Bank of Cyprus Group. Bank of Cyprus Group 1. Bank of America Merrill Lynch Financial Conference. September 2017

Transcription

1 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 Entity. 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.

2 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 provided for 2018; on course to deliver medium terms targets 2

3 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 Cypriot economy on a sustainable growth path GDP growth of 3.5% in 2Q2017 Falling unemployment rate Real GDP growth (%) Unemployment rate 18.0% Q2017 2Q E 16.0% 15.9% 16.1% 14.9% 1.3% 0.3% 1.7% 2.8% 3.7% 3.5% 2.9% 14.0% 11.8% 13.0% 11.7% (1.5%) 12.0% (3.2%) (6.0%) 10.0% 8.0% 6.0% Real GDP growth Actual CySTAT Real GDP growth forecast (MOF) E Unemployment rate (% of labour force) Credit ratings improving faster than peers Moody s credit ratings A3 Baa2 Ba1 Ba3 B2 Caa1 Caa3 A3 Baa2 Baa2 Ba1 Ba3 Caa2 reflected in reduced government bond yields Spreads (%) C 0 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 SOURCE: Statistical Service of Republic of Cyprus; Bloomberg; European Commission Winter Forecasts 2017; Ministry of Finance; Calculations by BOC Economic Research 3

4 Strong delivery against objectives Phase 1 Phase 2 Phase 3 Recapitalisation, shrink to core strength Normalisation of funding and balance sheet derisking Growth, capital build up and shareholder returns Bail-in and acquisition of certain assets and liabilities of Laiki 1bn share capital increase Sale of non-core assets Integration of Laiki Relisting in Cyprus and Greece Restructuring and Recoveries Division (RRD) set up Real Estate Management Unit (REMU) set up in 2016 Full ELA repayment Moved listing from ATHEX to LSE T2 issuance in Jan-17 return to capital markets 5.2 bn NPE reduction since Dec 14, accounting for 29% of Cyprus' GDP Well positioned to capitalise on Cyprus growth Continued proactive management of NPE reduction New lending focused on core sectors of economy Provision coverage in line with EU peer Normalised CoR in 2018 to drive shareholders return Step-up to Premium LSE listing 4

5 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 as % total assets Loans to deposits ratio (%) ( 4.7bn) ( 5.3bn) 49% 75% (51%) EBA average L/D 1 : 118% > % 90% 90%- 110% loans to deposits ratio Dec 2014 Jun 2017 Medium Term Target Dec 2014 Jun 2017 Dec 2014 Jun 2017 Medium Term Target 5.2 bn reduction in NPEs NPEs ratio NPEs ( bn) 63% 50% ( 5.2bn) NPEs coverage approaching 50% ` NPEs provision coverage Adequate capital post additional provisions CET1 (fully loaded) (%) 13.4% 11.8% CET1 (transitional) (%) <30% 34% 39% 41% 42% 48% 50% 14.0% 12.3% >13% Dec 2014 Jun 2017 Medium Term Target Dec 2014 Dec 2015 Dec 2016 Mar 2017 Jun 2017 Medium Term Target Dec 2014 Jun 2017 Medium Term Target (1) Based on EBA Risk Dashboard Report, data as at 31 March

6 Legacy NPE portfolio Core bank Clear strategy with focus on core Cypriot bank and managing legacy portfolio Redeployment of B/S to core sectors of Cypriot economy and targeted lending in the UK New lending 1H2017 mn Cyprus 845 UK 298 Revenue diversification via increasing focus on IBS 1 and WM 2 fee income and insurance Tangible cost savings initiatives through a targeted cost reduction program Fee income / Total income 15% 17% 19% H17 Distribution channel cost optimisation HR policies aimed at productivity enhancement 4 Roll out of digital strategy Comprehensive digital transformation programme in collaboration with IBM Further refining NPE management framework to maintain momentum in deleveraging plan 76% of restructured loans have no arrears Focus shifting towards SME and Retail portfolio workouts DFAs 3, write offs & foreclosures Pre-approved restructuring solutions Low value high volume tickets Specialist real estate unit - REMU Manages c. 1.5bn of property stock > 300mn sales at above book value (1) International business service. (2) Wealth management. (3) Debt for Asset swaps. (4) Excluding non recurring fees of approximately 7 mn 6

7 Leading position in the Cypriot market xx% Market share Hellenic Bank 38.7% 4 23% 4 8% 4 Gross loans bn Deposits bn 31.3% 4 27% 4 12% Branch network # branches Life Non-life Insurance premiums 1 mn 18.8% % % % & & 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. (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. 7

8 with robust new lending supporting the Cypriot economy Cyprus projected to grow faster than most countries in the region Real GDP growth (%) 2017E Tourism & professional services core sectors 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 % 2.9% 2.6% 2.4% 2.2% 1.7% 0.8% Construction Other Agriculture Information (0.0) Ireland Cyprus Spain Euro area average Greece Portugal Italy Financial (0.5) New lending largely to corporates New lending maps core sectors driving GDP growth New lending Cyprus ( mn) FY16: c. 1 bn 1H17: 845 mn Composition of 1H2017 lending: 845 mn 14% 2% New lending Cyprus ( mn) 1H2017 Trade Private individuals Professional and other services 94 Construction % Corporate 61% Consumer Hotels and restaurants Real estate Other Sectors Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 SME Other Manufacturing 39 SOURCE: Statistical Service of Republic of Cyprus; Ministry of Finance; IMF World Economic Outlook Database, April

9 Focus remains on asset quality improvement 5.2bn NPE reduction 9 consecutive quarters of NPE reduction 5.2 bn or 35% reduction in NPEs since Dec 14; 29% of Cyprus GDP Multi-pronged strategy through curing, collections, write-offs and consensual foreclosures 500mn Additional provisions in 1H2017 Brings provisioning assumptions in line with regulatory expectations Concludes regulatory dialogue on coverage Helps Bank to return to a normal impairment path No recourse to shareholders 48% Improved coverage ratio To exceed 50% by year end Coverage now above EU average 1 Paves way for a potential 3 rd party solution to address NPE stock 4.2% Cost of Risk (CoR) Elevated CoR of 4.2% 2 in 1H2017 driven by modifications to provisioning assumptions CoR expected to normalise going forward to ~100 bps Accelerates pathway to delivering returns to shareholders IFRS 9 Effective from Jan 2018 Post implementation coverage expected to improve to mid 50% Currently assessing and calibrating detailed impact Capital impact expected to be phased in over a 5 year period 3 (1) Based on EBA Risk Dashboard as at 31 March (2) Provisions for impairment of customer loans and gains/(losses) on derecognition of loans and changes in expected cash flows on acquired loans over average gross loans. Additional provisions of c. 500 mn are included in the calculation of Cost of Risk but are not annualised. Including impairments of other financial instruments, the provisioning charge for 1H2017 was 4.3%. (3) Expected to occur in line with the proposal of the Council of the European Union. 9

10 2Q-09 3Q-09 4Q-09 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 2Q-11 3Q-11 4Q-11 1Q-12 2Q-12 3Q-12 4Q-12 2Q-13 3Q-13 4Q-13 1Q-14 2Q-14 3Q-14 4Q-14 1Q-15 2Q-15 3Q-15 4Q-15 1Q-16 2Q-16 3Q-16 4Q-16 1Q-17 2Q-17 1 (85) (247) (164) (325) (668) (1,041) (1,020) (143) (649) (501) (459) 2.0 (298) (450) ,319 1,240 3,319 1, Nine consecutive quarters of improving asset quality trends High correlation between formation of problem loans & economic cycle Quarterly change of 90+ DPD ( mn) 90+ DPD ( bn) Slow deterioration Economic crisis Stabilisation Recovery 748 mn (9%) drop in 90+DPD in 1H DPD reduced by 5.1 bn (40%) since Dec 2014 NPEs down by 1.3 bn (12%) in 1H2017; down by 620 mn (6%) qoq; NPEs ( bn) NPE ratio NPEs with forbearance measures no impairments, no arrears 62.9% 63.0% 61.9% 62.2% 61.8% 61.0% 59.3% 57.8% 54.8% 51.8% 50.0% % drop since Dec % drop qoq; NPEs reduced by 5.2 bn (35%) since Dec 2014 NPEs ratio reduced by 12.9 p.p 2 since Dec 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 (1) Information for 1Q2013 and 2Q2013 is not available as it was not possible to publish the financial results for the three months ended 31 March (2) Percentage points. 10

11 Understanding loan portfolio Focus on quality new lending and Retail & SME NPEs Key strategic initiatives for further NPE reduction Cy operations- Gross loans ( bn) 17.7 Further refining NPE management framework to maintain momentum in deleveraging plan Performing Healthy 8.3 bn 6.0 High Quality New Business New lending targeted at core sectors of economy 76% of restructured loans have no arrears Close monitoring to ensure loans exit NPE status Retail: Cured Watching redefaults & quality of restructurings Expect 1.6 bn to exit NPEs in coming years 47% of this relates to Corporate loans Moving NPEs to RRD, to deliver viable restructuring or termination Execute longer term sustainable solutions Flexible approach to manage specific segments including DFAs and write offs Forborne No impairments No arrears 1,2 1.6 c 300mn reduction in Terminated a/c in 1H2017 Supportive underlying economic macro improvements Workout NPEs 9.4 bn Terminated accounts (Recoveries) Increased focus on Retail and SME c 600mn(Retail) transferred to RRD in 2Q2017 Focus on realising collateral via consensual & non consensual foreclosures Final Solutions used such as write offs REMU on-boards assets at conservative c.25-30% discount to OMV Enhance Retail/SME: Introduce pre-approved restructuring solutions Address low value high volume tickets Foreclosures: Focus on selling and realising foreclosed assets Dedicated REMU division managing on boarded properties (1) In pipeline to exit NPEs subject to meeting all exit criteria. (2) Analysis based on account basis. (3) Includes 0.7 bn of restructurings of performing loans. 11

12 NPE reduction aided by curing of restructured loans; NPE inflows stabilise FY2016 NPE net reduction: c. 2.8 bn 1H2017 NPE net reduction : c. 1.2 bn 0.85 (1.63) (1.12) Inflows as % of performing loans FY % (0.86) Inflows as % of performing loans 1H % (0.91) (0.47) (0.21) 9.35 Dec 2015 Inflows Curing restructured loans/collections Write-offs 1,2 Consensual Dec 2016 Inflows Curing restructured Write-offs 1,2 Consensual foreclosures loans/collections foreclosures Jun 17 (1) Value of on-boarded assets is set at a conservative 25%-30% discount from open market valuations, by two independent sources. (2) Includes debt for asset swaps and debt for equity swap. 12

13 Q1.06 Q3.06 Q1.07 Q3.07 Q1.08 Q3.08 Q1.09 Q3.09 Q1.10 Q3.10 Q1.11 Q3.11 Q1.12 Q3.12 Q1.13 Q3.13 Q1.14 Q3.14 Q1.15 Q3.15 Q1.16 Q Jan-Jul 2017Jan-Jul REMU the engine for dealing with foreclosed assets (1/2) 1 Property stock not substantially growing (Group) mn BV (140) (13) (1) 1,427 1,503 1,502 Stock as at 01 Jan 17 Additions Sales Impairment loss Foreign exchange and other movements Stock as at 30 Jun Property stock split on boarded at conservative carrying value 3 mn Cyprus: 1,331 mn Greece & Romania #319 #131 #38 #5 #901 #3 Total 1,502 #1,397 # Assets Residential Offices and other commercial properties Manufacturing and industrial Hotels Land and Plots Golf Under construction Greece and Romania 3 Encouraging trends in Real Estate Market Central Bank of Cyprus Residential Property Price Index 30,000 Sales contracts ,000 20,000 15,000 10,000 5, ,664 21,245 3,767 4,527 4,952 7,063 3,637 4,349 CBC RPPI Sales to Cypriots Sales to Non-Cypriots SOURCE: Central Bank of Cyprus, Cyprus Land Registry (1) BV= book value = Carrying value prior to the sale of property. (2) Total stock as at 30 June 2017 excludes investment properties and investment properties held for sale. (3) As of 1H

14 REMU the engine for dealing with foreclosed assets (2/2) 248 mn sales agreed YTD; REMU profit of 12 mn in 1H Sales > 300 mn achieved since REMU established (Cy) 5 Prices achieved on average above Book Value (Cy) mn BV FY16: 155 mn YTD: 184 mn Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 post end of 2Q mn BV 3 4 Hotels Commercial Residentail Land Gross Proceeds / OMV Net Proceeds / BV 1, % 99% 110% 113% 115% 3 98% 74% 12 94% 90% 102% 40 Total Sales YTD Hotels Commercial Residential Land 100% 80% 60% 40% 20% 0% 6 Year to date sale agreements of 248 mn 3,5 (Cy) Sales contract prices 6 ( mn) Sale of properties by type YTD (%) Total sale agreements 248 mn 21% 5% Land and Plots Hotels properties sold YTD 218 6% Commercial 67% Offers accepted (YTD) In process (YTD) SPA in preparation (YTD) SPA signed (YTD) Sold (YTD) Residential (1) BV= book value = Carrying value prior to the sale of property. (2) 2Q2017 sales include a disposal of a property ( 10 mn) which was classified in investment properties held for disposal. (3) Positively affected by 2 major sales. Adjusting for these two sales Gross Proceeds/OMV at 95% and Net Proceeds/BV at 98%. (4) Proceeds before selling charge and other leakages. (5) Proceeds after selling charges and other leakages. (6) Amounts as per SPAs. 14

15 67% 64% 64% 63% 62% 60% 58% 58% 56% 51% 51% 48% 48% 44% 44% 44% 42% 38% 35% 35% 35% 32% 32% 31% 31% 30% 30% 29% 29% Coverage ratio improvement facilitating significant B/S derisking On course to achieving medium term target of 50% Comfortably covered (over 100%) including collateral % of total NPEs 90+DPD provision coverage NPEs provision coverage Loan loss reserves Tangible Collateral 1 61% 48% 54% 54% 109% 109% 114% 34% 41% 39% 41% 42% 48% >50% 68% 67% 66% 41% 42% 48% Dec 2014 Dec 2015 Dec 2016 Mar 2017 Jun 2017 Medium Term Target Dec 16 Mar-17 Jun-17 BOC coverage in line with EU peer 2 NPE coverage (%) By Jan 2018 expected to be in mid 50% post implementation of IFRS 9 50% by year end (medium term target) 45% 1 3 RO HU SI HR CZ PL BG AT SK FR IT GR BOC PT BE ES LU DE IE MT NL SE EE LT GB LV NO FI DK (1) Restricted to Gross IFRS balance. (2) Based on EBA Risk Dashboard as at 31 March (3) Provision Coverage for BOC relates to NPEs provision coverage as at 30 June

16 Normalisation of CoR to help deliver shareholder returns CoR at 4.2% following modifications to provisioning assumptions Back-testing of provisions supports past provision adequacy Cost of Risk - Group (pre additional provisions) Quarter Gross Contractual Balance mn Surplus/(Gap) in provisions mn No. of Customers 1.7% 1.3% c. 500 mn additional provisions 1.7% 4.2% 1 1.7% FY2016 1Q2017 1H Target ~ 1.0% 1Q Q Q Q Q ,276 2Q ,298 3Q Q ,343 1Q ,194 2Q ,369 1, ,977 Changes in collective provisioning assumptions: o Recovery period increased for non-recoveries to 6 years (from average 3 years) o Average Haircut increased to 32% (from average 9%) Comfort around adequacy of existing provisioning levels; CoR expected at 100 bps going forward Back-testing of 12k fully settled customer exposures since 1Q2015 indicates resolution of cases within existing provisions Visibility around delivery of shareholder returns with normalisation of CoR (1) Provisions for impairment of customer loans and gains/(losses) on derecognition of loans and changes in expected cash flows on acquired loans over average gross loans. Additional provisions of c. 500 mn are included in the calculation of Cost of Risk but are not annualised. Including impairments of other financial instruments, the provisioning charge for 1H2017 was 4.3%. 16

17 Peer 1 BOC Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 BOC Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 1 BOC Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Asset quality improvement compares favourably vs peer 1 Highest reduction of NPEs as % of 2017 GDP vs peer Change in NPE as % of nominal GDP since 2014 (29.1%) Strong progress on NPE coverage NPE coverage progress since 2014 (in percentage points) (1.9%) (1.7%) (1.1%) (1.1%) (0.6%) (0.5%) (0.5%) (0.2%) 0.1% 1.0% 1.7% Average: 6,4% Highly secured NPE book when considering tangible collateral relative to peers NPE Total coverage 3 (1H2017) Provision coverage Tangible coverage as per EBA June % 48% 73% 114% 109% 105% 104% 101% 93% 92% 91% 87% 86% 38% 66% 60% 59% 50% 53% 47% 43% 31% 37% 71% 48% 45% 45% 51% 40% 45% 48% 56% 49% 6 Source: Company reports, IMF and EBA (1) The charts are not adjusted for market share. (2) Greece only. (3) Calculated using NPE provisions coverage - latest available 2Q2017 and collateral coverage as of June 2016 as per EBA transparency exercise except BOC which is as disclosed in 1H2017 results. (4) Portugal only. (5) Total coverage ratio progress. (6) Indicative as total coverage available as of 2Q2017, back solved using EBA tangible coverage as at June 2016 of 60%. 17

18 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 BOC Peer 8 Peer 9 Peer 10 Peer 11 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 BOC Peer 8 Peer 9 Peer 10 Undervalued relative to peer and fall in Texas ratio adjusted collaterals Price/Pre Provision Operating Profitability (2017E) valuation relative to European peers 8.6x 7.2x 7.0x 5.7x 5.3x 5.2x 4.8x 2.4x 2.0x Ireland Benelux Germany France Austria Italy Spain Cyprus Greece , 10 9 Valuation benchmark on a P/(Equity + Acc. Provisions) basis; Significant fall in Texas ratio including collaterals Texas ratio (Collateral) 12,13 Texas ratio 11 29% 40% 65% 83% 75% 102% 131% 139% 108% 108% 123% 0.78x 0.69x 0.62x 0.58x 0.46x 0.34x 0.29x 0.17x 0.15x Average: 0,36x 0.11x 0.09x 0.07x 25% Average peer group decrease with collateral: 31% 34% 55% 56% 57% 66% 66% BOC decrease: 57% 72% 73% 73% 77% Average: 59% Source: Company reports as of 1H2017, Factset as at 15 September 2017 (1) Representative Irish banks include: AIB and BoI. (2) Representative Benelux banks include: ING, ABN Amro and KBC. (3) Representative German banks include: DB and Commerzbank. (4) Representative French banks include: SocGen, BNPP and Credit Agricole. (5) Representative Austrian banks include: Erste and Raiffeisen. (6) Representative Italian banks include: UniCredit, ISP and UBI. (7) Representative Spanish banks include: Santander, Caixa Bank and BBVA. (8) Representative Cypriot bank includes: BOC. (9) Representative Greek banks include: Eurobank, Alpha Bank, Piraeus Bank and NBG. (10) Pre-provisions profit for 2017E based on annualisation of 1H2017 number. (11) Texas ratio is calculated as NPEs / (Tangible book value + Loan loss reserves). (12) Texas ratio (Collateral) is calculated as NPEs / (Tangible book value + Loan loss reserves including collateral). Bankia does not report total collateral. Bankia excluded as collateral not reported. (13) Calculated using NPE provisions coverage - latest available Q and collateral coverage as of June 2016 as per EBA transparency exercise except BOC which is as disclosed in 1H2017 results. 18

19 Strong and stable funding position Maintaining stable deposit balances and loan to deposit ratio Loans to deposits ratio EU average Loans to deposits ratio 1 Group Deposits bn Cyprus non-ibu Cyprus IBU UK Other countries 124% 125% 141% 136% 121% 121% 121% 118% 110% 118% 95% 95% 90% 90%- 110% Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Mar 17 Jun 17 Medium Term Target Strong market shares in resident and non-resident deposits Dec-14 Dec-15 Dec-16 Mar 17 Jun 17 Residents Non-residents Focus on deposit mix/cost optimisation 32.2% 25.5% 26.7% 24.1% 31.1% 34.1% 27.0% 27.2% 35.8% 34.5% 35.3% 29.5% 29.5% 30.1% LCR (Liquidity Coverage Ratio) compliance NSFR (Net stable Funding Ratio) compliance at 102%, ahead of introduction in Jan 2018 (min. 100%) Not compliance with local CBC liquidity ratios that are expected to be phased out Dec 13 Dec 14 Dec 15 Jun 16 Dec 16 Mar 17 Jun 17 (1) Based on EBA Risk Dashboard Report, Data as at 31 March (2) International Business Unit. 19

20 Capital ratios remain adequate Organic capital rebuild through operating profitability and b/s management 14.0% 6.3% 1.8% (8.8%) (1.0%) COR 2018 ~1.0% >13% Drivers of future capital strengthening Contain CoR 12.3% 9.5% 9.5% Reduction of RWA intensity as asset quality improves Stable operating profitability CET 1 (transitional) 31 Dec 2014 Operating profitability RWA reduction Provisions & impairments 1 Other CET 1 (transitional) 30 June Operating profitability 2018 Provisions & Impairmens 2018 CET 1 (transitional) 1 Min SREP requirement RWA intensity 2 reducing as asset quality improves Rebuild capital position through regained market access RWA intensity (%) Leverage ratio 3 CET 1 Tier % 12.6% 13.3% 11.0% 85% 85% 85% 79% 13.0% 16.1% 14.7% 1.4% 13.8% 12.4% 1.4% Potential issuance of up to 1.5% of AT1 and/or additional Tier 2 in the next 12 months, subject to market conditions Dec 14 Dec 15 Dec 16 Jun 17 Total Capital ratio pre additional provisions Total Capital ratio post additional provisions Min SREP requirement (1) Capital deductions, phase-in adjustments & reserve movements. (2) Risk Weighted Assets over Total Assets. (3) Tangible equity / total assets. 20

21 Good Progress made on Group KPIs Type Key performance indicators Dec-2016 Jun-2017 Medium Term Targets Preliminary 2018 Guidance DPD ratio 41% 39% <20% <30% Asset quality NPEs ratio 55% 50% <30% <40% NPEs coverage 41% 48% >50% Substantially delivered. Expected to increase to mid-50% by Jan 2018 Provisioning charge 1 1.7% 4.2% 2 <1.0% ~1.0% Funding Net Loans % Deposits 95% 90% 90%-110% <100% Capital CET1 14.5% 12.3% >13% 5 >13% 5 Total capital ratio 14.6% 13.8% >15% 5 >15% 5 Margins and efficiency Net interest margin 3.5% 3.4% ~3.00% Fee and commission income/total income 17% 3 19% >20% Downward pressure due to low interest rate environment and L/D dynamics Delivered but efforts for further improvement continuing Cost to income ratio 41% 4 46% 4 40%-45% Falling revenue puts pressure on C/I Balance Sheet Total assets 22.2 bn 22.1 bn > 25 bn Total assets to reach c. 24 bn by Dec 2018 EPS EPS ( cent) 0.71 (124.19) ~ (1) Provisions for impairment of customer loans and gains /(losses) on derecognition of loans and changes in expected cash flows on acquired loans over average gross loans. (2) Including impairments of other financial instruments, the provisioning charge for 1H2017 was 4.3%. Additional provisions of c. 500 mn are included in Cost of Risk but are not annualised. (3) Excluding non-recurring fees of approximately 7 mn. (4) Adjusted for the special levy, the cost to income ratio for 1H2017 was 42% compared to 39% for FY2016. (5) On an IFRS 9 phased-in basis (pre the Proposal of the Council of the European Union). (6) Excluding the impact of any unplanned or unforeseen risk reduction trades or macro events. 21

22 Key Takeaways NPEs Good progress on NPE reduction Coverage at 48%; to exceed 50% by year end The Bank no longer an outlier in terms of coverage vs. EU average 1 Additional provisions of c. 500 mn concludes the dialogue with the ECB on coverage Capital CET1 at 12.3% and 11.8% on a fully loaded basis Total Capital ratio at 13.8% Additional provisions of c. 500 mn taken without recourse to shareholders Funding Loan book is now fully funded, currently at 90% loans to deposit ratio Compliance with LCR & NSFR liquidity requirements 2 Profitability Robust new lending, supporting the Cypriot economy NIM of 3.37%; Cost/Income ratio of 42% outlook EPS of c More normal credit cost (~100 bps in 2018) CET 1 >13% and Total capital ratio >15% No equity dividend foreseen in 2018 Potential AT1 issuance (1) Based on EBA Risk Dashboard as at 31 March (2) Compliance with ECB requirements. Not compliant with Central Bank of Cyprus requirements. (3) Adjusted for the special levy and SRF contribution. 22

23 Key Information and Contact Details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: Affirmed to B-" on 13 April 2017 (stable outlook) Short-term Issuer Default Rating: Affirmed to B" on 13 April 2017 Viability Rating: Affirmed to b- on 13 April 2017 Moody s Investors Service: Baseline Credit Assessment: Upgraded to caa1 on 29 June 2017 Short-term deposit rating: Affirmed at "Not Prime" on 29 June 2017 Long-term deposit rating: Upgraded to Caa1 on 29 June 2017(positive outlook) Counterparty Risk Assessment: Assigned at B1(cr) / Not-Prime (cr) on 29 June 2017 Listing: LSE BOCH, CSE BOCH/ΤΡΚΗ, ISIN IE00BD5B1Y92 Contacts Investor Relations Tel: , investors@bankofcyprus.com Annita Pavlou Investor Relations Manager, Tel: , annita.pavlou@bankofcyprus.com Elena Hadjikyriacou (elena.hadjikyriacou@bankofcyprus.com) Marina Ioannou (marina.ioannou@bankofcyprus.com) Styliani Nicolaou (styliani.nicolaou@bankofcyprus.com) Andri Rousou (andri.rousou@bankofcyprus.com) Finance Director Eliza Livadiotou, Tel: , eliza.livadiotou@bankofcyprus.com Visit our website at: 23

24 Supporting materials Macroeconomic overview

25 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 Agriculture Industry Construction Tourism & trade Professional & admin Information Financial Public, education & health Other Improving macro fundamentals Tourism and professional services are the leading contributors Tourism arrivals (mn) Tourism Revenues Contribution to 2016 Real GDP growth in percentage points (total 2,8%) % bn % of GDP 13.2% 11.5% 11.5% 12.0% 9.9% % 2.7 (0.0) (0.5) e 2017e Construction activity - signs of recovery Support from key business enablers % changes year-on-year of yearly moving averages Production index in construction Building permits volume Corporate tax rate (2016) 12.5% 12.5% 20.0% 25.0% Double taxation avoidance treaties with c.50 countries 29.0% 29.5% 30.2% 31.3% 34.4% Level of education 2016, age Cyprus has the highest number of university graduates in the population in the EU after the UK and Ireland 24.3% 38.4% 37.4% Less than Upper secondary Upper secondary Tertiary SOURCES: Statistical Service of Republic of Cyprus, Eurostat; Calculations by BOC Economic Research 25

26 Supporting materials Asset quality

27 43% 58% 61% 55% 53% 71% 69% 71% 82% 84% 83% 76% 79% 77% 83% 80% 76% 73% 82% 74% 71% 64% 67% 63% 58% 61% 58% 59% 54% 61% 67% 76% 68% 68% 82% 73% 69% 73% 72% 62% 62% 68% 78% 72% 85% 80% 84% 78% 97% 96% 94% 98% 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Intense restructuring efforts continue; re-default level stable Quarterly evolution of restructuring activity ( bn) (Cy operations) 1 Restructured loans Write offs & non contractual write offs DFAs Cohort analysis of restructured 3,4 loans; 76% of restructured loans present no arrears Corporate SMEs Retail Total Bank Cyprus 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q % 90% 80% 76% 60% 72% 61% 40% 20% 0% No arrears No arrears No arrears No arrears (1) Restructuring activity within quarter as recorded at each quarter end and includes restructurings of 90+ DPD, NPEs, performing loans and re-restructurings. (2) Loans together with the associated provisions 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. (3) Restructured loans post 31 December 2013 excluding write offs & non contractual write offs and DFAs. (4) The performance of loans restructured during 2Q2017 is not presented in this graph as it is too early to assess. 27

28 NPE inflows stabilise; NPEs exits as expected (Cy) NPEs inflows ( bn) Redefaults New inflows Inflows as % performing loans 4.0% 2.6% 2.8% 2.9% 2.8% % Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q % 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Slowing of new inflows confirm: quality of new lending success of prior restructurings Support by improvement of underlying economic macro Outflows of NPEs on curing and exits ( bn) Curing of restructured loans 1 Curing as % of NPEs DFAs & DFEs Write offs and non contractual write offs Other (Interest / Collections / Change in balances) 1.6 bn forborne NPEs with no impairments or arrears 2, % 2.1% 2.0% (0.30) (0.26) (0.23) (0.13) (0.19) (0.38) (0.25) (0.37) (0.26) (0.09) (0.08) (0.04) (0.76) (0.88) (0.94) 5.5% 5.1% 4.3% - (0.58) (0.50) (0.40) (0.10) (0.11) (0.16) (0.25) (0.22) (0.24) (0.01) (0.75) (0.05) (0.84) (1.03) bn Corporate SME Retail FY2016 outflows: 3.61 bn 1H2017 outflows: 1.59 bn Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 (1) Comprises of debt for asset swaps and debt for equity swap. (2) In pipeline to exit NPEs subject to meeting all exit criteria. (3) Analysis based on account basis. 28

29 Continuous progress across all segments Focus shifts to Retail and SME after intense Corporate attention NPEs (Cy) 9.35 bn Corporate Dec Corporate 2.09 Exits Inflows 0.37 (2.42) NPE ratio 49.4% Terminated Corporate 1.67 SME 1.27 Terminated SMEs bn 2.68 bn Dec-16 Exits Inflows Jun 17 Dec 15 Exits Inflows Dec-16 Exits Inflows SME 4.51 (0.89) (0.55) (0.37) NPE provision coverage NPE total coverage 51.2% NPE ratio 68.7% NPE provision coverage NPE total coverage 114.2% 46.5% 118.3% Jun Retail bn Dec 15 Retail 3.32 NPE ratio 47.1% Terminated Retail 1.40 Exits Inflows Dec-16 Exits 3.03 (0.64) 0.35 (0.33) NPE provision coverage 29.1% 53.5% 30 June 2017 Inflows Jun NPE total coverage 109.7% 29

30 Cyprus NPL framework proving effective Robust foreclosure legal framework adopted in Cyprus in April 2015 Enables the enforcement of mortgages as security rights against debtors through foreclosure Minimises the involvement of the Land Registry Office and procedure is driven by the secured creditors in order to expedite property foreclosures Ability to initiate foreclosure proceedings once the loan is terminated / repayments & instalments are overdue for over 120 days Access to purchase the mortgaged property after 12 months since the for-sale process begins Cross country comparison of NPL supervisory framework Cyprus Italy Spain Greece Ireland Portugal NPL governance / workout Guidance on NPL workout practices / arrears management Guidance requiring banks to have NPL strategies / action plans Guidance requiring a dedicated arrears / NPL unit Guidance requiring banks to have NPL operational targets Debt enforcement / foreclosures Legal techniques to enable out-of-court enforcement of collateral Bilateral sales of repossessed assets permitted Blanket bans (moratoria) on sales/auctions/foreclosures Household insolvency and restructuring framework Out-of-court mechanism Bankruptcy regime for consumers/households Insolvency/bankruptcy discharge period (years) Collateral valuation Guidance of specific rules on valuation methods Guidance on valuation frequency for NPL collateral Requirements for appraisers Requirements for data collection on collateral Source: European Central Bank Stocktake of national supervisory practices and legal framework related to NPLs, September

31 Supporting materials Financial performance

32 BOC - Main performance indicators Ratios Group 1H2017 Net Interest Margin 3.37% Performance Cost to income ratio 42% 1 Loans to deposits 90% 90+ DPD / 90+ DPD ratio 7,561 mn (39%) 90+ DPD coverage 61% Asset Quality Cost of risk (annualised) 4.2% 2 Provisions / Gross Loans 23.8% Transitional Common Equity Tier 1 capital 2,142 mn Capital CET1 ratio (transitional basis) 13.8% Total Shareholders Equity / Total Assets 11.5% (1) Adjusted for the special levy and the SRF contribution. (2) Provisions for impairment of customer loans and gains/(losses) on derecognition of loans and changes in expected cash flows on acquired loans over average gross loans. Additional provisions of c. 500 mn are included in the calculation of Cost of Risk but are not annualised. Including impairments of other financial instruments, the provisioning charge for 1H2017 was 4.3%. 32

33 Operating profitability stabilised; 2Q2017 impacted by additional provisions mn 1H2017 1H2016 2Q2017 1Q2017 qoq % (1H) yoy% Net Interest Income % -12% Non interest income % 27% Total income % -2% Total expenses (214) (202) (107) (107) 0% 6% Profit before provisions and impairments % -9% Loan loss provisions 2 (656) (158) (592) (64) 829% 316% Impairments of other financial and non financial instruments (36) (22) (4) (32) -86% 67% Provision for litigation and regulatory matters (35) 0 (18) (17) 11% - Total Provisions and impairments (727) (180) (614) (113) 450% 306% Share of profit from associates and joint ventures % 146% (Loss)/profit before tax and restructuring costs (467) 102 (482) Tax (72) (12) (66) (6) 939% 490% Profit/(loss) attributable to NCIs (1) (6) (1) 0 45% -90% (Loss)/profit after tax and before restr. costs (540) 84 (549) Advisory, VEP and other restr. costs 3 (14) (87) (7) (7) -10% -84% Net gain on disposal of non-core assets % (Loss)/profit after tax (554) 56 (556) Net interest margin 3.37% 3.59% 3.38% 3.33% +5 bps -22 bps Key Highlights Stable qoq NII at 160 mn Non-interest income maintained at 77 mn NIM at 3.37% for 1H2017 Staff cost pressures offset, by no SRF contribution in 2Q2017 Additional provisions of c. 500 mn in 2Q2017 to accelerate derisking Provisions for litigation and regulatory matters of 35 mn include 18 mn relating to litigations for securities issued by the Bank between 2007 and 2011 and to redress provisions for the UK operations in 2Q mn in 1Q2017 mainly due to a fine imposed by the Cyprus Competition Commission in 1Q2017 Increased tax charge in 2Q2017 of 66 mn mainly due to reduction in DTA Loss after tax of 554 mn for 1H2017 Cost-to-Income ratio 46% 42% 45% 46% -1 p.p. +4 p.p. Cost-to-Income ratio adjusted for the special levy and SRF contribution 42% 40% 43% 41% +2 p.p. +2 p.p. (1) Profit before provisions and impairments, gains/(losses) on derecognition and changes on expected cash flows, restructuring costs and discontinued operations. (2) Provisions for impairment of customer loans and gains /(losses) on derecognition of loans and changes in expected cash flows on acquired loans. (3) Advisory, VEP and other restructuring costs comprise mainly: 1) fees of external advisors in relation to: (i) disposal of operations and non-core assets (ii) customer loan restructuring activities which are not part of the effective interest rate and (iii) the listing on the London Stock Exchange and 2) voluntary exit plan cost. 33

34 Stable NIM despite negative interest rate environment Net Interest Income and Net Interest Margin Average contractual interest rates 2 (bps) (Cy) Net Interest Income mn Net Interest Margin (NIM) (bps) bn Quarterly Average Interest bearing assets 1 Yield on Loans Cost of Deposits Customer spread FY16 NII: 686 mn NIM: 3.47% 1H17 NII: 316 mn NIM: 3.37% Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Net interest income (NII) and net interest margin (NIM) for 1H2017 amounted to 316 mn and 3.37% respectively. NII down by 12% yoy, reflecting the low interest rate environment and the lower volume of loans primarily as a result of the DFAs The NII and NIM for 2Q2017 amounted to 160 mn and 3.38% respectively, at similar levels as for 1Q2017 Average interest earning assets for 1H2017 amounted to 19.0 bn, down by 5% yoy, largely due to DFAs and the elevated provisions charges for 2Q2017. Quarterly average interest earning assets for 2Q2017 amounted to 19.0 bn, at similar levels to the previous quarter Customer spread stable at 425 bps in 2Q2017 (1) Interest earning assets include placements with banks and central bank, reverse repurchase agreements, net loans and advances to customers and investments excluding equity and mutual funds. (2) Based on average loan contractual interest rates, before IFRS adjustments. 34

35 Fee and Commission Income at 19% of total Income Analysis of Non Interest Income ( mn) Quarterly Net FX gains / (losses) & Net gains/(losses) on other financial instruments, and other income. Gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties Insurance income net of insurance claims Net fee and commission income 15% 16% 16% % 19% 19% % Net fee and commission income % Total income x Recurring non- interest income ( mn) Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Fee & commission income in Cyprus by business line International Banking Services (IBS) Consumer SME Corporate RRD Wealth and Management Other 6% 32% 9% 8% 1% 2% 42% One third of IB, W&M fee & commission income is driven by Payment Transactions Payment Transactions are increasing Average Number of Payment Transactions per month (thousands) Incoming Payment Orders pre post- Bail-in Bail-in Outgoing Payment Orders Q2017 2Q2017 (1) Excluding non-recurring fees of approximately 7 mn. 35

36 Total expenses Total operating expenses ( mn) Staff costs Cost to Income Ratio (C/I ratio) Other operating expenses % 42% 42% 41% 39% 40% 40% 39% Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Special Levy and SRF contribution ( mn) Special Levy SRF contibution Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Cost to Income ratio Cost to Income ratio excluding special levy on banks and SRF contibution 46% 46% 41% 42% 1Q2016 1H2016 9M2016 FY2016 1Q2017 1H Staff costs at 57 mn for 2Q2017, up by 6% qoq, following the renewal of collective agreement with the Union Other operating expenses at 44 mn for 2Q2017, up by 7% qoq, primarily due to the increase in advertising and marketing, advisory and other professional fees during 2Q2017 Special levy and contribution to the SRF for 2Q2017 totalled 6 mn, compared to 12 mn a quarter earlier. The annual contribution to the SRF, was fully booked in 1Q2017, in line with IFRS C/I ratio at 46% for 1H2017. Excluding the special levy and contribution to the SRF, C/I ratio at 42%, compared to 41% for 1Q2017 Actions for focused, targeted cost containment: Tangible savings through a targeted cost reduction program for operating expenses Introduction of appropriate technology/ processes to enhance product distribution channels and reduce operating costs Introduction of HR policies aimed at enhancing productivity 36

37 Income Statement Review mn 1H2017 1H2016 2Q2017 1Q2017 qoq % (1H) yoy% Net Interest Income % -12% Net fee and commission income % 19% Insurance income net of insurance claims % -1% Core income % -7% Other income % 78% Total income % -2% Total expenses (214) (202) (107) (107) 0% 6% Profit before provisions and impairments % -9% Loan loss provisions 2 (656) (158) (592) (64) 829% 316% Impairments of other financial and non financial instruments (36) (22) (4) (32) -86% 67% Provision for litigation and regulatory matters (35) 0 (18) (17) 11% - Total Provisions and impairments (727) (180) (614) (113) 450% 306% Share of profit from associates and joint ventures % 146% (Loss)/profit before tax and restructuring costs (467) 102 (482) Tax (72) (12) (66) (6) 939% 490% Profit/(loss) attributable to NCIs (1) (6) (1) 0 45% -90% (Loss)/profit after tax and before restr. costs (540) 84 (549) Advisory, VEP and other restr. costs 3 (14) (87) (7) (7) -10% -84% Net gain on disposal of non-core assets % (Loss)/profit after tax (554) 56 (556) Net interest margin 3.37% 3.59% 3.38% 3.33% +5 bps -22 bps Cost-to-Income ratio 46% 42% 45% 46% -1 p.p. +4 p.p. Cost-to-Income ratio adjusted for special levy and SRF contribution 42% 40% 43% 41% +2 p.p. +2 p.p. (1) Profit before provisions and impairments, gains/(losses) on derecognition and changes on expected cash flows, restructuring costs and discontinued operations. (2) Provisions for impairment of customer loans and gains /(losses) on derecognition of loans and changes in expected cash flows on acquired loans. (3) Advisory, VEP and other restructuring costs comprise mainly: 1) fees of external advisors in relation to: (i) disposal of operations and non-core assets (ii) customer loan restructuring activities which are not part of the effective interest rate and (iii) the listing on the London Stock Exchange and 2) voluntary exit plan cost. 37

38 Cyprus: Income Statement by business line for 1H2017 mn Consumer Banking SME Banking Corporate Banking International Banking Wealth & Brokerage & Asset Management RRD REMU Insurance Other Total Cyprus Net interest income (9) Net fee & commission income (2) Other income Total income Total expenses (57) (6) (6) (13) (2) (15) (4) (8) (80) (191) Profit/(loss) before provisions and impairments (1) 14 (50) 255 Provisions for impairment of customer loans net of gains/(losses) on derecognition of loans and changes in expected cash flows Impairment of other financial and non financial instruments Provision for litigation and regulatory matters (30) (29) 0 (7) 0 (574) (638) (25) (25) (31) (31) Share of profits from associates Profit/(loss) before tax 54 (3) (509) (1) 14 (100) (435) Tax (7) 0 (6) (7) (1) 65 0 (2) (112) (70) Profit attributable to non controlling interest (1) (1) Profit/(loss) after tax and before one off items 47 (3) (444) (1) 12 (213) (506) 38

39 Careful Expansion of BOC UK operations Gross loans and customer deposits Loans by sector at 30 June 2017 Gross loans ( bn) 1% 1% Corporate % SMEs % Consumer credit Housing Dec 2014 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Mar 2017 Jun 2017 Customer deposits ( bn) Dec 2014 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Mar 2017 Jun 2017 Core operating profitability is rising Operating profit ( mn) Q2016 1Q2017 2Q2017 (Loss)/profit after tax ( mn) 1.6 (2.4) (13.6) Loss after tax negatively affected by legal and regulatory redress provision charges 4Q2016 1Q2017 2Q2017 Gross loans and customer deposits in the UK increased by 50% and 33% since Dec 15 to 1.24 bn and to 1.38 bn, respectively New lending of 257 mn during 1H2017 Loss after tax of 2.4 mn for the 2Q2017, negatively affected by legal and regulatory redress provision charges Expansion of UK operations that remains consistent with Group's overall credit appetite and regulatory environment 39

40 Gross loans by Geography and by Customer Type Gross loans by geography Total ( bn) 30 June 2017 (%) Cyprus UK Other countries 1 7.4% 1.9% Other countries UK % Cyprus Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Gross loans by customer type 30 June 2017 (%) Total ( bn) Corporate Retail Housing 10.5% SME Retail Other Retail other Retail Housing % 46.9% SMEs % Corporate Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 (1) Other countries: Greece, Russia and Romania. 40

41 Analysis of Deposits by Currency and by Type Deposits by Currency 30 June 2017 (%) Total EUR USD GBP Other Currencies EUR USD GBP Other currencies ( bn) % 10.8% 1.0% 77.3% Total Cyprus 90.5% Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Deposits by type of deposits 30 June 2017 (%) Total Time deposits Savings accounts Current & demand accounts ( bn) Time deposits Savings account Current and demand account 35.7% 6.7% 57.6% Mar-15 Jun-15 Sep-15 Dec-15 Mar -16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 41

42 Consolidated Balance Sheet mn % change mn % change Cash and balances with Central Banks Loans and advances to banks 54% 2,317 1,506-35% 708 1,088 Deposits by banks -5% Funding from central banks 6% Repurchase agreements 0% Debt securities, treasury bills and equity investments 36% Customer deposits 0% 16,584 16,510 Net loans and advances to customers -5% 14,913 15,649 Stock of property 5% 1,502 1,427 Subordinated loan stock Other liabilities % 1,097 1,014 Other assets -5% 1,729 1,828 Total assets 0% 22,087 22,172 Total liabilities 2% 19,509 19,066 Shareholders equity -17% 2,543 3,071 Non controlling interests 2% Total equity -17% 2,578 3,106 Total liabilities and equity 0% 22,087 22,172 42

43 Risk Weighted Assets Regulatory Capital Risk weighted assets by Geography ( mn) Cyprus 17,845 17,675 17,554 17,336 16,128 Russia United Kingdom Romania Greece Other Total RWA 18,968 18,803 18,865 18,681 17,368 RWA intensity(%) 84% 84% 85% 83% 79% Risk weighted assets by type of risk ( mn) Equity and Regulatory Capital ( mn) Shareholders equity 3,054 3,063 3,071 3,079 2,543 CET1 capital 2,735 2,736 2,728 2,694 2,142 Tier I capital 2,735 2,736 2,728 2,694 2,142 Tier II capital Total regulatory capital (Tier I + Tier II) 2,756 2,757 2,749 2,919 2,390 Reconciliation of Group Equity to CET 1 mn Group Equity per financial statements 2,578 ` Less: Intangibles and other deductions (24) Credit risk 16,921 16,747 16,862 16,785 15,474 Less: Deconsolidation of insurance and other entities (216) Less: Regulatory adjustments (DTA and other items) (147) Market risk Less: Revaluation reserves and other unrealised items transferred to Tier II (49) CET 1 (transitional) 2,142 Operational risk 2,040 2,050 1,997 1,889 1,889 Total 18,968 18,803 18,865 18,681 17,368 Less: Adjustments to fully loaded (mainly DTA) (99) CET 1 (fully loaded) 2,043 Risk Weighted Assets 17,368 CET 1 ratio (fully loaded) 11.8% CET 1 ratio (transitional) 12.3% (1) The increase in Russia RWA is due to one off regulatory adjustments on operational risk in relation to disposed operations where permission to exclude it received from regulators early January (2) Other countries primarily relates to exposures in Channel Islands. 43

44 Reduction in Overseas Non-Core Exposures Overseas non-core exposures 1 ( mn) Russia: Net exposure Serbia: Net exposure Romania: Net exposure Greece: Net exposure In addition, at 30 June 2017, there were 173 mn of overseas exposures in Greece ( 195 mn as at 31 March 2017) not identified as non-core exposures In accordance with Group s strategy to exit from overseas non-core operations, the operations of the Bank of Cyprus branch in Romania are expected to be terminated during 2017, subject to regulatory approvals. The remaining assets and liabilities of the branch will be transferred to other entities of the Group Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 (1) Comparatives excluding core exposures. (2) Lending exposures to Greek entities in the normal course of business in Cyprus and lending exposures in Cyprus with collaterals in Greece. 44

45 Non-Performing Loans definition Non-Performing Exposures (NPEs) as per the EBA definition: In 2014 the European Banking Authority (EBA) published its reporting standards on forbearance and non-performing exposures (NPEs). According to the EBA standards, a loan is considered a non-performing exposure 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 ii. the exposures are impaired i.e. in cases where there is a specific provision, 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 exit criteria of NPE forborne are the following: 1. The extension of forbearance measures does not lead to the recognition of impairment or default 2. One year has passed since the forbearance measures were extended 3. There is not, following the forbearance measures, any past due amount or concerns regarding the full repayment of the exposure according to the post forbearance conditions. 90+DPD: Loans in arrears for more than 90 days (90+ DPD) are 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). 45

46 Supporting materials BOC shareholder structure

47 Share Capital increase in 2014 attracted reputable international investors & a world class Board of Directors Current shareholding of BOC 1 Current Board composition Name Designation 65.0% 4.8% 9.3% 5.0% 5.0% 3.5% 4.1% 3.3% Dr. Josef Ackermann Mr. Maksim Goldman Mr. John Patrick Hourican Dr. Christodoulos Patsalides Chairman Independent Vice Chairman Non Independent CEO Executive Deputy CEO and COO Executive Mr. Arne Berggren Board member Independent Cyprus Popular Bank Public Co Ltd Lamesa Holding S.A. TD Asset Management European Bank for Reconstruction and Development Tyrus Capital S.A.M Senvest Management LLC Osome Investments Limited Other Mr. Michalis Spanos Mr. Ioannis Zographakis Dr. Michael Heger Ms. Lyn Grobler Mr. James B. Lockhart III 2 Board member Senior Independent Board member Independent Board member Independent Board member Independent Board member Independent Mrs Anat Bar-Gera 2 Board member Independent (1) In accordance with the shareholders' disclosure obligations pursuant to Irish Transparency Rules and Regulations. (2) Subject to ECB approval. 47