0114/ /en Half-Yearly Financial Report Alpha Bank Ltd ABCY

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Marianna Stephens
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1 0114/ /en Half-Yearly Financial Report Alpha Bank Ltd Financial Results of Alpha Bank Cyprus Ltd for the period from January 1 to June 30, 2017 Please find attached the announcement and financial results for the 6 months ended 30 June 2017 ABCY Attachments: 1. Announcement of First Half 2017 Financial Results 2. First Half 2017 Financial Results Regulated Publication Date: 29/08/2017

2 First Half 2017 Results of Alpha Bank Cyprus Ltd [ ] Main Highlights - Pre provision income of Euro 15.4 mil. compared to Euro 3.4 mil. for the same period in Losses after tax Euro 27.3 mil. as a result of increased impairments to cover credit risk. - Increase of Non Performing Exposures coverage ratio to 49%. - Strong capital base with Common Equity Tier I ratio (CET I) of 15.6%. - Strong liquidity position with net loans to deposits ratio of 86.6% from 100.3% on Increase of customer deposits by 10.3% compared to Capital Adequacy On 30 June 2017, Common Equity Tier I ratio (CET Ι) stood at 15.6%, Total Tier I ratio at 18.8% and Total Capital Adequacy ratio at 20.2%. The capital adequacy ratios are in accordance with the transitional provisions for the year. Financial Performance The financial results of Alpha Bank Cyprus Ltd for the first half of 2017, present losses after tax of Euro 27.3 million compared to profit after tax of Euro 7.6 million for the same period of 2016 mainly due to increased impairments to cover credit risk. Key financial data From 1 January to Change In Euro mil. Net interest income -31.8% Total income -34.2% Total expenses -57.3% (24.4) (57.1) Pre provision income 352.9% Impairment profit/(loss) and provisions to cover credit risk -1,008.5% (42.7) 4.7 Profit / (loss) after tax % (27.3) 7.6 Profit / (loss) per share (0.16) cent 0.04 cent In Euro mil Loans and advances to Customers -4.8% 1, ,946.4 Due to Customers 10.3% 2, ,940.6 Transitional Common Equity Tier I ratio (CET I) -90 basis points 15.6% 16.5% 1

3 The results were mainly impacted by: the change in loan and deposit spreads, the increase of impairments to cover credit risk, which improved the Non Performing Exposures coverage ratio to 49%, the increase of the deposit base and the reduction of operational expenses. Net Interest income for the first half 2017 amounted to Euro 33.8 million, presenting a decrease of 31.8% compared to the same period in The decrease is mainly attributed to the change of interest rate spreads. Total income of the Bank amounted to Euro 39.8 million for the first half 2017, decreased by 34.2%, compared to the same period in It is noted that income for the first half 2016 includes a non recurring profit of Euro 6.6 million from the sale of Visa Europe shares. Total expenses of the Bank for the first half 2017, amounted to Euro 24.4 million, 57.3% lower than the same period in 2016, mainly due to the cost of a voluntary retirement programme offered in the first half of Excluding the above non-recurring retirement cost, total expenses decreased by 5.1% compared to the same period in Cost to income ratio, excluding non-recurring items (income from sale of Visa Europe shares and the voluntary retirement compensation cost), stands for the first half 2017 at 61.4% compared to 47.7% for the same period of Impairment loss and provisions to cover credit risk amounted to Euro 42.7 million for the first half 2017 compared to a release of impairments of Euro 4.7 million for the same period in 2016, thus improving Non Performing Exposures coverage ratio and allowing a more active management of the portfolio in arrears. Balance Sheet Net loans and advances to customers on 30 June 2017 amounted to Euro 1,853.6 million, a decrease of 4.8% compared to 31 December Amounts due to customers on 30 June 2017 amounted to Euro 2,140.6 million, compared to Euro 1,940.6 million on 31 December 2016, presenting an increase of 10.3%. The net loans to deposits ratio was improved to 86.6% on 30 June 2017, from 100.3% on 31 December Accumulated impairments to cover credit risk amounted to Euro million on 30 June 2017, covering 32.3% of gross loans, compared to Euro million on 31 December Accumulated impairments include the fair value adjustment of the loan portfolio, which was acquired at fair value. Loans over 90 days past due stood on 30 June 2017, at Euro 1,477.6 million representing 53.9% of gross loans. On 31 December 2016, they stood at Euro 1,468.0 million. Non-performing exposures, according to the definition of the European Banking Authority (EBA), stood on 30 June 2017 at Euro 1,803.9 million representing 65.9% of gross loans, compared to Euro 1,802.1 million on 31 December On 30 June 2017, coverage ratio of non performing exposures, according to the definition of the European Banking Authority (EBA), stands at 49.0% compared to 47.5% on 31 December

4 International Financial Reporting standard 9 (IFRS9) Regarding the new accounting standard IFRS 9, the application of which is mandatory from , it is noted that the Bank has started a programme for implementation, as it is specifically mentioned in note 1.1 of the annual financial statements of , where also the main changes of the new standard regarding the accounting treatment of financial instruments are explained. The progress of the programme is evolving according to plan, while most of the individual projects identified are in the implementation phase. The design of the governance framework and the process that will be followed for the classification of financial instruments that will be recognised after , is in progress. In particular, the high level design of the process for the definition of business models as well as the assessment of the characteristics of contractual cash flows has significantly progressed. At the same time a detailed recording of the classification process in manuals is being carried out and necessary enhancements/modifications are being implemented to IT applications. With regards to the impairment work stream, the Bank is completing the development of models for the calculation of credit risk losses. At the same time, it is in progress the process of developing analytical methodologies for the staging of financial instruments for which impairment losses will be calculated depending on the level of the issuer / borrower's credit risk deterioration, which will determine the financial instruments for which impairment will be calculated based on 12-m expected losses or lifetime expected losses. Until today, important assumptions in relation to IFRS 9 application have not been finalised and any impact analysis can be based on hypotheses, assumptions and simplified approaches that are still being developed. Therefore, there is currently no specific and reliable information on the estimated impact of IFRS 9 on the Bank s key supervisory indicators and / or financial position. Challenges of the economy and the banking system The main challenge relates to the economic environment and concerns the high level of nonperforming loans of the banking sector and the economy in Cyprus. Non-performing loans and the high level of private sector debt remain an unstable factor in the smooth growth of the economy. Additional challenges are expected from United Kingdom's exit from the European Union. Developments and Prospects The economy of Cyprus signals positive prospects which are supported by: the positive GDP growth of 3.5% of the second quarter of 2017 compared to the same period of 2016, the decrease of unemployment rate for the first six months of 2017 at 10,8% compared to 12.9% for the same period in 2016, the upgrade of the cypriot economy from international credit agencies, the increase of tourism, the increase of customer deposits of the banking system. The Bank monitors its capital adequacy ratios, the maturity of its assets and liabilities and is in constant cooperation with the supervisory authorities, to take necessary preventive measures to manage its capital adequacy and liquidity, under prevailing circumstances. 3

5 Basic priorities of the Bank s Business Plan are to: maintain strong capital adequacy, monitor liquidity, deleverage and clean up loan portfolio, effective monitoring of non performing exposures which is a key factor to generate satisfactory profitability, attract new deposits and maintain strong deposits base, contain operating expenses, increase productivity introduce new technologies to improve the quality of services offered to Customers. For the preparation of the Interim Financial Statements of 30 June 2017, which have not been reviewed by the auditors, the same accounting policies were applied as those used in preparing the Audited Financial Statements for the year 2016, with the exception of the new standards applied as from 1 January 2017, as described in note 1.1 of the interim financial statements for the first six months of The Interim Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, the requirements of the Cyprus Companies Law, Cap.113 and the Securities and Cyprus Stock Exchange Laws and Regulations. As per the guidelines of European Securities and Markets Authority (ESMA) on Alternative Performance Measures (APMs) published in October 2015, applicable since 3 July 2016 and adopted by the Cyprus Stock Exchange Commission with the circular E148 dated the Bank publishes additional information. The Bank believes that certain Alternative Performance Measures (APMs) provide additional information that is useful both for assessing performance and for making strategic decisions. Relevant analysis and table with APMs is included in the management report of the Interim Financial Statements as at The Interim Financial Statements of the Bank for the period 1 January to 30 June 2017 were approved during the meeting of the Board of Directors held on 29 August The Interim Financial Statements for the period 1 January 2017 to 30 June 2017 are available on the website of Alpha Bank Cyprus Ltd ( and Cyprus Stock Exchange ( 4

6 FINANCIAL STATEMENTS OF ALPHA BANK CYPRUS LTD AS AT Income Statement and other Comprehensive Income From 1 January to Interest and similar income 51,847 66,115 Interest expense and similar charges (18,057) (16,596) Net interest income 33,790 49,519 Fees and commission income 3,621 3,779 Commission expense (460) (597) Net fee and commission income 3,161 3,182 Dividend income 2 - Gains less losses on financial transactions 1,486 7,704 Other income 1, ,896 7,804 Total income 39,847 60,505 Staff costs (15,204) (17,956) Voluntary retirement program - (31,445) General administrative expenses and other expenses (8,353) (6,702) Depreciation and amortization (891) (1,016) Total expenses (24,448) (57,119) Impairment profit/(loss) and provisions to cover credit risk (42,666) 4,720 Profit / (Loss) before tax (27,267) 8,106 Tax - (542) Profit / Loss after tax (27,267) 7,564 Other comprehensive income recognised directly in equity: Amounts that may be reclassified in the statement of comprehensive income Net change in available for sale securities reserve 1,327 (630) Total amounts that may be reclassified in the statement of comprehensive income 1,327 (630) Total comprehensive income / (expense) after tax for the period attributable to the owners of the Bank (25,940) 6,934 Profit/(loss) per share : Basic and diluted ( cents) (0.16) 0.04

7 FINANCIAL STATEMENTS OF ALPHA BANK CYPRUS LTD AS AT Balance Sheet ASSETS Cash and balances with central banks 40, ,873 Due from banks 680, ,229 Investment securities available for sale 91, ,829 Derivative financial assets 7, Loans and advances to customers 1,853,605 1,946,360 Investment property 2,023 2,023 Property, plant and equipment 22,637 23,113 Intangible assets Deferred tax assets 14,164 14,164 Other assets 10,287 8,110 Total Assets 2,723,512 2,596,415 LIABILITIES Due to banks 62, ,563 Derivative financial liabilities 117 7,467 Due to customers 2,140,588 1,940,628 Subordinated bonds 116, ,331 Other liabilities and provisions 18,929 18,597 Total Liabilities 2,338,623 2,185,586 EQUITY Share capital 148, ,303 Share premium 90,467 90,467 Reserves 2, Retained earnings 79, ,138 Convertible capital securities 64,000 64,000 Total Equity 384, ,829 Total Liabilities and Equity 2,723,512 2,596,415 Off balance sheet items 180, ,210

Preliminary Financial Results of Alpha Bank Cyprus Ltd for the year 2015 [ ]

Preliminary Financial Results of Alpha Bank Cyprus Ltd for the year 2015 [29.2.2016] Main Highlights - Strong Capital Base with Common Equity Tier 1 ratio at 17.5% on 31.12.2015 - After tax losses of Euro44.7