.3) 6% (2.6) 5.9 1 1% 0% 3.8 2009 2010 2011 2012 2013 9M2016 1H2014 2H2014 1H2015 2H2015 2.4 1.3 0.2 0.0 Dec Jun Dec Jun Dec Jun Sep Apr Jun Dec Jun Dec Jun Dec Jun Sep Dec Jan 2013 2013 2013 2014 2014 2015 2015 2016 2016 2016 2017 2013 2014 2014 2015 2015 2016 2016 Strengthened capital position due to Improving funding structure; moving Improving asset quality and coverage reduction in RWAs closer to a self-funded franchise 90+DPD ratio CET1 ratio (fully loaded) Loan to deposit ratio (L/D) Customer deposits as % of total assets 90+DPD provision coverage CET1 ratio (transitional) Leverage ratio 3 NPE ratio EBA average 8,6% 9,4% 12,5% 12,5% 12,6% 13,0% 13,2% L/D 5 : 121% 62,9% 61,9% 61,8% 59,3% 57,8% 148% 145% 141% 136% 15.6% 48.1% 52.6% 53.6% 14.9% 121% 14.0% 14.4% 14.6% 14.0% 110% 38.3% 38.7% 40.6% 42.5% 102% 15.1% 14.4% 13.1% 13.6% 13.8% 61% 10.4% 13.4% 48.6% 49.8% 53.2% 52.9% 50.1% 44.0% 42.6% 54% 49% 49% 48% 70% 65% Dec Dec Jun Dec Jun Sep Jun Dec Jun Dec Jun Dec Jun Sep Dec Jun Dec Jun Dec Jun Sep 2014 ⁴ 2013 2014 2015 2015 2016 2016 2013 2014 2014 2015 2015 2016 2016 2013 2014 2014 2015 2015 2016 2016 (1) Ratio of ELA as a % of total assets for Dec 2016 is based on total assets as at 30 Sep 2016 (2) Mainly attributable to loan restructuring activity and slower formation of new problem loans (3) Leverage ratio defined as tangible equity over total assets CET1 ratio includes positive impact of € 1 bn capital increase; FL ratio as reported, transitional ratio estimated as 11,3% (reported) + 1,7% impact due to capital increase (4) 6 (5) Based on EBA Risk Dashboard Report, data as at 30 June 2016
Strategic milestone and way forward Cyprus-London listing – overview New listing Current listing CSE ATHEX CSE LSE Greater visibility for the Bank and the Cypriot economy Broader shareholder base Low levels of liquidity Further enhance the confidence of all stakeholders in the Group Low levels of research coverage – only covered by HSBC Standard listing is an intermediate step; aim is to achieve premium Equity listing on the LSE and future inclusion in the FTSE UK index series No index inclusion Clean structure with higher standards of corporate governance Athens listing no longer suitable given lack of Greek banking Decoupling from Greece operations New Irish holding company to become the parent First Trading Date on CSE / LSE on [19] January 2017 Potential Tier 2 Transaction Debt / Capital CET1 levels stabilised and opportunity to optimise capital structure with non-CET1 capital issuance Limited issuance needs for Bank of Cyprus and expected to be a rare issuer in the capital markets Normalise funding structure, increase access to capital markets and explore options to create MREL eligible liabilities 7
Key Investment Highlights
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