Bank of Cyprus Group. Group Financial Results for the six months ended 30 June August Overview. Income Statement Review

Transcription

1 Bank of Cyprus Group Group Financial Results for the six months ended 30 June 2015 Overview Income Statement Review Balance Sheet Review KPIs Key Takeaways Additional Information 26 August

2 1H2015 Group Financial Results Key Highlights Improving funding structure; Loans to deposits ratio at 136% (138% at 31 March 2015) and customer deposits accounting for 54% of total assets (51% at 31 March 2015) Emergency Liquidity Assistance (ELA) reduced by 1 bn during 2Q2015 to 5,9 bn and by further 500 mn post quarter-end to a current level of 5,4 bn; 6 bn ELA reduction since peak Common Equity Tier 1 capital ratio (transitional basis) increased by 100 basis points to 14,9% (qoq) due to reduced risk weighted assets (RWAs) and organic capital generation 90+ DPD and NPEs were reduced by 143 mn to 12,6 bn (qoq) and by 366 mn to 14,8 bn (qoq) respectively; 90+ DPD ratio at 53% and 90+ DPD provisioning coverage improved to 43% Profit after tax at 60 mn for 1H2015; Profit before provisions and impairments at 169 mn and Profit after tax at 31 mn for 2Q2015; Post quarter-end, the Bank agreed to sell the majority of its Russian operations; release of RWAs by approx. 600 mn and improvement of CET1 ratio by approx. 33 basis points With a deleveraged and de-risked balance sheet, improving funding structure and stabilising asset quality, the Bank is focusing on core business and profitability 2

3 Overview Income Statement Review Balance Sheet Review KPIs Key Takeaways Additional Information 3

4 BOC Overview Strengthened capital position Significant Balance Sheet deleveraging Adjusting for the disposal of the majority of the Russian operations CET1 ratio (transitional basis) Adjusting for the disposal of the majority of the Russian operations -25% Total assets ( bn) 15,4% 14,0% 13,9% 14,9% 15,2% * 33,0 31,4 30,3 29,4 28,6 27,5 26,8 26,7 25,4 24,7 10,5% 10,4% 11,3% Capital increase of 1 bn -1,9% Dec 2012 Jun 2013 Dec 2013 Jun Sep Dec Mar 2015 Jun 2015* proforma Jun 2015 Jun 2013 Sep 2013 Dec 2013 Mar Jun Sep Dec Mar 2015 Jun 2015 proforma Jun 2015 ELA funding reduced by 6,0 bn since peak 90+ DPD formation slowed down sharply 11,4 11,4 ELA funding ( bn) 11,1 11,2 11,0 10,9 11,1 1,3 1,4 1,4 9,9 ECB funding ( bn) 9,6 9,5 10,2 1,4 8,8 8,6 0,9 7,7 8,3 0,9 7,4 7,7 0,8 6,9 6,4 0,5 5,9 5,9 0,5 5,4 945 Adjusting for the disposal of the majority of the Russian operations Change in 90+ DPD ( mn) FY2009 FY2010 FY2011 FY2012 FY2013 FY 1Q2015 2Q2015 proforma 2Q2015 Apr 2013 Jun 2013 Sep 2013 Dec 2013 Mar Jun Sep Dec Mar 2015 Jun Aug 2015 * CET 1 ratio includes independently verified profits for 1H2015 4

5 Macroeconomic overview GDP growth expected to be positive from 2015 faster recovery than other peripheral countries GDP Growth (yoy) f 2016f 1,4% 1,6% 0,3% 0,4% (2,4%) (2,3%) (5,4%) (3,4%) (3,9%) 1,2% -0,4% -0,8% -1,2% -2,4% -2,3% -3,7% -5,3% -6,0% -5,5% -4,7% -3,2% -1,8% -2,1% -1,8% 0,2% 0,9% Real GDP growth - Actual Initial Projections (EC) (8,7%) Current projections (EC) 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q 2Q 3Q 4Q 1Q2015 2Q2015 Improved rating and credit outlook as demonstrated by benchmark sovereign bond issue Yield 16% 14% 12% 10% 8% 6% 4% 2% 2020 Cyprus government bond Continued improvement According to the flash estimate published on 14 August 2015, real GDP in 2Q2015 increased by 0,9% over the corresponding quarter of, on a seasonally adjusted basis. This was the second consecutive quarterly increase after fourteen quarters of continuous decline. Yields of Cyprus Government bonds have been stable despite the turbulence in Greece, underlying the decoupling of Cypriot economy and banking system SOURCE: Statistical Service of Republic of Cyprus, European Commission, Bloomberg, IMF and company reports 5

6 Macroeconomic overview Tourist Arrivals and Receipts: annual % changes Evolution of Residential Property Price Index (RPPI) (yoy % change) 14,4% Arrivals Receipts 10,1% 8,7% 8,0% 6,5% 3,8% 3,2% 1,5% 1,5% -1,0% -2,6% -2,8% * ytd 25% 20% 15% 10% 5% 0% -5% -10% -15% Residential Property Price Index -43% since 1Q2008 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q 2Q 3Q 4Q 1Q2015 Unemployment will ease gradually 15% 15,9% 16,2% 15,8% 14,8% 10% 11,9% 0,5% 7,9% 0,2% 1,3% 5% -1,8% -4,2% -5,2% 0% ** 2016** Unemployment rate (% of labour force) Employment growth % Tourist arrivals for January to July 2015 reached 1,5 mn, recording an increase of 6,5% compared to a similar period the year before, due to increased arrivals from UK and other northern European countries compensating for lower arrivals from Russia. During 1Q2015, the RPPI recorded an annual decrease of 7%. RPPI declined by 43% since its peak in 1Q2008 Unemployment rate projections for 2015 expected to have a small decrease to 15,8% and is expected to ease gradually. * Figures for 2015 arrivals are up to July 2015 and receipts are up to May 2015 ** Figures for 2015 and 2016 are based on European Commission report SOURCE: Central Bank of Cyprus, Statistical Service of Republic of Cyprus, European Commission, IMF and company reports. 6

7 Overview Income Statement Review Balance Sheet Review KPIs Key Takeaways Additional Information 7

8 Income Statement Review 1H2015 1H 3 yoy % 2Q2015 1Q2015 qoq % Net interest income % % Other income % Total income % % Total expenses (194) (208) -7% (92) (102) -10% Profit before provisions and impairments % Provisions for impairment of customer loans (457) (289) 58% (309) (148) 109% Gains on derecognition and changes in expected cash flows on acquired loans % Impairments of other financial and non financial assets (31) (34) -8% (30) (1) - Share of profit from associates % Profit before tax, restructuring costs and discontinued operations % % Tax (11) (5) 132% (2) (9) -69% Loss attributable to non-controlling interests (0) (0) - (0) (0) - Profit after tax from continuing operations % % Restructuring costs (21) (21) 3% (14) (7) 61% Loss from disposal group held for sale/discontinued operations (33) (66) -51% (12) (21) -43% Net gain on disposal of non-core assets % Profit after tax % % Net interest margin 3,88% 4,07% 3,79% 3,94% Cost-to-Income ratio 36% 33% 35% 38% 1. Profit before provisions and impairments, gains on derecognition and changes on expected cash flows on acquired loans, restructuring costs and discontinued operations. 2. Profit after tax and before restructuring costs, discontinued operations and net profit on disposal of non-core assets 3. The 1H2015 is not comparable to the 1H given the significant deleveraging completed since then, including, among others, the partial repayment of the sovereign bond held by the Bank, by the Republic of Cyprus on 1 July. 8

9 Net Interest Income and Net Interest Margin Net Interest Income ( mn) and Net Interest Margin (bps) Interest income from Laiki Recapitalisation bond Net interest income (other) NIM FY: Q2015 5,73% Q2015 1H2015: 5,42% 5,11% ,39% 1H2015: 1,29% 1,19% 394 4,34% 1H2015: 388 1H2015: 4,13% 379 1Q 2Q 3Q 4Q 1Q2015 2Q2015 Evolution of Yield of Loans, Cost of Deposits and Customer Spread in Cyprus operations* 3,92% 2Q2015 Group Net Interest Income (NII) at 214 mn compared to 225 mn for 1Q2015, reflecting the reduction in lending rates in March 2015 and the partial repayment of a bond by the Republic of Cyprus in June 2015; Group Net Interest Margin (NIM) at 3,79% for 2Q2015, compared to 3,94% for 1Q2015 NII and NIM continue to reflect market conditions in Cyprus and the composition of the Group s funding, with Eurosystem funding accounting for 25% of assets at 30 June Going forward, the NII will be negatively affected by the early repayment of a bond by the Republic of Cyprus in June 2015, primarily driven by the upfront recognition of the accounting gain Customer spread in Cyprus decreased to 3,92% in 2Q2015 compared to 4,34% in 1Q2015 reflecting the impact of the reduction in lending and deposit rates in March Yield on Loans Cost of Deposits Customer spread * Includes all currencies 9

10 Analysis of Non-interest income Analysis of Non Interest Income ( mn) Net fee and commission income Insurance income net of insurance claims Net FX gains/(losses) & Net gains/(losses) on other financial instruments (Losses)/gains from revaluation and disposal of investment properties Other income/(expenses) 14% 12% 14% 13% 16% 14% % Net fee and commission income % Total income x Non interest income ( mn) Recurring noninterest income 1Q 2Q 3Q 4Q 1Q2015 2Q2015 Non-interest income remained at the same level for 2Q2015 at 47 mn Net fee and commission income for 2Q2015 at 36 mn (about 14% of total income); lower compared to 1Q2015 due to seasonality relating to annual charges for banking services provided Recurring income from insurance business (average of about 11 mn for the last six quarters) reflecting the Group s leading position in the insurance business in Cyprus; 2Q2015 Insurance income was lower mainly due to revaluation effect of investments Average recurring income from fee and commission income and insurance income of about 50 mn for the last six quarters 10

11 Total expenses Total expenses ( mn) Other operating expenses Staff costs Total expenses for 2Q2015 decreased to 92 mn from 102 mn for 1Q2015, driven by the reduction of operating expenses due to lower advertising, consultancy and professional expenses. Operating expenses per quarter, excluding 2Q2015 and 4Q when there were one-off items, are around 45 mn Q 2Q 3Q 4Q 1Q2015 2Q2015 Group Cost to Income Ratio Staff costs for 2Q2015 at 59 mn broadly at the same level as for the previous quarters The cost-to-income ratio stood at 36% for 1H2015, compared to 38% for 1Q2015 Group cost to income ratio 34% 33% 35% 36% 38% 36% 1Q 1H 9M FY 1Q2015 1H

12 Group Income Statement Highlights Group Income Statement Highlights ( mn) Q 2Q 3Q 4Q 1Q2015 2Q Profit before impairments* restructuring costs and discontinued operations -276 Provisions for impairment of customer loans and gains on derecognition and changes in expected cash flows on acquired loans Profit/(loss) after tax from continuing operations** -337 Profit/(loss) after tax Profit before impairments*, restructuring costs and discontinued operations for 2Q2015 at 169 mn, compared to 170 mn for 1Q2015 Provisions for impairment of customer loans and gains on derecognition and changes in expected cash flows on acquired loans for 2Q2015 at 122 mn, compared to 105 mn for 1Q2015 Profit after tax from continuing operations for 2Q2015 at 16 mn, compared to a profit for 1Q2015 at 57 mn Profit after tax for 2Q2015 at 31 mn, compared to a profit of 29 mn for 1Q2015 * Profit before provisions and impairments, gains on derecognition and changes on expected cash flows on acquired loans, restructuring costs and discontinued operations. ** Profit/(loss) after tax and before restructuring costs, discontinued operations and net profit on disposal of non-core assets 12

13 Income Statement Highlights Group vs Cyprus 1H2015 Cyprus Vs Group performance ( mn) 93% 96% 92% 99% 173% % % contribution of Cyprus operations Cyprus operations Rest of operations Group Net interest income Total income Total expenses Profit before provisions and impairments* restructuring costs and discontinued operations Profit/(loss) after tax from continuing operations** Profit before provisions and impairments* for the Cyprus operations for 1H2015 at 335 mn, compared to a Group total of 339 mn for the same period Profit after tax from continuing operations** for the Cyprus operations for 1H2015 at 127 mn, compared to a Group profit of 73 mn for the same period * Profit before provisions and impairments, gains on derecognition and changes on expected cash flows on acquired loans, restructuring costs and discontinued operations. ** Profit/(loss) after tax and before restructuring costs, discontinued operations and net profit on disposal of non-core assets 13

14 Overview Income Statement Review Balance Sheet Review KPIs Key Takeaways Additional Information 14

15 Balance Sheet* Deleverage - Shrinking to Strength mn Cash & bank placements Jun 2013 Dec 2013 Mar Jun Sep Dec Mar 2015 Jun 2015 Change Since Jun Investments Net Loans Other assets Total assets Customer deposits ECB funding ELA Interbank funding Other liabilities Total equity Total liab. & equity Balance sheet deleverage qoq CET1 ratio (transitional basis) Leverage ratio (Assets/Equity) n/a 10,4% 10,6% 11,3% 15,4% 14,0% 13,9% 14,9% 11,3x 11,1x 10,6x 10,1x 7,3x 7,7x 7,6x 7,2x Net loans reduction driven by disposal of non-core assets and the ongoing deleveraging Deposit base gradually stabilising Overall 6,0 bn ELA reduction from peak Steady reduction of total assets. Average quarterly reduction at 1bn or 4% CET1 ratio & Leverage ratio strengthened by share capital increase, deleverage and RWA reduction * Consolidated Balance Sheet ignoring classification as disposal group held for sale 15

16 Funding Structure Analysis of Liabilities and Equity ( bn) Total equity Other liabilities ELA ECB funding Customer deposits Loans to Deposits ratio Customer deposits ( bn) to Total Assets Loans to deposits ratio (net) Adjusting for the disposal of the majority of the Russian operations 30,35 29,38 28,56 27,48 26,79 26,67 25,38 151% 140% 145% 148% 148% 141% 138% 136% 139% 51% 49% 48% 48% 49% 49% 51% 54% 53% 14,97 14,07 13,80 13,33 13,17 13,61 13,63 1,40 1,40 1,40 0,92 0,88 0,80 0,50 9,56 9,51 8,78 7,68 7,40 6,90 5,90 1,68 1,64 1,77 1,76 1,86 1,85 1,83 2,74 2,76 2,81 3,79 3,48 3,51 3, proforma Further progress in normalising the Bank s funding structure. At 30 June 2015, customer deposits and Eurosystem funding accounted for 54% and 25% of assets, respectively. Consistent improvement in the loans to deposits ratio (L/D), with L/D ratio improving by 2 p.p. in 2Q2015 to 136%, the lowest level post-bail-in

17 Eurosystem Funding Reliance Reducing Fast Continuous reduction of ELA and ECB funding with further potential going forward 34% 36% 36% 37% 36% 11,40 11,11 11,16 10,96 10,91 1,30 1,40 1,40 11,4 11,11 9,86 9,56 9,51 10,18 1,40 8,78 31% 31% 8,60 8,28 0,92 0,88 7,68 7,40 29% 7,70 0,80 6,90 25% 6,40 0,50 5,90 23% 5,90 0,50 5,40 * In light of challenging market conditions given recent developments in Greece and Russia, the Bank is maintaining a significant liquidity buffer. Once market conditions are normalised, the Bank expects to proceed with further ELA repayments. Apr 2013 Jun 2013 Sep 2013 Dec 2013 Mar Jun Sep Dec Mar 2015 Jun Aug 2015 ELA ( bn) ECB funding ( bn) Eurosystem Funding % Total Assets * Ratio of Eurosystem Funding % Total Assets for 25 August 2015 based on balance sheet as at 30 June

18 Customer Deposits Customer Deposits by Geography ( mn ) Evolution of Customer deposits** ( mn) Cyprus UK Russia & Other countries* Group Cyprus Q2013 4Q2013 1Q 2Q 3Q 4Q 1Q2015 2Q2015 Deposit market shares in Cyprus 35,2% 32,2% 30,8% 28,4% Residents Non-Residents 27,5% 27,2% 26,4% 26,7% 26,9% 27,2% 26,9% 25,8% 26,1% 26,7% Group customer deposits totalled mn at 30 June Customer deposits in Cyprus remained relatively stable and stood at mn at 30 June 2015, despite the full abolition of capital controls in April 2015 and the recent adverse economic developments in Greece, underlying the decoupling of the Cypriot banking system and economy. 25,6% 25,5% 24,6% 24,3% 23,7% 23,7% 23,9% 24,1% 24,2% 24,7% 24,6% 24,9% 25,1% 25,3% Deposit market shares in Cyprus for Residents and non-residents stand at 25,3% and 26,7% respectively * Other countries comprise Ukraine (until March ), Romania and Greece. ** Including deposits of disposal groups held for sale/discontinued operations. 18

19 Capital Position Evolution for CET1 ratio during 2Q ,9%4,0% +0,7% +0,9% 13,9% -0,5% -0,5% -0,1% 14,4% Capital Adequacy Ratios prof Adjusting for the disposal of the majority of the Russian operations 15,4% 15,6% 15,2% 15,3% 14,9% 15,0% 14,0% 14,2% 13,9% 14,1% CET1 ratio (transitional) Profit before provisions Provisions Loss from discontinued operations RWAs Change CET1 ratio (transitional) DTA CET1 ratio (fully loaded) 11,3% 11,5% 10,6% 10,8% CET 1 ratio (transitional) Total capital ratio (transitional) Clean Fully Loaded CET1 ratio 2 (March ) 24% 19% 14% 9% 4% 86% BOC 13,4% Clean Fully Loaded CET1 ratio (Mar-2015*) RWAs intesity (RWAs % Total assets) median CET1 ratio median RWAs intensity Comprises 38 EU banks covered by Citigroup Research 100% 80% 60% 40% 20% 0% CET1 ratio (transitional) at 14,9% at 30 June (compared to 13,9% at 31 March 2015), mainly due to the reduction in RWAs and organic capital generation. The reduction in RWAs was driven by the NPEs reduction and balance sheet deleveraging and the reassessment of credit risk exposures and collaterals to optimise credit risk management and management of RWAs. Taking into account the agreement for the sale of the majority of the Russian operations, the pro-forma CET1 ratio (transitional) rises to 15,2% CET1 ratio (fully loaded) at 14,4% at 30 June 2015 Significant RWAs intensity at 86% compared to the average for European banks as at 31 March 2015 (median of 38 banks covered by Citigroup is 42%). 1 Includes independently verified profits for 1H As per Citigroup Research, Clean Fully Loaded CET1 ratio excludes Deferred Tax Credits, AFS and Danish Compromise Estimated Impact. 3 Includes data for 9 EU banks as at 31 December and 29 EU banks as at 31 March

20 Gross Loans Gross Loans * by Geography ( mn) Cyprus Russia UK Other countries** -16% Group gross loans totalled 23,9 bn at 30 June 2015, compared to 24,1 bn at 31 March Gross loans in Cyprus totalled 21,2 bn at 30 June 2015, and accounted for 89% of gross loans of the Group % -2% -4% % -4% % -1% Overall, a 16% reduction in Group gross loans since June 2013 Domestic loan book reduced by 11% since June 2013, reflecting primarily customers efforts to deleverage by using their deposits to pay down debt * Gross loans are reported before fair value adjustment on initial recognition relating to loans acquired from Laiki Bank (difference between the outstanding contractual amount and the fair value of loans acquired) amounting to 1,351 mn (compared to 1,545 mn at 31 March 2015), including loans of discontinued operations/disposal group held for sale. ** Other countries: Romania, Ukraine (until March ) and Greece. Furthermore, certain loans and advances in Romania are included, that previously were reported under Cyprus. 20

21 Credit Risk Quality of Loan portfolio Problem Loans ( bn) 90+ DPD NPLs (CBC definition) NPEs (EBA definition) Adjusting for the disposal of the majority of the Russian operations 13,1 14,0 14,4 14,6 14,7 15,0 15,0 15,2 14,8 14,2 10,2 11,0 13,0 13,0 12,8 12,6 13,0 12,7 12,8 12,6 12,1 7,7 6, proforma Evolution of 90+ DPD and NPEs ( mn) Change in 90+ DPD Change in NPEs Adjusting for the disposal of the majority of the Russian operations proforma 1H2013 3Q2013 4Q2013 1Q 2Q 3Q 4Q 1Q2015 2Q2015 2Q DPD 1 decreased by 143 mn during 2Q2015 and totalled 12,6 mn at 30 June 2015 Non Performing Exposures (NPEs), as per EBA definition, decreased by 366 mn during 2Q2015 and totalled 14,8 bn at 30 June 2015 The level of NPEs exceeds the level of 90+ DPD, primarily due to the fact that cured performing exposures are required to remain in the NPEs category until specific probation timeframes have elapsed DPD are loans with a specific provision (i.e. impaired loans) and loans past-due for more than 90 days but not impaired 21

22 Credit Risk Provisions Accumulated provisions Group loan quality indicators Accumulated provisions ( bn) Provisions % Gross loans 16,2% 17,6% 18,6% 19,1% 19,3% 20,0% 21,6% 22,2% 22,5% 38,8% 90+ DPD provision coverage 90+ DPD ratio Adjusting for the disposal of the majority of the Russian operations 47,4% 48,6% 48,6% 49,8% 52,5% 53,2% 53,1% 52,9% 52,7% 4,6 4,8 5,0 5,0 4,9 4,9 5,1 5,4 5, % 37% 38% 39% 39% 38% 41% 42% 43% 41% proforma Cost of risk 1 Cost of Risk - Cyprus Cost of Risk - Group 3,6% 2,8% 2,8% 2,7% 2,1% 2,2% 1,9% 2,4% 2,2% 2,4% 1,5% 1,7% 1Q 1H 9M FY 1Q2015 1H2015 Accumulated provisions totalled 5,4 bn and accounted for 22,5% of gross loans at 30 June 2015 The gains on derecognition and changes in expected cash flows relate to a part-reversal of the fair value adjustment on initial recognition relating to loans acquired from Laiki Bank. The reversal is the result of revised expectations of future cash flows compared to the cash flows expected at the time of acquisition. For credit risk monitoring purposes, the fair value adjustment is considered as part of provisions and the Group reviews both of them as a single item Group annualised cost of risk for 1H2015 was 2,2%, compared to 2,1% for 1Q2015 and 3,6% for FY; Annualised cost of risk for Cyprus for 1H2015 was 1,7%, compared to 1,5% for 1Q Calculated as the provisions for impairment of customer loans, including provisions of discontinued operations, (in total 493 mn), net of gains on derecognition and changes in expected cash flows on acquired loans (totalling 230 mn) over average gross loans 22

23 Credit Risk 90+ DPD loans by number of days past due 90+ DPD loans by number of days past due ( bn) 13,00 12,76 12,59 12,98 12,65 12,79 12,65 4,85 4,02 3,54 3,76 3,36 3,37 3,00 1,05 1,13 1,15 1,15 1,01 0,97 0,40 0,23 0,23 0,29 0,34 0,22 0,93 0,52 6,70 7,29 7,69 7,84 7,85 8,07 8, Impaired with arrears over 90 dpd Impaired with arrears up to 90 dpd Impaired with no arrears Not Impaired but with arrears over 90 dpd Group 90+ DPD ratios by customer type ( bn) 90+ DPD at 12,65 bn at 30 June 2015 compared to 12,79 bn a quarter earlier. Approximately 1 bn of loans classified as impaired have presented no arrears during the last few quarters. The Bank is monitoring the performance of these customers. 90+ DPD of Corporate, SMEs and Retail has been relatively stable at 59%, 63% and 35% respectively at 30 June 2015 compared to 31 March % 57% 56% 56% 58% 61% 59% 62% 60% 63% 63% 59% 59% 54% 36% 35% 36% 35% 30% 32% 30% Corporate SMEs Retail 23

24 Credit Risk by customer type 90+ DPD fully covered by provisions & tangible collateral 30 June 2015 Corporate SMEs Retail - Housing Retail - Other Cyprus 47% 21% 21% 11% 100% Gross loans ( bn) 10,1 4,5 4,3 2,3 21,2 90+ DPD loans by segment 61,7% 66,7% 26,7% 48,6% 54,2% Loan Loss Reserve (LLR) coverage 43,3% 31,9% 24,5% 50,6% 39,1% Tangible coverage 69,1% 74,7% 80,1% 51,6% 70,0% Total coverage 112,4% 106,6% 104,6% 102,2% 109,1% Significant provision and collateral coverage, with additional comfort from personal guarantees xx % of total gross loans (Cyprus only) 24

25 Restructuring and Recoveries Division Good progress has been made with Restructuring efforts on top 30 exposures 1 assumed by RRD bn 5,8 bn RRD set up and assumption of exposures 5,3 bn 1,2 1,3 0,5 5,0 bn 1,0 2,2 4,7 bn 0,9 2,1 4,3 bn 0,9 2,1 1,7 0,8 0,4 0,3 0,5 0,5 0,1 0,3 0,5 0,5 0,5 0,3 0,2 0,2 0, Restructuring implemented or to be signed Detailed non binding heads of terms for restructuring agreed Good progress in agreeing heads of terms for restructuring; some commercial points still open Diligence ongoing; Some way to go before heads of terms to be agreed Insolvency appointment Other recovery cases Currently, about 0,9 bn of restructured loans that are managed and monitored by RRD will be transferred to business lines upon satisfactory performance Aggregate of top exposures being reduced; approximately 400 mn restructured loans are in the process of being transferred back to business lines 1 Funded and unfunded exposures. Top 30 exposures assumed by RRD on 30 November 2013 and their progress over time 25

26 Overseas non-core operations Disposing of overseas operations considered as non-core During 2Q2015 the Bank disposed of its investment in Marfin Diversified Strategy Fund Post 30 June 2015, the Bank has reached an agreement to sell the majority of its Russian operations, including Uniastrum Bank. The sale follows a similar disposal in Ukraine and completes the disposal of the Group s overseas banking subsidiaries identified for sale. The sale allows the Group to de-risk its balance sheet by approximately 600 mn and allows the release of risk weighted assets of approximately 600 mn. The sale improves the Group s regulatory capital position, with a positive impact of approximately 33 basis points on the CET 1 ratio. The non-core overseas operations as at 30 June 2015 were as follows: Greece: The net exposure comprised (a) net on-balance sheet exposures (excluding foreclosed properties) totalling 56 mn (compared to 76 mn at 31 March 2015), (b) 637 foreclosed properties with a book value of 199 mn (compared to about 619 foreclosed properties with a book value of 200 mn at 31 March 2015), (c) off-balance sheet exposures totalling 133 mn (compared to 154 mn at 31 March 2015) and (d) lending exposures to Greek entities in the normal course of business in Cyprus totalling 74 mn, (compared to 89 mn at 31 March 2015) and lending exposures in Cyprus with collaterals in Greece totalling 66 mn at the same level as with previous quarter Romania: The overall net exposure is 368 mn (compared to 439 mn at 31 March 2015). Russia: The overall net exposure is 103 mn (compared to 121 mn at 31 March 2015). 26

27 Overview Income Statement Review Balance Sheet Review KPIs Key Takeaways Additional Information 27

28 Significant progress made on Group KPIs, with a clear plan of action to achieve medium-term targets Category Asset quality Funding Capital Key performance indicators 90+ DPD coverage Provisioning charge Eurosystem funding % total balance sheet Basel 3 transitional CET1 Group Dec- Group Jun Cyprus Jun Mediumterm target (2017) * 41% 43% 39% 40%-50% 3,6% 2,2%** 1,7% <1,0% 31% 25% n.a <25% 14,0% 14,9% n.a >12% 1. Reverse trend on overdue loans 2. Normalise funding; Eliminate ELA 3. Focus on core markets in Cyprus Key Pillars & Plan of action Continue restructuring, capitalising on the foreclosure law Seek FDI to enhance business viability Re-cycle restructured loans into the lending business for continued support and service Boost deposits by leveraging on stronger capital position Access Debt Capital Markets on the back of improved ratings, stronger financial soundness and better prospects Proceeds from exiting non-core overseas activities Direct lending into promising sectors with a view to funding the recovery of the Cypriot economy Further diversify income stream by boosting fee income from new sources in international business and wealth Margins and efficiency Net interest margin Fee and commission income/ total income Cost to income ratio 3,9% 3,9% 3,8% ~3,25% 13% 15% 15% Increase 36% 36% 35% 40%-45% 4. Achieve a lean operating model 5. Deliver returns Set-out a digital vision and introduce appropriate technology to enhance product distribution channels Introduce technology and processes to reduce operating costs Introduce HR policies aimed at enhancing productivity Strengthen governance and risk management to deliver appropriate medium-term risk-adjusted returns * Medium term target refers to the targets set as per the latest NDR presentation (available on the Group s website). ** Calculated as the provisions for impairment of customer loans, including provisions of discontinued operations, (in total 493 mn), net of gains on derecognition and changes in expected cash flows on acquired loans (totalling 230 mn) over average gross loans 28

29 Key Takeaways Leading financial institution in an economy that is on the road to economic recovery CET1 ratio at 14,9% (transitional basis); capital position shields the Group from further shocks and helps in regaining trust of counterparties Post 30 June 2015 the Bank has reached an agreement for the sale of the majority of the Russian operations; The sale allows the Group to de-risk its balance sheet even further and eliminates future potential risks, to release risk weighted assets and therefore improve its CET1 ratio by approx. 33 basis points. Stabilising deposit base; Loans-to-deposits ratio improved to 136%. ELA reduced by 6,0 bn to 5,4 bn through deleveraging actions, capital proceeds and customer inflows. Improved funding structure with customer deposits at 54% of total assets compared to 51% at 31 March 2015 RRD efforts are yielding results, with loan quality showing further signs of stabilisation; 90+ DPD reduced to 12,6 bn, with 90+ DPD provisioning coverage improving to 43% The adoption of the foreclosure legislation and insolvency framework coupled with the improved fundamentals of the Cypriot economy is a significant step in enabling the Bank to tackle its delinquent loans and to improve its asset quality. Recurring profitability stabilising, with profit before provisions at 169 mn and profit after tax at 31 mn for 2Q

30 Overview Income Statement Review Balance Sheet Review KPIs Key Takeaways Additional Information 30

31 Key Information and Contact Details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: upgraded to "CCC" on 28 April 2015 Short-term Issuer Default Rating: affirmed at "C" on 28 April 2015 Viability Rating: upgraded to ccc on 28 April 2015 Moody s Investors Service: Baseline Credit Assessment: Affirmed at caa3 on 28 May 2015 (stable outlook) Short-term deposit ratings: Affirmed at Not Prime on 17 November Long-term deposit ratings: Affirmed at Caa3 on 28 May 2015 (stable outlook) Counterparty Risk Assessment: Assigned at Caa2(cr) / Not-Prime (cr) on 28 May 2015 Listing: ATHEX BOC, CSE BOCY, ISIN CY Contacts Investor Relations Tel: , investors@bankofcyprus.com Constantinos Pittalis, Investor Relations Manager, Tel: , constantinos.pittalis@bankofcyprus.com Annita Pavlou, (annita.pavlou@bankofcyprus.com ) Elena Hadjikyriacou, (elena.hadjikyriacou@bankofcyprus.com ) Marina Ioannou, (marina.ioannou@bankofcyprus.com ) Styliani Nicolaou, (styliani.nicolaou@bankofcyprus.com ) Chief Financial Officer Eliza Livadiotou, Tel: , eliza.livadiotou@bankofcyprus.com Finance Director Dr. Chris Patsalides, Tel: , christakis.patsalides@bankofcyprus.com Visit our website at: 31

32 Consolidated Balance Sheet mn % change mn % change Cash and balances with Central Banks -11% Placements with banks -13% Debt securities, treasury bills and equity investments Net loans and advances to customers -36% Other assets Non current assets and disposal groups classified as held for sale -12% Total assets -5% Note: As from the fourth quarter of, the Group s operations in Russia are treated as a disposal group held for sale and results have been presented accordingly as discontinued operations in accordance with IFRSs. Amounts due to banks +24% Funding from Central Banks -23% Repurchase agreements -1% Customer deposits +3% Debt securities in issue Other liabilities -6% Non current liabilities and disposal groups classified as held for sale +9% Total liabilities -6% Share capital Capital reduction reserve and share premium Revaluation and other reserves +21% Accumulated losses -12% (69) (79) Shareholders equity +1% Non controlling interests -17% Total equity +1% Total liabilities and equity -5%

33 Consolidated Income Statement mn 2Q2015 1Q2015 4Q* 3Q* 2Q* Net interest income Net fee and commission income Net foreign exchange gains/(losses) and net gains/(losses) on other financial instruments 12 (4) 14 (13) (1) Insurance income net of insurance claims (Losses)/gains from revaluation and disposal of investment properties (16) (7) (9) (4) 4 Other income Total income Staff costs (59) (59) (58) (59) (59) Other operating expenses (33) (43) (56) (44) (45) Total expenses (92) (102) (114) (103) (104) Profit before provisions and impairments, gains on derecognition and changes in expected cash flows on acquired loans, restructuring costs and discontinued operations Provisions for impairment of customer loans (309) (148) (306) (117) (160) Gains on derecognition and changes in expected cash flows on acquired loans Impairments of other financial and non-financial assets (30) (1) (57) 1 (34) Share of profit/(loss) from associates and joint ventures (2) 2 Profit/(loss) before tax, restructuring costs and discontinued operations (163) Tax (2) (9) (1) (6) (2) (Loss) attributable to non - controlling interests (0) (0) 0 (0) (0) Profit/(loss) after tax and before restructuring costs, discontinued operations and net profit on disposal of non-core assets Restructuring costs (164) (14) (7) (3) (11) (16) Loss from disposal group held for sale / discontinued operations (12) (21) (157) (37) (19) Net gain/(loss) on disposal of non-core assets 41 - (13) - 60 Profit/(loss) after tax (337) (5) 50 Comparative information has been represented. See Note 4.2 to the Mid-year Financial Report for the six months ended 30 June 2015, Comparative information. 33

34 Income Statement bridge for 1H2015 mn Per presentation Reclassification Per financial statements Net interest income Net fee and commission income Net foreign exchange gains/(losses) and net gains/(losses) on other financial instruments Insurance income net of insurance claims Losses from revaluation and disposal of investment properties (23) (23) Other income 9 9 Total income Total expenses (194) (21) (215) Profit before provisions and impairments, gains on derecognition and changes in expected cash flows on acquired loans, restructuring costs and discontinued operations Provisions for impairment of customer loans (457) (457) Gains on derecognition and changes in expected cash flows on acquired loans 230 (230) - Impairments of other financial and non-financial assets (31) (31) Share of profit from associates 3 3 Profit before tax, restructuring costs and discontinued operations Tax (11) (11) Loss attributable to non-controlling interests (0) (0) Profit after tax and before restructuring costs, discontinued operations and net profit from disposal of non-core assets Restructuring costs (21) 21 - Net losses on disposal of non-core assets (33) (33) Profit from disposal group held for sale / discontinued operations, net of minority interest 41 (41) - Profit after tax

35 Cyprus Income Statement ( mn) 1H2015 1H 2Q2015 1Q2015 4Q 3Q 2Q Net interest income Net fee & commission income Net FX income/(losses) and net gains/(losses) from financial instruments (5) 12 (9) (2) Insurance income net of insurance claims Other income /(expenses) (1) 5 (4) 3 (5) (5) 5 Total income Staff costs (110) (110) (55) (55) (56) (55) (55) Other operating expenses (68) (76) (31) (37) (54) (38) (40) Total expenses (178) (186) (86) (92) (110) (93) (95) Profit before provisions and impairments Provisions for impairment (410) (272) (288) (122) (207) (101) (163) Gains on derecognition and changes in expected cash flows on acquired loans Impairment of other financial assets and non financial assets (20) (34) (19) (1) (48) 1 (34) Share of profit from associates (2) 2 Profit/(loss) before tax (65) Tax (11) (2) (3) (8) 0 (2) (1) (Loss)/profit attributable to non-controlling interests (0) (0) (0) 0 1 (0) (0) Profit/(loss) after tax and before one off items (64)

36 Cyprus operations: key driver of Group performance High NIM Cyprus operations supported by high funding reliance on Eurosystem funding Lower Cost to Income ratio for Cyprus operations (bps) % FY2013: 353 FY: 385 1H2015: % 38% 31% 31% 33% 35% 35% 35% 1H2013 3Q2013 4Q2013 1Q 2Q 3Q 4Q 1Q2015 2Q2015 1H2013 9M2013 FY2013 1Q 1H 9M FY 1Q2015 1H2015 Historical fee and commission income / total income for Cyprus operations Evolution of Cost of risk* for Cyprus operations Total income ( bn) 0,7 1,0 0,29 0,30 0,25 0,27 0,26 0,25 3,7% 3,9% 3,7% 19% 13% 14% 12% 15% 12% 16% 14% 81% 87% 86% 88% 85% 88% 84% 86% 1,9% 2,4% 2,2% 2,4% 1,5% 1,7% Q 2Q 3Q 4Q 1Q2015 2Q2015 Other income Fee and commission income 1H2013 9M2013 FY2013 1Q 1H 9M FY 1Q2015 1H2015 * Calculated as the provisions for impairment of customer loans, including provisions of discontinued operations, (in total 493 mn), net of gains on derecognition and changes in expected cash flows on acquired loans (totalling 230 mn) over average gross loans. Gross loans are before the deduction of the fair value adjustment on initial recognition relating to loans acquired from Laiki Bank. 36

37 Summary Income Statement by Geography ( mn) UK OTHER 1H2015 1H 1H2015 1H Net interest income Net fee & commission income Net FX income/(losses) and net gains/(losses) from financial instruments Insurance income net of insurance claims Other income /(expenses) 0 0 (2) 5 Total income Staff costs (7) (6) (16) (20) Other operating expenses (8) (6) (20) (31) Total expenses (15) (12) (36) (51) Profit/(loss) before provisions and impairments 4 6 (5) 15 Provisions for impairment (1) (30) (82) (66) Gains on derecognition and changes in expected cash flows on acquired loans Impairment of other financial assets and non financial assets - - (12) - Share of profit/(loss) from associates Profit/(loss) before tax 4 (24) (99) (51) Tax (1) 0 1 (6) Profit attributable to non-controlling interests Profit/(loss) after tax and before one off items 3 (24) (90) (49) 37

38 Cyprus: Income Statement by business line ( mn) Consumer Banking SME Banking Corporate Banking International Banking Wealth & Brokerage & Asset Management RRD Other Total Cyprus Net interest income Net fee & commission income Other income /(expenses) Total income Total expenses (59) (6) (5) (9) (2) (18) (79) (178) Profit/(loss) before provisions and impairments (25) 335 Provisions for impairment (5) 1 (15) (0) (0) (392) 1 (410) Gains on derecognition and changes in expected cash flows on acquired loans Impairment of other financial assets (20) (20) Share of profit of associate and Non- Controlling Interest Profit/(loss) before tax (121) (34) 138 Tax (16) (7) (6) (7) (1) (11) Profit/(loss) after tax and before one off items (106) (23) 127 Cost-to-Income ratio 41% 16% 14% 16% 43% 10% - 35% 38

39 Risk Weighted Assets by Geography Regulatory Capital Risk weighted assets by Geography ( mn) Cyprus Russia United Kingdom Romania Equity and Regulatory Capital ( mn) Shareholders equity CET1 capital Tier I capital Greece Other Total Tier II capital Total regulatory capital (Tier I + Tier II) Risk weighted assets by type of risk ( mn) Credit risk Market risk Operational risk Total Other countries include Ukraine, Channel Islands and Netherlands 2 Includes independently verified profits for 1H

40 Reconciliation of Group of Group Equity Equity to CET to CET 1 1 ( mn) Group Equity per financial statements Less : Intangibles and other deductions (16) Less: Deconsolidation of insurance and other entities (222) Less: Regulatory adjustments (Minority Interest, DTA and other items) (24) Less: Revaluation reserves and other unrealised items transferred to Tier II (52) CET 1 (transitional) Less : Adjustments to fully loaded (mainly DTA) (114) CET 1 (fully loaded) Risk Weighted Assets CET 1 ratio (fully loaded) 14,4% 1 CET 1 ratio includes profits of 1H

41 Loans and Deposits by Geography Gross Loans by Geography Deposits by Geography mn Cyprus UK Russia Other countries* Group Gross Loans by Geography mn Cyprus non-ibu** Cyprus IBU** Cyprus Total UK Russia Other countries*** Group Deposits by Geography 4,7% 2,4% 4,3% Cyprus UK 10,2% 4,4% 0,0% Cyprus - non IBU Cyprus - IBU** UK 88,6% Russia Other Countries* 23,6% 61,8% Russia Other Countries Total Cyprus 85% * Other countries: Romania and Greece ** IBU- Division servicing exclusively international activity companies registered in Cyprus and abroad and nonresidents *** Other countries: Romania and Greece 41

42 Gross loans by Geography and by Customer Type Gross loans by geography Other countries* Russia UK Cyprus 28,35 26,74 26,26 1,27 25,30 24,74 1,46 1,79 1,23 23,77 24,09 23,93 1,18 1,28 1,43 1,19 1,29 0,80 1,17 1,30 0,70 1,11 1,21 0,69 0,97 0,67 0,91 1,03 1,07 0,58 1,13 23,83 22,80 22,60 22,02 21,72 21,20 21,32 21,19 1,03 Total ( bn) *Other countries: Greece, Romania and Ukraine (until March ) Gross loans by customer type Retail other Retail Housing SMEs 28,35 3,44 5,44 26,74 26,26 25,30 24,74 23,77 24,09 23,93 3,01 2,94 2,52 2,42 2,44 2,54 2,52 5,37 5,30 4,67 4,61 4,41 4,43 4,39 Total ( bn) Corporate 6,37 6,12 6,09 5,50 5,54 5,09 5,02 4,99 13,10 12,24 11,93 12,61 12,17 11,83 12,10 12,

43 Analysis of Deposits by Geography and by Type Deposits by geography Russia & Other countries* UK Cyprus IBU 1,25 16,97 1,29 4,75 1,02 14,97 1,24 4,05 14,07 13,80 13,33 13,17 13,61 13,63 0,83 0,87 1,25 0,79 1,25 0,55 0,61 0,61 1,29 1,30 1,36 1,39 3,79 3,59 3,46 3,47 3,57 3,21 Total ( bn) Cyprus non-ibu 9,67 8,66 8,20 8,09 7,79 7,85 8,07 8, * Other countries: Romania and Ukraine Deposits by type of deposit Current & demand accounts Savings accounts Time deposits 16,97 3,42 0,83 12,72 14,97 3,49 0,93 14,07 13,80 13,33 13,17 13,61 13,63 3,53 3,72 3,96 4,33 4,48 4,47 0,95 0,95 0,84 0,96 0,97 1,02 10,55 9,59 9,13 8,53 7,88 8,16 8,14 Total ( bn)

44 Market Shares and Customer flows in Cyprus Market share evolution in Cyprus 38,1% Deposits 39,1% 40,0% 39,5% 40,5% Loans Around 1% increase in the Bank s market share in deposits since low of 24,6% in November. The Bank s market share in loans has been hovering around 38% 27,9% 27,5% 26,4% 25,5% 24,9% 24,8% 24,6% 24,8% 25,0% 25,5% 40,8% 25,3% 41,1% 25,2% 38,8% 25,4% 37,2% 25,7% 37,3% 37,7% 38,0% 38,6% 38,5% Total customer flows per quarter ( mn) Customer flows were positive during 2Q Post full abolition of capital controls in April 2015, customer flows are positive Q2013 3Q2013 4Q2013 1Q 2Q 3Q 4Q 1Q2015 2Q2015 3Q2015* * Up to 25 August

45 UK Operations UK Loans ( bn) Loans by sector ex-laiki UK loans 1,46 1,38 1,28 1,19 1,17 1,11 0,83 0,72 0,65 0,56 0,45 0,40 0,30 0,91 1,03 1,13 Consumer Credit Housing 2% 2% SMEs 23% 0,83 0,74 0,73 0,72 0,74 0,77 0,81 0,91 1,03 1,13 Dec 2012 Jun 2013 Sep 2013 Dec 2013 Mar Jun Sep Dec Mar 2015 Jun 2015 Corporate 73% UK Deposits ( bn) 1,21 1,29 1,28 1,24 1,25 1,25 1,29 1,30 1,36 1,39 Dec 2012 Jun 2013 Sept 2013 Dec 2013 Mar June Sept Dec Mar 2015 Jun

46 Overseas Operations Russia, Romania and Greece Romanian Gross loans ( mn) Total exposure in Greece and Romania Romania mn Overall net exposure Greece mn Net Exposure from on balance sheet financial assets Exposure from off balance sheet financial assets Dec 2013 Mar Jun Sept Dec Mar 2015 Jun 2015 Foreclosed properties (book value) Russian Gross loans ( bn) Russian Deposits ( bn) 1,79 1,62 1,43 1,29 1,30 1,21 0,97 1,07 1,03 1,15 1,08 0,92 0,77 0,85 0,79 0,55 0,61 0,60 Jun 2013 Sept 2013 Dec 2013 Mar Jun Sept Dec Mar 2015 Jun 2015 Jun 2013 Sept 2013 Dec 2013 Mar Jun Sept Dec Mar 2015 Jun In addition to the above, in the normal course of business in Cyprus, the Bank has lending exposures to Greek entities amounting to 74 mn as at 30 June 2015, compared to 89 mn as at 31 March 2015 and lending exposures in Cyprus with collaterals in Greece totalling 66 mn, at the same level as the previous quarter end. 46

47 Adoption 7 of Foreclosure law and Insolvency framework Adoption removes the uncertainty of previous months, but implementation risks remains Foreclosure Law Provides for the holding of private auctions and sales of mortgaged property by Creditors, without the involvement of governmental bodies New process expected to shorten significantly the time frame for foreclosing property The Bank is assessing the various provisions and expects to be using selectively the new enforcement procedures Insolvency framework Objective is to introduce a proper insolvency regime for both individuals and legal entities The aim of the framework is: For natural persons - The introduction of the concept of Consensual or Non-Consensual Personal Repayment Schemes and Debt Relief Orders (both subject to satisfaction of certain criteria) through the appointment of an Insolvency Practitioner, maintaining, where feasible, the primary residence - the modernisation of the existing bankruptcy procedures enabling bankrupt debtors to reactivate their economic activity after 3 years following their bankruptcy Key challenges & issues Untested process Courts not adequately resourced Lack of experience in court procedures Managing reputational implications Implementation of the various provisions of the law For legal entities - The modernisation of the liquidation procedures, and - The provision of a mechanism through the appointment of an Examiner for the restructuring of debts and finding ways of keeping a company a going concern. The Bank is assessing the various provisions of the laws, e.g. enforcement rights against guarantors 47

48 Asset Quality ( mn) Jun-15 Mar-15 Dec-14 Sep-14 Jun-14 A. Gross Loans after Fair value on Initial recognition Fair value on Initial recognition B. Gross Loans B1. Loans with no arrears B2. Loans with arrears but not impaired Up to 30 DPD DPD DPD DPD Over 1 year DPD B3. Impaired Loans With no arrears Up to 30 DPD DPD DPD DPD Over 1 year DPD = (90+ DPD)* DPD ratio (90 + DPD / Gross Loans ) 52,9% 53,1% 53,2% 52,5% 49,8% Accumulated provisions Gross loans provision coverage 22% 22% 22% 20% 19% 90+ DPD provision coverage 43% 42% 41% 38% 39% * Loans in arrears for more than 90 days (90+ DPD) = Loans with arrears over 90 days but not impaired + Impaired Loans 48

49 90+ DPD by Geography 90+ DPD by Geography ( bn) Cyprus Russia UK Other countries* 90+ DPD ratios by Geography Cyprus Russia UK Other countries* 12,76 12,59 0,89 0,52 0,28 0,25 0,44 0,51 12,98 0,57 0,26 0,55 12,65 12,79 12,65 0,55 0,58 0,47 0,11 0,09 0,09 0,51 0,60 0,61 49% 75% 51% 65% 53% 46% 54% 52% 54% 56% 54% 59% 34% 21% 39% 24% 23% 10% 11% 8% 80% 84% 82% 83% 11,18 11,28 11,60 11,47 11,53 11, * Other countries: Romania, Ukraine (until March ) and Greece 49

50 Analysis of Loans and 90+ DPD ratios by Business Line* Gross loans by business line ( bn) % of total 19% 9% 16% 8% 22% 6% 20% 90+ DPD ratios by business line % 33% 32% 29% 27% 28% 28% 24% 27% 26% 14% 17% 16% 16% 15% 31% 32% 31% 31% 30% 66% 68% 69% 68% 70% 79% 82% 81% 81% 80% 100% 100% 100% 100% 100% 5,21 4,87 4,34 4,53 4,59 2,73 2,63 2,30 2,20 2,14 3,94 3,90 3,85 3,85 3,80 2,01 1,90 1,75 1,83 1,80 5,84 5,55 5,33 5,37 5,20 1,50 1,48 1,40 1,39 1,38 4,06 4,41 4,78 4,91 5,02 Corporate SMEs Housing Consumer Credit RRD-Mid and Large Corporates RRD-SMEs RRD - Recoveries Corporate SMEs Housing Consumer Credit RRD-Mid and Large Corporates RRD-SMEs RRD-Recoveries *As part of the restructuring of the Group, management is currently monitoring the loan portfolio of the Group using new business line definitions. An important component of the Group s new operational structure is the establishment of the RRD for the purposes of centralising and streamlining the management of its delinquent loans. No comparative information is available prior to June. 50

51 Analysis of Loans and 90+ DPD ratios by Economic Activity Gross loans by economic activity ( bn) % of total 10% 4% 7% 17% 13% 33% 8% 6% 90+ DPD ratios by economic activity % 44% 45% 47% 50% 48% 48% 50% 51% 53% 55% 54% 54% 54% 51% 47% 52% 60% 59% 62% 57% 70% 72% 77% 78% 79% 77% 80% 52% 50% 48% 51% 48% 48% 48% 32% 33% 34% 37% 38% 38% 38% 57% 54% 55% 58% 54% 55% 57% 65% 64% 60% 60% 67% 67% 64% 2,83 2,82 2,74 2,70 2,47 2,48 2,50 1,00 0,95 0,96 0,95 0,89 0,91 0,92 1,89 1,85 1,82 1,61 1,50 1,57 1,64 4,25 4,21 4,13 4,09 3,96 4,04 4,19 4,20 4,12 3,63 3,59 3,12 3,17 3,20 2,31 2,18 2,44 2,32 1,86 1,89 2,07 1,73 1,72 1,53 1,53 2,12 2,09 1,55 8,54 8,41 8,05 7,96 7,85 7,92 7,86 Trade Manufacturing Hotels & Restaurants Construction Real estate Private Individuals Professional & other services Other sectors Trade Manufacturing Hotels & Restaurants Construction Real estate Private Individuals Professional & other services Other sectors 51

52 Credit Risk 90+ DPD by Geography and by customer type Group 90+ DPD loans by geography ( bn) 48,6% 48,6% 49,8% 52,5% 13,0 12,8 12,6 13,0 12,7 12,8 12,6 0,9 0,9 0,5 0,6 0,6 0,5 0,30,5 0,3 0,4 0,5 0,6 0,3 0,3 0,1 0,5 0,1 0,6 0,5 0,6 0,1 11,3 11,2 11,3 11,6 11,5 11,5 11, Cyprus UK Russia Other countries* Group 90+ DPD loans by customer type ( bn) 53,2% 53,1% 52,9% 90+DPD ratio (% of total loans) Group 90+ DPD have stabilised below 13 bn 90+ DPD in Cyprus have stabilised at around 11,4 bn Adoption of foreclosure legislation and insolvency framework are significant steps in enabling the Bank to tackle its delinquent loans in Cyprus and to improve asset quality. 13,0 12,8 12,6 13,0 12,7 12,8 12,6 1,3 1,3 1,2 1,3 1,2 1,2 1,2 1,2 1,2 1,1 1,1 1,2 1,3 1,2 3,3 3,4 3,3 3,5 3,1 3,1 3,1 7,2 6,9 7,0 7,1 7,2 7,2 7, Corporate SMEs Retail other Retail housing * Other countries include certain loans and advances in Romania that were previously reported under Cyprus 52

53 90+ DPD and Quarterly Change of 90+ DPD 90+ DPD ( bn) and Quarterly change of 90+ DPD ( mn) Quarterly change of 90+ DPD ( mn) 13,0 13,0 12,8 12,6 13,0 12,7 12,8 12,6 90+ DPD ( bn) 11,0 90+ DPD formation 7,7 6,5 1,3 1,6 2,0 2,3 2,2 2,5 2,9 3,5 3,6 3,8 4,0 4,4 5,0 5,1 5, * FY mn FY mn FY mn FY mn FY mn FY mn * Information for 1Q2013 and 2Q2013 is not available as it has not been possible to publish the financial results for the three months ended 31 March

54 Rescheduled Loans Rescheduled Loans by customer type ( bn) Rescheduled Loans Retail housing Retail consumer SMEs Corporate 7,66 8,06 9,03 1,72 1,49 1,41 0,59 0,50 0,52 1,81 1,57 1,59 4,18 4,46 4, Rescheduled loans % gross loans 1 by customer type % 41% 41% 39% 34% 35% 36% 33% 35% 22% 22% 24% Corporate SMES Retail housing Retail Consumer ( mn) Loans with no arrears Loans with arrears but not impaired Impaired Loans Total Further progress on restructuring activity with Group rescheduled loans totalling 9,03 bn at 30 June 2015 compared to 8,06 bn at 31 March 2015 Around 39% of rescheduled loans have no arrears post rescheduling. Taking into account only the loans restructured post 31 March, for the Cyprus operations the percentage of rescheduled loans with no arrears increases to 70% Higher rescheduling activity observed in corporate (41% at 30 June 2015 at the same level as at 31 March 2015) followed by Retail housing rescheduling activity which increased to 39% compared to 35% at 31 March Before fair value adjustment on initial recognition relating to loans acquired from Laiki Bank (difference between the outstanding contractual amount and the fair value of loans acquired) amounting to 1,351 mn for gross loans and to 611 mn for rescheduled loans (compared to 1,545 mn and 689 mn respectively at 31 March 2015), including loans of discontinued operations/disposal group held for sale. 54

55 Credit Risk - Analysis of problem loans Analysis of problem loans - Cyprus operations ( bn) (Jun-15) 10,5 0,8 0,1 11,4 1,0 0,6 0,1 0,4 0,1 13,6 2,5 bn with arrears >90+DPD Impaired -no arrears other IFRS and reclassification adj Total 90+ DPD with forbearance measure<90+ DPD re-forborne within 2 years forborne >30+ DPD Contagion effect Other reclassification adjustments NPEs The Bank is taking targeted action to address the 2,5 bn of NPE exposures that do not present arrears over 90 days The Bank s main focus for addressing the problem loans is the active management of the 10,5 bn of loans with arrears over 90+DPD * 90+ DPD are loans with a specific provision (i.e. impaired loans) and loans past-due for more than 90 days but not impaired 55

56 Provisioning Methodology Valuation of collateral A Conservative approach for prudent calculation of provisions Key highlights of provisioning methodology The valuation is a combination of: New valuations, from independent valuers for (i) New loans and a 2 nd valuation for amounts > 3mn, (ii) performing accounts with exposures over 3 mn every 3 years (iii) Non performing/ restructured accounts with LTV > 50% All other cases monitored though the appropriate CBC indices and revalued only in cases where there is a material decline in a specific property Introduction of commercial property price index of the CBC for the monitoring of commercial buildings and land CBC guidelines are applied to marketable securities in order to ensure the appropriate valuation Foreign property mortgaged for facilities in Cyprus is revalued at specified intervals Restructuring / Recoveries cases follow separate valuation guidelines Assumptions and Key drivers: Older valuations are adjusted/indexed to market values based on RICS s property price index to reflect current market conditions Conservative assumptions for taxes and expenses on the repossession and subsequent sale of the collateral The timing of recovery from mortgages has been estimated to be 3 years with the exception for specific cases where a different period has been used based on specific facts and circumstances. Projection of future property prices based on an internal model reviewed by auditors and external advisors, based on various parameters such as GDP growth, macroeconomic scenario for future changes in property values and other economic fundamentals. The cumulative average future change in property values during this period has been capped at 0% in accordance with the Loan Impairment and Provisioning Directives of and 2015 of the CBC. 56