TIDMBOCH

RNS Number : 7165R

Bank of Cyprus Holdings PLC

04 March 2019

Announcement

Preliminary Group Financial Results for the year ended 31 December 2018

Nicosia, 4 March 2019

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014.

 
 
        Key Highlights for the year ended 31 December 2018 
 
        Capital Strength into 2019 
         *    CET1 ratio of 15.4% pro forma for DTC and Helix 
              (12.1% as reported) 
 
 
         *    Total Capital ratio of 18.3% pro forma for DTC and 
              Helix (14.9% as reported) 
 
 
         *    SREP 2019 ratios: CET1 of 10.5% and Total Capital of 
              14.0%, reflecting phasing-in of CCB and O-SII Buffer 
 
 
         *    Legislative amendments to convert DTA to DTC approved 
              on 1 March 2019 result in a more capital efficient 
              tax asset, releasing EUR285 mn of capital (FL for DTA, 
              as of 1 Jan 2019) 
 
 
         *    DTC conversion to add c.170 bps of capital, Helix to 
              add c.160 bps of capital (pro forma as at 31 Dec 
              2018) 
 
 
 
        Real progress on Balance Sheet repair 
         *    Fifteen consecutive quarters of organic NPE reduction 
 
 
         *    NPEs reduced by EUR4.0 bn yoy to EUR4.8 bn, pro forma 
              for Helix, 68% down since December 2014 
 
 
         *    NPE ratio at 36% and coverage at 47% pro forma for 
              Helix 
 
 
         *    Government ESTIA scheme for the resolution of NPEs 
              backed by primary residence expected to be launched 
              in 1Q2019. This will positively impact c.EUR900 mn of 
              NPEs 
 
 
         *    Continue to actively explore a number of alternatives 
              to accelerate de-risking, including further disposals 
              of NPEs and other non-core assets 
 
 
 
        Corporate actions unlocking value for shareholders 
         *    Agreement to sell EUR2.7 bn of NPEs (Project Helix); 
              completion is scheduled around end 1Q / beginning 2Q 
              2019 
 
 
         *    Sale of UK subsidiary, adding 70 bps to capital, 
              focus now on Cyprus 
 
 
         *    Issuance of EUR220 mn AT1 Capital Securities, adding 
              140 bps to Total Capital ratio 
 
 
 
        Strong liquidity position 
         *    Significant liquidity surplus of EUR4.4 bn, pro forma 
              for Helix 
 
 
         *    Loan to deposit ratio of 65% pro forma for Helix 
 
 
         *    Cyprus deposits stable qoq at EUR16.8 bn 
 
 
 
        Performance reflects continued derisking 
         *    Total Income of EUR781 mn, Operating profit of EUR381 
              mn, Underlying profit of EUR140 mn for FY2018 
 
 
         *    Loss relating to Helix of EUR150 mn, declining to 
              c.EUR105 mn by completion as the time value of money 
              unwinds 
 
 
         *    The rapid de-risking of the Bank also resulted in a 
              4Q2018 impairment of the DTA of EUR79 mn, expected to 
              be reversed in 1Q2019, following the 
              recharacterisation of the tax asset to DTC 
 
 
         *    The combination of all the above result in a loss 
              after tax of EUR104 mn for FY2018 
 

Group Chief Executive Statement

"This has been an important year in the transformation of the Bank and one in which we have made significant progress on a number of fronts against our objective of balance sheet de-risking and refocusing the business in supporting the growing Cypriot economy.

Balance sheet repair was accelerated through the agreement for the sale of c.EUR2.7 bn non-performing loans in Project Helix. We have made good progress towards completion, including syndicating down the Bank's participation in the senior debt to EUR50 mn from the initial level of EUR450 mn and in so doing, significantly de-risking the Bank's residual exposure to the portfolio sold. We expect completion around the end of the first quarter / beginning of the second quarter of 2019, upon receipt of the required regulatory approvals from the ECB. We expect these approvals to be forthcoming.

This portfolio sale complements our organic non-performing exposure (NPE) reduction, which amounted to EUR1.3 bn for the full year. During the fourth quarter, we reduced NPEs by EUR217 mn, broadly in line with the guidance, marking our fifteenth consecutive quarter of organic reductions in NPEs.

Since the peak in 2014, and including the sale of the Helix portfolio, we have now reduced the stock of NPEs by 68% to EUR4.8 bn pro forma for Helix, covered by 47% provisioning, above the EU average. We remain committed to making further material progress in 2019 and to continue supporting a growing Cyprus economy.

We have a clear strategy for continuing the improvement in the asset quality position of the Bank and to further deal with the residual c.EUR4.8 bn of non-performing loans. This includes Estia, a government scheme for the resolution of NPEs backed by primary residence, expected to be launched around the end of the first quarter 2019 that will positively impact

c.EUR900 mn of NPEs.

In November, we completed the sale of our UK subsidiary, adding c.70 bps to our capital ratios. In addition, in December, we issued EUR220 mn of Additional Tier 1 Capital Securities (AT1), further strengthening our Total Capital ratio at the year-end by 140 bps.

During the fourth quarter, our deposits in Cyprus remained broadly stable and we have significant surplus liquidity of EUR3.1 bn as at 31 December 2018, expected to increase to EUR4.4 bn pro forma for Helix. New lending in Cyprus was EUR1.9 bn in 2018, exceeding new lending in Cyprus in 2017. We are pleased to have maintained our leading market position in a strengthening Cypriot economy, which expanded by 3.9% in 2018. Our loan to deposit ratio at the year-end stood at 65% pro forma for Helix.

The Bank is well capitalised. As at 31 December 2018 the CET1 ratio (transitional) was 15.4% and the Total Capital ratio was 18.3%, both pro forma for DTC and Helix (12.1% and 14.9% as reported, respectively).

Following the Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2018, based on the pre-notifications received, we expect the SREP requirements to remain unchanged, when ignoring the phasing-in of the Capital Conservation Buffer and the Other Systemically Important Institution Buffer.

On 1 March 2019 the Cyprus Parliament adopted legislative amendments allowing for the conversion of deferred tax assets (DTA) into deferred tax credits (DTC). These amendments, when they enter into force, will result in a more efficient capital treatment of the DTC, under CRD IV, resulting in a CET1 uplift of c.170 bps, based on 31 December 2018 results.

In 2018, we generated total income of EUR781 mn and a positive operating result of EUR381 mn. The underlying result for the year is a profit of EUR140 mn. The impact of Project Helix amounted to a loss of EUR150 mn in FY2018, expected to decline to c.EUR105 mn by completion as the time value of money unwinds. The rapid de-risking of the Bank has also resulted in a partial impairment of the deferred tax asset of c.EUR80 mn recorded in the fourth quarter, resulting in a net loss of EUR67 mn, which is expected to be reversed in the first quarter 2019, post legislative amendments recharacterising the DTA into DTC. The combination of the above actions resulted in a loss after tax for the year of EUR104 mn. Going forward and post the execution of further NPE reduction, there is an on-going requirement to manage costs.

We are proud of the significant progress we have made this year against our strategic objectives. We recognise, however, that there is still much to do, and we remain as focused as ever on continuing to seek solutions, both organic and inorganic, to make the Bank a stronger, safer, Cyprus-focused institution, capable of supporting the local economy."

John Patrick Hourican

A. Preliminary Financial Results - Statutory Basis

Unaudited Consolidated Income Statement for the year ended 31 December 2018

 
                                                             2018      2017 (represented) 
                                                            EUR000           EUR000 
                                                          ----------  ------------------- 
 Turnover                                                    984,698            1,102,049 
                                                          ==========  =================== 
 Interest income                                             557,065              723,268 
                                                          ----------  ------------------- 
 Interest similar to interest income                          52,054               31,878 
                                                          ----------  ------------------- 
 Interest expense                                          (144,024)            (167,223) 
                                                          ----------  ------------------- 
 Expense similar to interest expense                        (46,042)             (44,014) 
                                                          ----------  ------------------- 
 Net interest income                                         419,053              543,909 
                                                          ----------  ------------------- 
 Fee and commission income                                   178,907              183,752 
                                                          ----------  ------------------- 
 Fee and commission expense                                 (23,636)             (10,211) 
                                                          ----------  ------------------- 
 Net foreign exchange gains                                   37,688               45,062 
                                                          ----------  ------------------- 
 Net gains on financial instrument transactions 
  and loss on disposal/dissolution of subsidiaries 
  and associates                                              45,235                3,008 
                                                          ----------  ------------------- 
 Insurance income net of claims and commissions               52,912               50,401 
                                                          ----------  ------------------- 
 Net losses from revaluation and disposal of investment 
  properties                                                (13,275)              (4,061) 
                                                          ----------  ------------------- 
 Net gains on disposal of stock of property                   31,867               30,447 
                                                          ----------  ------------------- 
 Other income                                                 25,604               19,042 
                                                          ----------  ------------------- 
                                                             754,355              861,349 
                                                          ----------  ------------------- 
 Staff costs                                               (216,740)            (205,888) 
                                                          ----------  ------------------- 
 Special levy on deposits on credit institutions 
  in Cyprus and contribution to Single Resolution 
  Fund                                                      (25,095)             (22,846) 
                                                          ----------  ------------------- 
 Other operating expenses                                  (234,891)            (275,318) 
                                                          ----------  ------------------- 
                                                             277,629              357,297 
                                                          ----------  ------------------- 
 Net gains on derecognition of financial assets 
  measured at amortised cost                                  39,624              173,443 
                                                          ----------  ------------------- 
 Credit losses to cover credit risk on loans and 
  advances to customers                                    (340,882)            (953,498) 
                                                          ==========  =================== 
 Credit losses of other financial instruments                (1,610)              (6,459) 
                                                          ==========  =================== 
 Impairment of non-financial instruments                    (18,651)             (58,972) 
                                                          ==========  =================== 
 Loss before share of profit from associates                (43,890)            (488,189) 
                                                          ----------  ------------------- 
 Share of profit from associates                               9,095                8,957 
                                                          ----------  ------------------- 
 Loss before tax from continuing operations                 (34,795)            (479,232) 
                                                          ----------  ------------------- 
 Income tax                                                 (75,916)             (75,573) 
                                                          ----------  ------------------- 
 Loss after tax from continuing operations                 (110,711)            (554,805) 
                                                          ----------  ------------------- 
 Discontinued operations 
                                                          ----------  ------------------- 
 Profit after tax from discontinued operations                 7,243                  480 
                                                          ----------  ------------------- 
 Loss for the year                                         (103,468)            (554,325) 
                                                          ==========  =================== 
 Attributable to: 
                                                          ----------  ------------------- 
 Owners of the Company - continuing operations             (110,764)            (552,332) 
                                                          ----------  ------------------- 
 Owners of the Company - discontinued operations               7,243                  480 
                                                          ----------  ------------------- 
 Total loss attributable to the owners of the 
  Company                                                  (103,521)            (551,852) 
                                                          ----------  ------------------- 
 Non-controlling interests - continuing operations                53              (2,473) 
                                                          ----------  ------------------- 
 Loss for the year                                         (103,468)            (554,325) 
--------------------------------------------------------  ==========  =================== 
 
 Basic and diluted losses per share attributable 
  to the owners of the Company 
  (EUR cent) - continuing operations                          (24.8)              (123.8) 
                                                          ==========  =================== 
 Basic and diluted losses per share attributable 
  to the owners of the Company 
  (EUR cent)                                                  (23.2)              (123.7) 
                                                          ==========  =================== 
 

Unaudited Consolidated Balance Sheet as at 31 December 2018

 
                                                        2018         2017 
 Assets                                                EUR000       EUR000 
                                                    -----------  ----------- 
 Cash and balances with central banks                 4,610,491    3,393,934 
                                                    -----------  ----------- 
 Loans and advances to banks                            472,532    1,192,633 
                                                    -----------  ----------- 
 Derivative financial assets                             24,754       18,027 
                                                    -----------  ----------- 
 Investments                                            777,232      830,483 
                                                    -----------  ----------- 
 Investments pledged as collateral                      737,459      290,129 
                                                    -----------  ----------- 
 Loans and advances to customers                     10,921,786   14,602,454 
                                                    -----------  ----------- 
 Life insurance business assets attributable 
  to policyholders                                      402,565      429,890 
                                                    -----------  ----------- 
 Prepayments, accrued income and other assets           256,001      226,105 
                                                    -----------  ----------- 
 Stock of property                                    1,530,389    1,641,422 
                                                    -----------  ----------- 
 Investment properties                                   24,475       19,646 
                                                    -----------  ----------- 
 Property and equipment                                 260,723      279,814 
                                                    -----------  ----------- 
 Intangible assets                                      170,411      165,952 
                                                    -----------  ----------- 
 Investments in associates and joint ventures           114,637      118,113 
                                                    -----------  ----------- 
 Deferred tax assets                                    301,778      383,498 
                                                    -----------  ----------- 
 Non-current assets and disposal group classified 
  as held for sale                                    1,470,038        6,500 
                                                    -----------  ----------- 
 Total assets                                        22,075,271   23,598,600 
                                                    ===========  =========== 
 Liabilities 
                                                    -----------  ----------- 
 Deposits by banks                                      431,942      495,308 
                                                    -----------  ----------- 
 Funding from central banks                             830,000      930,000 
                                                    -----------  ----------- 
 Repurchase agreements                                  248,945      257,322 
                                                    -----------  ----------- 
 Derivative financial liabilities                        38,983       50,892 
                                                    -----------  ----------- 
 Customer deposits                                   16,843,558   17,849,919 
                                                    -----------  ----------- 
 Insurance liabilities                                  591,057      605,448 
                                                    -----------  ----------- 
 Accruals, deferred income and other liabilities        263,146      306,227 
                                                    -----------  ----------- 
 Pending litigation, claims, regulatory and other 
  matters                                               116,951      138,375 
                                                    -----------  ----------- 
 Subordinated loan stock                                270,930      302,288 
                                                    -----------  ----------- 
 Deferred tax liabilities                                44,282       46,113 
                                                    -----------  ----------- 
 Non-current liabilities and disposal group held          5,812            - 
  for sale 
                                                    -----------  ----------- 
 Total liabilities                                   19,685,606   20,981,892 
                                                    -----------  ----------- 
 Equity 
                                                    -----------  ----------- 
 Share capital                                           44,620       44,620 
                                                    -----------  ----------- 
 Share premium                                        1,294,358    2,794,358 
                                                    -----------  ----------- 
 Revaluation and other reserves                         190,411      273,708 
                                                    -----------  ----------- 
 Retained earnings/(accumulated losses)                 591,941    (527,128) 
                                                    -----------  ----------- 
 Equity attributable to the owners of the Company     2,121,330    2,585,558 
                                                    -----------  ----------- 
 Other equity instruments                               220,000            - 
                                                    -----------  ----------- 
 Total equity excluding non-controlling interests     2,341,330    2,585,558 
                                                    -----------  ----------- 
 Non-controlling interests                               48,335       31,150 
                                                    -----------  ----------- 
 Total equity                                         2,389,665    2,616,708 
                                                    -----------  ----------- 
 Total liabilities and equity                        22,075,271   23,598,600 
                                                    ===========  =========== 
 
 
B. Preliminary Financial Results - Underlying Basis 
Unaudited Consolidated Income Statement 
---------------------------------------------------------------------------------------------------------------------- 
                                                                                                                  (FY) 
                                           FY2017                            2Q2018      1Q2018        (4q vs   Yoy(2) 
EUR mn                     FY2018  represented(2)  4Q2018   3Q2018   represented(2)   represented(2)   3q) +%       +% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Net interest income           452             544      112     113              114              113      -2%     -17% 
Net fee and commission 
 income                       166             174       43      43               41               39       3%      -4% 
Net foreign exchange 
 gains and net gains 
 on financial 
 instrument 
 transactions and loss 
 on 
 disposal/dissolution 
 of subsidiaries and 
 associates                    66              48       14      10               13               29      28%      37% 
Insurance income net 
 of claims and 
 commissions                   53              50       15      13               13               12      22%       5% 
Net gains/(losses) 
 from revaluation and 
 disposal of investment 
 properties and on 
 disposal of stock 
 of properties                 18              26        3     (6)                2               19        -     -30% 
Other income                   26              19        9       6                5                6      37%      34% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Total income                  781             861      196     179              188              218       9%      -9% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Staff costs                 (217)           (205)     (59)    (53)             (53)             (52)      10%       6% 
Other operating 
 expenses                   (158)           (154)     (44)    (34)             (43)             (37)      26%       3% 
Special levy and 
 contribution 
 to Single Resolution 
 Fund                        (25)            (23)      (7)     (6)              (5)              (7)      10%      10% 
Total expenses              (400)           (382)    (110)    (93)            (101)             (96)      16%       5% 
                         --------  --------------  -------  ------  ---------------  ---------------  ------- 
Operating profit              381             479       86      86               87              122       1%     -21% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Provision charge            (168)           (780)     (40)    (29)             (41)             (58)      37%     -78% 
(Impairments)/reversal 
 of impairments of 
 other financial and 
 non-financial assets        (20)            (65)      (7)       1              (6)              (8)        -     -69% 
(Provisions)/reversal 
 of provisions for 
 litigation, regulatory 
 and other matters           (23)            (93)     (13)    (15)                7              (2)      -4%     -75% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Total provisions and 
 impairments                (211)           (938)     (60)    (43)             (40)             (68)      45%     -78% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Share of profit from 
 associates                     9               9        0       4                3                2     -67%       2% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Profit/(loss) before 
 tax and non-recurring 
 items                        179           (450)       26      47               50               56     -44%        - 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Tax                             3            (14)        7       0              (0)              (4)        -        - 
(Profit)/loss 
 attributable 
 to non-controlling 
 interests                    (0)               3      (3)       1                0                2        -        - 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Profit/(loss) after 
 tax and before 
 non-recurring 
 items                        182           (461)       30      48               50               54     -36%        - 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Advisory and other 
 restructuring costs 
 - excluding 
 discontinued 
 operations and NPE 
 sale (Helix)                (42)            (29)     (16)    (11)              (7)              (8)      56%      43% 
Profit/(loss) after 
 tax - Organic                140           (490)       14      37               43               46     -62%        - 
                         --------  --------------  -------  ------  ---------------  ---------------  ------- 
Profit/(loss) from 
 discontinued 
 operations 
 (UK)                           3               0      (1)     (0)                1                3       8%        - 
Restructuring costs 
 relating to NPE sale 
 (Helix)                     (18)               -      (1)     (5)              (6)              (6)     -66%        - 
Loss relating to NPE 
 sale (Helix)               (150)               -        -    (15)            (135)                -        -        - 
Impairment of DTA            (79)            (62)     (79)       -                -                -        -      27% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
(Loss)/profit after 
 tax                        (104)           (552)     (67)      17             (97)               43        -     -81% 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
 
 
 
B. Preliminary Financial Results - Underlying Basis 
Unaudited Consolidated Income Statement - Key Performance Ratios 
---------------------------------------------------------------------------------------------------------------------- 
                                                                                                                  (FY) 
                                           FY2017                            2Q2018           1Q2018   (4q vs   Yoy(2) 
Key Performance Ratios     FY2018  represented(2)   4Q2018  3Q2018   represented(2)   represented(2)    3q) +        + 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Net Interest Margin 
 (annualised)(1)            2.48%           3.10%    2.39%   2.47%            2.54%            2.56%   -8 bps  -62 bps 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Cost to income ratio          51%             44%      56%     52%              54%              44%  +4 p.p.  +7 p.p. 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Cost to income ratio 
 excluding special 
 levy and contribution 
 to Single Resolution 
 Fund                         48%             42%      52%     49%              51%              41%  +3 p.p.  +6 p.p. 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Operating profit return 
 on average assets                                                                                                -0.5 
 (annualised)(1)             1.8%            2.3%     1.6%    1.6%             1.6%             2.3%        -     p.p. 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Basic earnings/(losses) 
 per share attributable 
 to the owners of the 
 Company - Organic 
 (EUR cent)                 31.45        (109.93)     3.12    8.27             9.59            10.48   (5.15)   141.38 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
Basic (losses)/earnings 
 per share attributable 
 to the owners of the 
 Company (EUR cent)       (23.21)        (123.72)  (14.93)    3.84          (21.79)             9.67  (18.77)   100.51 
-----------------------  --------  --------------  -------  ------  ---------------  ---------------  -------  ------- 
1. Ignoring the classification of the Helix portfolio of EUR1,148 mn (NBV) 
 and of the Velocity portfolio of EUR6 mn (NBV) as disposal groups held for 
 sale. 2. Represented for the disposal of the UK subsidiary 
p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 
 percentage point 
 

Commentary on Underlying Basis

Reclassifications to comparative information were made to conform to current year presentation. Provisions for pending litigation, claims, regulatory and other matters were reclassified from other 'Accruals deferred income and other liabilities' to the face of the consolidated balance sheet. In addition, investments previously classified in 'Life insurance business assets attributable to policyholders' totalling EUR91 mn were reclassified to 'Investments' and an amount of EUR2 mn was reclassified from 'Prepayments, accrued income and other assets' to 'Life insurance assets attributable to policyholders'. Furthermore, the results of the discontinued operations in the UK were represented as discontinued operations. The reclassifications and representation did not have an impact on the results for the year or the equity of the Group.

 
 Unaudited Consolidated Balance Sheet 
======================================================================================================== 
 EUR mn                                                              31.12.2018   31.12.2017          +% 
==================================================  ==============  ===========  ===========  ========== 
 Cash and balances with central banks                                     4,610        3,394         36% 
 Loans and advances to banks                                                473        1,193        -60% 
 Debt securities, treasury bills and equity 
  investments                                                             1,515        1,121         35% 
 Net loans and advances to customers                                     10,922       14,602        -25% 
 Stock of property                                                        1,530        1,641         -7% 
 Other assets                                                             1,555        1,641         -5% 
 Non-current assets and disposal group 
  classified as held for sale                                             1,470            7           - 
==================================================  ==============  ===========  ===========  ========== 
 Total assets                                                            22,075       23,599         -6% 
==================================================  ==============  ===========  ===========  ========== 
 Deposits by banks                                                          432          495        -13% 
 Funding from central banks                                                 830          930        -11% 
 Repurchase agreements                                                      249          257         -3% 
 Customer deposits                                                       16,844       17,850         -6% 
 Subordinated loan stock                                                    271          302        -10% 
 Other liabilities                                                        1,060        1,148         -8% 
==================================================  ==============  ===========  ===========  ========== 
 Total liabilities                                                       19,686       20,982         -6% 
==================================================  ==============  ===========  ===========  ========== 
 
 Shareholders' equity                                                     2,341        2,586         -9% 
==================================================  ==============  ===========  ===========  ========== 
 Non-controlling interests                                                   48           31         55% 
==================================================  ==============  ===========  ===========  ========== 
 Total equity                                                             2,389        2,617         -9% 
==================================================  ==============  ===========  ===========  ========== 
 Total liabilities and equity                                            22,075       23,599         -6% 
==================================================  ==============  ===========  ===========  ========== 
 
                                                        31.12.2018 
 Key Balance Sheet figures and ratios                    before(1)   31.12.2018   31.12.2017        +(1) 
==================================================  ==============  ===========  ===========  ========== 
 Gross loans (EUR mn)                                       15,900       13,148       18,755        -15% 
==================================================  ==============  ===========  ===========  ========== 
 Accumulated provisions (EUR mn)                             3,852        2,254        4,204         -8% 
==================================================  ==============  ===========  ===========  ========== 
 Customer deposits (EUR mn)                                 16,844       16,844       17,850         -6% 
==================================================  ==============  ===========  ===========  ========== 
 Loans to deposits ratio (net)                                 72%          65%          82%    -10 p.p. 
==================================================  ==============  ===========  ===========  ========== 
 NPE ratio                                                     47%          36%          47%      0 p.p. 
==================================================  ==============  ===========  ===========  ========== 
 NPE provisioning coverage ratio                               52%          47%          48%     +4 p.p. 
==================================================  ==============  ===========  ===========  ========== 
 Leverage ratio                                              10.1%        10.1%        10.4%   -0.3 p.p. 
==================================================  ==============  ===========  ===========  ========== 
 Capital ratios and risk weighted assets                31.12.2018   31.12.2018   31.12.2017           + 
                                                      pro forma(2) 
==================================================  ==============  ===========  ===========  ========== 
 Common Equity Tier 1 (CET1) ratio (transitional)            15.4%        12.1%        12.7%     -60 bps 
==================================================  ==============  ===========  ===========  ========== 
 CET1 FL (allowing for IFRS 9 transitional 
  arrangements)(3)                                           15.4%        11.9%        12.2%     -30 bps 
==================================================  ==============  ===========  ===========  ========== 
 Total capital ratio                                         18.3%        14.9%        14.2%     +70 bps 
==================================================  ==============  ===========  ===========  ========== 
 Risk weighted assets (EUR mn)                              14,015       15,372       17,260        -11% 
==================================================  ==============  ===========  ===========  ========== 
 
   p.p. = percentage points, bps = basis points, 100 basis points (bps) = 
   1 percentage point; 1. Ignoring the classification of the Helix portfolio 
   of EUR1,148 mn (NBV) and of the Velocity portfolio of EUR6 mn (NBV) as 
   disposal groups held for sale. 2. Pro forma for DTC and Helix. 3. The 
   CET1 FL ratio for 31 December 2018, including the full impact of IFRS 
   9, amounts to 10.1% and 13.5% pro forma for DTC and Helix. 
 

B.1. Unaudited reconciliation of the Income Statement for the year ended 31 December 2018 between statutory and underlying bases

 
 EUR mn                               Underlying   Reclassification   Statutory 
                                         Basis                          Basis 
 Net interest income                         452               (33)         419 
                                     ===========  =================  ========== 
 Net fee and commission 
  income                                     166               (11)         155 
                                     ===========  =================  ========== 
 Net foreign exchange 
  gains and net gains 
  on financial instrument 
  transactions and loss 
  on disposal/dissolution 
  of subsidiaries and 
  associates                                  66                 17          83 
                                     ===========  =================  ========== 
 Insurance income net 
  of claims and commissions                   53                  -          53 
                                     ===========  =================  ========== 
 Net gains from revaluation 
  and disposal of investment 
  properties and on disposal 
  of stock of properties                      18                  -          18 
                                     ===========  =================  ========== 
 Other income                                 26                  -          26 
                                     -----------  -----------------  ---------- 
 Total income                                781               (27)         754 
                                     ===========  =================  ========== 
 Staff costs                               (217)                  -       (217) 
                                     ===========  =================  ========== 
 Other operating expenses                  (158)               (77)       (235) 
                                     ===========  =================  ========== 
 Special levy and contribution 
  to Single Resolution 
  Fund                                      (25)                  -        (25) 
                                     -----------  -----------------  ---------- 
 Total expenses                            (400)               (77)       (477) 
                                     -----------  -----------------  ---------- 
 Operating profit                            381              (104)         277 
                                     ===========  =================  ========== 
 Provision charge                          (168)              (133)       (301) 
                                     ===========  =================  ========== 
 Impairments of other 
  financial and non-financial 
  assets                                    (20)                  -        (20) 
                                     ===========  =================  ========== 
 Provisions for litigation, 
  regulatory and other 
  matters                                   (23)                 23           - 
                                     -----------  -----------------  ---------- 
 Total provisions and 
  impairments                              (211)              (110)       (321) 
                                     ===========  =================  ========== 
 Share of profit from 
  associates                                   9                  -           9 
                                     -----------  -----------------  ---------- 
 Profit/(loss) before 
  tax and non-recurring 
  items                                      179              (214)        (35) 
                                     ===========  =================  ========== 
 Tax                                           3               (79)        (76) 
                                     ===========  =================  ========== 
 (Profit)/loss attributable                    -                  -           - 
  to non-controlling interests 
                                     -----------  -----------------  ---------- 
 Profit/(loss) after 
  tax and before non-recurring 
  items                                      182              (293)       (111) 
                                     ===========  =================  ========== 
 Advisory and other restructuring 
 costs - excluding discontinued 
 operations and NPE sale 
 (Helix)                                    (42)                 42           - 
                                     -----------  -----------------  ---------- 
 Profit/(loss) after 
  tax - Organic                              140              (251)       (111) 
                                     ===========  =================  ========== 
 Profit from discontinued 
  operations (UK)                              3                  4           7 
                                     ===========  =================  ========== 
 Restructuring costs 
  relating to NPE sale 
  (Helix)                                   (18)                 18           - 
                                     ===========  =================  ========== 
 Loss relating to NPE 
  sale (Helix)                             (150)                150           - 
                                     ===========  =================  ========== 
 Impairment of DTA                          (79)                 79           - 
                                     -----------  -----------------  ---------- 
 Loss after tax                            (104)                  -       (104) 
                                     -----------  -----------------  ---------- 
 
 
 

The reclassification differences between the statutory and underlying bases mainly relate to the impact from the 'non-recurring items', that is the NPE sale (Helix) and related restructuring costs and items associated with the classification of the UK as discontinued operations, as well as the impairment of the deferred tax asset. In detail:

-- Net interest income includes EUR32.5 mn unrecognised interest on previously credit impaired loans which have cured during the year. For statutory reporting purposes, this amount is presented within "Credit losses to cover credit risk on loans and advances to customers".

-- EUR11.2 mn fee and commission expense on the amounts deposited in regards to the AT1 issue disclosed within 'Advisory and other restructuring costs - excluding NPE sale (Helix)' under the underlying basis.

   --      'Net foreign exchange gains and net gains on financial instrument transactions and loss on disposal/dissolution of subsidiaries and associates' under the statutory basis include an amount of EUR16.1 mn relating to net gains on loans and advances to customers measured at fair value through profit or loss (FVPL) disclosed within 'Provisions charge' under the underlying basis. Additionally, it includes EUR3.8 mn relating to the UK disclosed within discontinued operations in the underlying basis. 

-- 'Restructuring costs relating to NPE sale (Helix)' of EUR18.4 mn, 'Provisions for litigation, regulatory and other matters' of EUR22.8 mn and 'Advisory and other restructuring costs-excluding the NPE sale (Helix)' of EUR32.2 mn disclosed as expenses under the statutory basis are shown separately under the underlying basis (from the total of EUR32.2 mn around EUR1.3 mn relates to restructuring costs on the disposal of the UK group therefore is classified as discontinued operations in the underlying basis).

-- Additionally EUR3.6 mn for UK regulatory matters included within expenses in the statutory basis, are disclosed within discontinued operations in the underlying basis.

-- The loss of disposal of Helix of EUR149.8 mn disclosed within 'Provisions charge' under the statutory basis is separately disclosed under the underlying basis.

-- Impairments of other financial instruments relating to UK of EUR2.7 mn is classified as a cost on discontinued operations per the underlying basis.

-- Finally, the impairment of deferred tax asset of EUR79 mn included within Tax in the statutory basis is classified as a non-recurring item and disclosed within 'Impairment of DTA' under the underlying basis.

B.2. Balance Sheet Analysis

B.2.1 Capital Base

Shareholders' equity totalled EUR2,341 mn at 31 December 2018, compared to EUR2,206 mn at 30 September 2018 and to EUR2,586 mn at 31 December 2017. The Common Equity Tier 1 capital (CET1) ratio (transitional basis) stood at 12.1% at 31 December 2018, compared to 11.9% at 30 September 2018 and 12.7% at 31 December 2017. During 4Q2018 the CET1 ratio was positively affected by the reduction in risk-weighted assets. Adjusting for Deferred Tax Assets, the CET1 ratio on a fully-loaded basis (IFRS 9 transitional) totalled 11.9% at 31 December 2018, compared to 11.6% at 30 September 2018 and 12.2% at 31 December 2017.

The Group has elected to apply the EU transitional arrangements for regulatory capital purposes (EU Regulation 2017/2395) where the impact on the impairment amount from the initial application of IFRS 9 on the capital ratios is phased-in gradually. The amount added each year decreases based on a weighting factor until the impact of IFRS 9 is fully absorbed at the end of the five years. For the year 2018 the impact on the capital ratios is 5% of the impact on the impairment amounts from the initial application of IFRS 9, increasing to 15% (cumulative) for the year 2019. The CET1 ratio on a fully-loaded basis (including the full impact of IFRS 9) amounts to 10.1% at 31 December 2018 (and 13.5% pro forma for DTC and Helix), compared to 9.7% at 30 September 2018 (and 10.9% pro forma for Helix). On a transitional basis and on a fully phased-in basis after the five year period of transition is complete, the impact of IFRS 9 is expected to be manageable and within the Group's capital plans.

As at 31 December 2018, the Total Capital ratio stood at 14.9%, compared to 13.4% at 30 September 2018 and 14.2% at 31 December 2017.

The Group's capital ratios are above the minimum CET1 regulatory capital ratio of 9.375%, comprising a 4.50% Pillar I requirement, a 3.00% Pillar II requirement and a phased-in CCB of 1.875% and the overall Total Capital Ratio requirement of 12.875%, comprising a Pillar I requirement of 8.00% (of which up to 1.5% can be in the form of Additional Tier 1 capital and up to 2.0% in the form of Tier 2 capital), a Pillar II requirement of 3.00% (in the form of CET1), as well as a phased-in CCB of 1.875%.

In accordance with the provisions of the Macroprudential Oversight of Institutions Law of 2015, the CBC is also the responsible authority for the designation of banks that are Other Systemically Important Institutions (O-SIIs) and for the setting of the O-SII buffer requirement for these systemically important banks. The Group has been designated as an O-SII and the O-SII buffer currently set by the CBC for the Group is 2%. This buffer will be phased-in gradually, starting from 1 January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented (2.0%) on 1 January 2022.

Following the Annual Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2018 and based on the pre-notification received in February 2019, the Group's minimum phased-in CET1 capital ratio and Total Capital ratio remain unchanged, when ignoring the phasing-in of the Capital Conservations Buffer and the Other Systemically Important Institution Buffer. The Group's phased-in CET1 capital ratio is expected to be 10.5%, comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 0.5%. The Group's Total Capital requirement is expected to be 14.0%, comprising an 8.0% Pillar I requirement, a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 0.5%. The new SREP requirements are expected to be effective from March 2019 and remain subject to ECB final confirmation. The Group CET1 ratio remains above these requirements.

The EBA final guidelines on Supervisory Review and Evaluation Process (SREP) and supervisory stress testing in July 2018 and the Single Supervisory Mechanism's (SSM) 2018 SREP methodology provide that CET1 held for the purposes of Pillar II add-ons cannot be used to meet any other capital requirements (Pillar 1, P2R or the combined buffer requirements), and therefore cannot be used twice. Such restrictions are, however, only expected to apply with effect from the 2019 SREP cycle. Pillar II add-ons derive from the Group's individual capital guidance, which is a point in time assessment made in the context of the SREP process and, accordingly, they may vary over time.

Sale of Bank of Cyprus UK Limited (BOC UK)

In November 2018, the Company completed the sale of its wholly owned subsidiary bank in the UK, Bank of Cyprus UK Limited ('BOC UK') and its subsidiary Bank of Cyprus Financial Services Limited ('BOC FS', and together the 'UK Group'), following receipt of the necessary regulatory approvals from the Prudential Regulation Authority and the European Central Bank. The transaction has had an overall positive impact on the Group capital ratios of c.70 bps.

Additional Tier 1

In December 2018, the Company proceeded with the issuance and settlement of EUR220 mn of Additional Tier 1 Capital Securities (the 'Capital Securities'), which had been priced in August 2018, after obtaining the consent of the ECB for the reduction of capital and the approval of the Irish Court for the reclassification of the share premium to distributable reserves, pursuant to section 85(1) of the Companies Act 2014 of Ireland. This reclassification had been approved at the Company's Annual General Meeting in August 2018. The reduction of capital did not have any impact on regulatory capital or the total equity position of the Company, the Bank or the Group.

The distributable reserves created provide the basis for the calculation of distributable items under the Capital Requirements Regulation (EU) No. 575/2013 ('CRR'), which provides that coupons on AT1 capital instruments may only be funded from distributable items. Distributable items for the purposes of the CRR are determined, in part, by reference to distributable reserves. The Company is currently subject to a prohibition on dividend distributions. However, such prohibition does not apply to the payment of coupons on any AT1 capital instruments issued by the Company.

The proceeds of the issue have been on-lent by the Company to the Bank. The on-loan constitutes Additional Tier 1 capital for the Bank. The issuance has increased the Total Capital Ratio by c.140 bps to 14.9% as at 31 December 2018.

Subsequent to the issuance, the Capital Securities were admitted to the official list of the Luxembourg Stock Exchange (LuxSE) and to trading on the Euro MTF market of the LuxSE.

Project Helix

In August 2018, the Company reached an agreement for the sale of a portfolio (the 'Portfolio') of loans with a gross book value of EUR2.8 bn as at 30 June 2018 (of which EUR2.7 bn related to non-performing exposures (NPEs)) secured by real estate collateral (known as 'Project Helix', or the 'Transaction'). The gross book value of EUR2.8 bn included properties of EUR39 mn as at 30 June 2018 that will also be transferred to the buyer. The Portfolio will be transferred to a licensed Cypriot Credit Acquiring Company (the 'CyCAC') by the Bank. As at 31 December 2018, the Helix portfolio included loans with gross book value of EUR2.7 bn (of which EUR2.6 bn related to NPEs) secured by real estate collateral, and properties of

EUR74 mn (compared to properties of EUR60 mn as at 30 September 2018).

At completion, the Bank will receive gross cash consideration of c.EUR1.4 bn. Subject to regulatory approval, the Bank's participation in the senior debt in relation to such financing has been syndicated down to EUR50 mn, from the initial level of EUR450 mn, significantly de-risking the Bank's residual exposure to the portfolio sold.

The completion of the Transaction remains subject to a number of conditions precedent, including mainly regulatory and other approvals, including the ECB agreeing to a Significant Risk Transfer ('SRT') benefit from the Transaction. Completion is expected around the end of 1Q2019 / early 2Q2019.

The impact from this Transaction on the CET1 ratio is a decrease of c.80 bps relating to the accounting loss (including transaction costs) of c.EUR150 mn for FY2018, declining to c.EUR105 mn as the time value of money of c.EUR45 mn unwinds to completion. On completion, the derecognition of the Helix portfolio is expected to have a positive impact on the CET1 ratio of 160 bps, resulting from the release of risk weighted assets.

All relevant figures and pro forma calculations are based on 31 December 2018 financial results, unless otherwise stated. Calculations on a pro forma basis assume completion of the Transaction and SRT benefit from Helix, which as at the date of this announcement has not been approved by the ECB.

Legislative amendments for the conversion of DTA to DTC

A conversion of DTA to DTC was adopted by Parliament on 1 March 2019. The law amendment covers the losses transferred from Laiki Bank to the Bank in March 2013. The introduction of CRD IV in January 2014 and its subsequent phasing-in led to a more capital intensive treatment of this DTA for the Bank.

The law amendment, when it enters into force, will result in improved regulatory capital treatment, under CRD IV, of the deferred tax asset amounting to EUR250 mn or a CET1 uplift of 170 bps (transitional basis) as at 31 December 2018. The improvement in the regulatory capital ratios as of 1 January 2019 amounts to EUR285 mn or a CET1 uplift of 190 bps (fully loaded basis). This improvement includes the impact from a reversal of impairment of the related DTA of EUR108 mn recorded in prior periods.

Pro forma capital ratios

The CET1 ratio (transitional basis) of 12.1% as at 31 December 2018 improves to 15.4% pro forma for DTC and Helix. The Total Capital ratio of 14.9% as at 31 December 2018 improves to 18.3% pro forma for DTC and Helix.

B.2.2 Funding and Liquidity

Funding

Funding from Central Banks

At 31 December 2018, the Bank's funding from central banks amounted to EUR830 mn, which relates to ECB funding, (compared to ECB funding of EUR830 mn at 30 September 2018 and EUR930 mn at 31 December 2017), comprising solely of funding through the Targeted Longer-Term Refinancing Operations (TLTRO II).

The Bank fully repaid ELA in January 2017.

Deposits

Group customer deposits totalled EUR16,844 mn at 31 December 2018, compared to EUR16,850 mn at 30 September 2018 and EUR17,850 mn at 31 December 2017. Group customer deposits decreased by 6% yoy, reflecting the disposal of the UK subsidiary.

Cyprus deposits remained broadly flat qoq and increased by 5% yoy to EUR16,844 mn at 31 December 2018 (compared to EUR15,983 mn at 31 December 2017) accounting for 100% of Group customer deposits, after the disposal of the UK subsidiary at the end of 3Q2018. The 11% increase in local deposits in FY2018 offsets the 11% reduction in deposits of International Business Units (IBUs) in the same period.

The Bank's deposit market share in Cyprus reached 36.0% at 31 December 2018 (compared to 36.3% at 30 September 2018, on the same basis). Customer deposits accounted for 76% of total assets at 31 December 2018.

The Loan to Deposit ratio (L/D) stood at 72% at 31 December 2018 when ignoring the classification of the Helix portfolio as a disposal group held for sale, at the same levels as at 30 September 2018 and 82% at 31 December 2017, compared to a high of 151% at 31 March 2014. Post NPEs sales (Helix and Velocity), the L/D ratio is reduced by a further 7 p.p to 65%.

Subordinated Loan Stock

At 31 December 2018 the Bank's subordinated loan stock (including accrued interest) amounted to EUR271 mn (compared to EUR264 mn as at 30 September 2018 and EUR302 mn as at 31 December 2017) and relates to unsecured subordinated Tier 2 Capital Notes of nominal value EUR250 mn, issued by the Bank in January 2017.

The Bank's subordinated loan stock as at 31 December 2017 of EUR302 mn included an unsecured and subordinated Tier 2 Capital Loan of nominal value GBP30 mn issued in December 2017 by the Bank's subsidiary in the UK.

B.2.2 Funding and Liquidity

Liquidity

At 31 December 2018 the Group Liquidity Coverage Ratio (LCR) stood at 231% (compared to 220% at 30 September 2018, and 190% at 31 December 2017) and was in compliance with the minimum regulatory requirement of 100%.

The Net Stable Funding Ratio (NSFR ratio) was not introduced on 1 January 2018, as opposed to what was expected. It will become a regulatory indicator when CRR2 is enforced with the limit set at 100%. At 31 December 2018, the Group's NSFR, on the basis of Basel standards, stood at 119% (compared to 117% at 30 September 2018 and 111% at 31 December 2017).

In accordance with the Capital Requirements Regulation (CRR), the local regulatory liquidity requirements set by the Central Bank of Cyprus (CBC) were abolished on 1 January 2018. The CBC introduced a macro-prudential measure in the form of a liquidity add-on imposed on top of the LCR requirement of the Bank, which became effective on 1 January 2018 until 31 December 2018. The objective of the measure was to ensure that there was going to be a gradual release of the excess liquidity in the Cyprus market arising from the lower liquidity requirements under the LCR compared to the ones under the local regulatory liquidity requirements previously in place. The add-on applied stricter outflow and inflow rates on some of the parameters used in the calculation of the LCR, as well as additional liquidity requirements in the form of outflow rates on items that are not subject to outflow rates under the LCR. The measure was implemented in two stages, the first stage was applicable from 1 January 2018 until 30 June 2018 and the second stage from 1 July 2018 until 31 December 2018, with a reduction of 50% of the add-on rates from 1 July 2018. The LCR add-on was fully abolished on 1 January 2019. As at 31 December 2018, the Bank was in compliance with the LCR including the add-on, which stood at 171%.

B.2.3 Loans

Group gross loans totalled EUR15,900 mn at 31 December 2018, compared to EUR16,201 mn at 30 September 2018 and EUR18,755 mn at 31 December 2017. Gross loans in Cyprus totalled EUR15,702 mn at 31 December 2018 and accounted for 99% of Group gross loans.

The remaining UK operations as at 31 December 2018 included gross loans in the UK amounting to EUR11 mn, compared to EUR1,621 mn at 31 December 2017. The exposures remaining post the sale of BOC UK are expected to be run down over time and have been categorised as non-core overseas exposures as of 30 September 2018.

New loan originations for the Group reached EUR2,231 mn for FY2018, at the same levels as new lending in FY2017. New loans granted in Cyprus reached EUR1,870 mn for FY2018, exceeding new lending in Cyprus for FY2017.

At 31 December 2018, the Group net loans and advances to customers totalled EUR10,922 mn (compared to EUR14,602 mn at 31 December 2017).

In addition, at 31 December 2018, net loans and advances to customers of EUR1,148 mn were classified as a disposal group held for sale in line with IFRS 5 and relate to Helix, compared to EUR1,184 mn at 30 September 2018, EUR1,239 mn at 30 June 2018 and EURNil at 31 December 2017. Moreover, at 31 December 2018, net loans and advances to customers of EUR6 mn were classified as a disposal group held for sale in line with IFRS 5 and relate to Project Velocity.

The Bank is the single largest credit provider in Cyprus with a market share of 45.4% at 31 December 2018, at the same levels as at 30 September 2018 and 38.6% as at 30 June 2018. The market share on loans was affected as at 30 September 2018 following a decrease in total loans in the banking sector, mainly attributed to EUR6 bn non-performing loans of Cyprus Cooperative Bank (CyCB) which remained to SEDIPES as a result of the agreement between CyCB and Hellenic Bank.

B.2.4 Loan portfolio quality

Tackling the Group's loan portfolio quality remains the top priority for management. The Group continues to make steady progress across all asset quality metrics and the loan restructuring activity continues. The Group has been successful in engineering restructuring solutions across the spectrum of its loan portfolio.

Non-performing exposures (NPEs) as defined by the European Banking Authority (EBA) were reduced by EUR203 mn or 3% during 4Q2018 to EUR7,419 mn at 31 December 2018, accounting for 47% of gross loans (ignoring the classification of the Helix (and Velocity) portfolio as a disposal group held for sale), compared to 47% at 30 September 2018 on the same basis, and compared to 43% at 30 June 2018 and 47% at 31 December 2017, on the same basis with respect to Helix (and Velocity), but before the disposal of the UK operations. The organic reduction of NPEs in 4Q2018 on the residual portfolio was EUR217 mn, in line with the guidance. This included an amount of EUR99 mn, which relates to a reclassification between gross loans and accumulated provisions on loans and advances to customers classified as a disposal group held for sale.

The provisioning coverage ratio of NPEs stood at 52% at 31 December 2018 (ignoring the classification of the Helix (and Velocity) portfolio as a disposal group held for sale), compared to 52% at 30 September 2018 on the same basis, and compared to 52% at 30 June 2018 and 48% at 31 December 2017, on the same basis with respect to Helix (and Velocity), but before the disposal of the UK operations.

When taking into account tangible collateral at fair value, NPEs are fully covered.

 
                                                            30.09.2018(1) 
                                         31.12.2018(1) 
                                              % of gross          % of gross 
                                      EUR mn     loans    EUR mn     loans 
====================================  ======  ==========  ======  ========== 
NPEs as per EBA definition            7,419     46.7%     7,622     47.0% 
 Of which, in pipeline to exit: 
  - NPEs with forbearance measures, 
  no arrears(2)                       1,211      7.6%     1,283      7.9% 
1. Ignoring the classification of the Helix portfolio of EUR1,148 
 mn (NBV) and of the Velocity portfolio of EUR6 mn (NBV) as 
 disposal groups held for sale. 2. The analysis is performed 
 on a customer basis. 
 

Overall, the Group has recorded significant organic NPE reductions for fifteen consecutive quarters and expects the organic reduction of residual NPEs (post Helix) to continue during the coming quarters at a pace of c.EUR200 mn per quarter, as portfolio size and business line mix is expected to change radically.

Project Helix

During 2018, in addition to the organic reduction of NPEs, the Group accelerated balance sheet de-risking through reaching an agreement in August 2018 for the sale of a portfolio of loans (the 'Portfolio') with a gross book value of EUR2.8 bn (of which EUR2.7 bn relate to non-performing loans as at 30 June 2018), secured by real estate collateral ('NPLs') (known as 'Project Helix', or the 'Transaction'). The Portfolio had a contractual balance of c.EUR5.7 bn as at 31 March 2018.

The Transaction is the first NPL disposal by the Bank and represents a significant milestone in the delivery of the Bank's strategy of improving asset quality through the reduction of NPEs.

Following the completion of Project Helix, the Bank's gross NPEs will be 68% lower than its peak in 2014.

Project Helix reduces the NPE ratio by c.11 p.p. to 36% as at 31 December 2018. Ignoring the classification of the Helix (and Velocity) portfolios as disposal groups held for sale, the NPE ratio is 47%, including the impact from the UK sale (+5 p.p.).

The NPE provision coverage as at 31 December 2018 is 47%, compared to 49% as at 30 September 2018. The drop of 2 p.p. is mainly due to increased NPE inflows in 4Q2018 due to the 'unlikely to pay' (UTP) criteria, as well as the settlement and agreement for sale of high coverage exposures. Ignoring the classification of the Helix (and Velocity) portfolios as disposal groups held for sale, the NPE provision coverage is 52%.

The completion of the Transaction remains subject to a number of conditions precedent, including mainly regulatory and other approvals, including the ECB agreeing to a SRT benefit from the Transaction.

All relevant figures and pro forma calculations are based on 31 December 2018 financial results, unless otherwise stated. Calculations on a pro forma basis assume completion of the Transaction and SRT benefit from Helix, which as at the date of this announcement has not been approved by the ECB.

ESTIA

In July 2018, the Government announced a scheme aimed at addressing NPEs backed by primary residence, known as ESTIA. This Scheme is expected to positively impact c.EUR0.9 bn of retail core NPEs, subject to eligibility criteria and participation rate. This Estia eligible portfolio refers to the potentially eligible portfolio based on the Bank's available data. Eligibility criteria relate primarily to the Open Market Value (OMV) of the residence, total income and net wealth of the household. These will act as a clear definition of socially protected borrowers, acting as an enabler against strategic defaulters. In accordance with the Scheme, the eligible loans are to be restructured to the lower of contractual and OMV, and the Government to subsidise one third of the instalment. The terms of the Scheme are subject to finalisation and the Scheme is expected to be launched around the end of 1Q2019.

Project Velocity

In December 2018, the Bank entered into an agreement with APS Delta s.r.o, to sell a non-performing loan portfolio of primarily retail unsecured exposures, with a contractual balance of EUR245 mn and a gross book value of EUR34 mn as at 30 September 2018 (known as "Project Velocity" or the "Sale"). This portfolio comprises of 9,700 heavily delinquent borrowers, including 8,800 private individuals and 900 small-to-medium-sized enterprises. The gross book value of this portfolio as at 31 December 2018 was EUR33 mn.

The Sale is expected to be neutral to both the profit and loss account and to capital. The Sale is subject to the necessary approvals and is expected to be completed within 2Q2019.

The Group continues to actively explore a number of alternatives to accelerate the de-risking of its balance sheet, including further disposals of NPEs and other non-core assets.

B.2.5. Real Estate Management Unit (REMU)

The Real Estate Management Unit (REMU) on-boarded EUR117 mn of assets (including construction cost) in 4Q2018 (up by 29% qoq) and EUR428 mn of assets in FY2018, via the execution of debt for asset swaps and repossessed properties. The focus for REMU is increasingly shifting from on-boarding of assets resulting from debt for asset swaps towards the disposal of these assets. The Group completed disposals of EUR42 mn in 4Q2018 (compared to EUR28 mn in 3Q2018) and disposals of EUR196 mn in FY2018, resulting in a profit on disposal of EUR33 mn for the year. During FY2018, the Group executed sale-purchase agreements (SPAs) with contract value of EUR238 mn (656 properties). In addition, the Group signed SPAs for disposals of assets with contract value of EUR106 mn.

Following the incorporation of Cyreit Variable Capital Investment Company PLC, properties of carrying value EUR166 mn were reclassified from the stock of properties (measured at the lower of cost and net realisable value under IAS 2) to investment properties (measured at fair value under IAS 40). In November 2018, the Bank signed an agreement for the disposal of its entire holding in the investment shares of the Cyreit Fund, resulting in a valuation loss of EUR14 mn recorded in 3Q2018, relating to both properties and other receivables. The completion of the disposal is subject to regulatory approvals and expected in early 2Q2019.

As at 31 December 2018, assets held by REMU had a carrying value of EUR1.5 bn, in addition to assets reclassified to investment properties of EUR166 mn, which were subsequently classified as a disposal group held for sale. As at 31 December 2018, properties with carrying value of EUR74 mn were included in the portfolio for the NPE sale (Helix), compared to EUR60 mn as at 30 September 2018 and EUR39 mn as at 30 June 2018.

 
Assets held by REMU (Group)                                                                         qoq 
 EUR mn                                                            FY2018  FY2017  4Q2018  3Q2018    +%  yoy +% 
                                                                   ------  ------  ------  ------  ---- 
Opening balance                                                     1,641   1,427   1,558   1,524    2%     15% 
-----------------------------------------------------------------  ------  ------  ------  ------  ----  ------ 
On-boarded assets (including construction cost)                       428     520     117      91   29%    -18% 
-----------------------------------------------------------------  ------  ------  ------  ------  ----  ------ 
Sales                                                               (196)   (258)    (42)    (28)   56%    -24% 
-----------------------------------------------------------------  ------  ------  ------  ------  ----  ------ 
Transfer to investment properties                                   (166)       -       -       -     -       - 
-----------------------------------------------------------------  ------  ------  ------  ------  ----  ------ 
Transfer to non-current assets and disposal groups held for sale    (162)       -   (102)    (21)  384%       - 
-----------------------------------------------------------------  ------  ------  ------  ------  ----  ------ 
Closing balance                                                     1,530   1,641   1,530   1,558   -2%     -7% 
-----------------------------------------------------------------  ------  ------  ------  ------  ----  ------ 
 
 
 Analysis by type and country     Cyprus   Greece   Romania   Total 
 31 December 2018 (EUR mn) 
-------------------------------  -------  -------  --------  ------ 
 Residential properties              164       25         0     189 
 Offices and other commercial 
  properties                         228       44         7     279 
 Manufacturing and industrial 
  properties                          80       38         0     118 
 Hotels                               35        0         -      35 
 Land (fields and plots)             896        8         4     908 
 Properties under construction         1        -         -       1 
-------------------------------  -------  -------  --------  ------ 
 Total                             1,404      115        11   1,530 
-------------------------------  -------  -------  --------  ------ 
 
 
                                  Cyprus   Greece   Romania   Total 
 31 December 2017 (EUR mn) 
-------------------------------  -------  -------  --------  ------ 
 Residential properties              146       29         0     175 
 Offices and other commercial 
  properties                         288       39         9     336 
 Manufacturing and industrial 
  properties                         113       34         0     147 
 Hotels                               78        0         -      78 
 Land (fields and plots)             837        6         5     848 
 Properties under construction        57        -         -      57 
-------------------------------  -------  -------  --------  ------ 
 Total                             1,519      108        14   1,641 
-------------------------------  -------  -------  --------  ------ 
 

B.2.6 Non-core overseas exposures

The remaining non-core overseas net exposures (including both on-balance sheet and off-balance sheet exposures) at 31 December 2018 are as follows:

 
 EUR mn     31 December 2018   31 December 2017 
           ----------------- 
 Greece           162                193 
 Romania           35                 79 
 Serbia            7                  9 
 Russia            23                 31 
 UK                11                 - 
---------  -----------------  ----------------- 
 

The Group continues its efforts for further deleveraging and disposal of non-essential assets and operations.

In addition, further to the disposal of the UK operations, residual exposures of EUR11 mn remain in the UK as at 31 December 2018, compared to EUR23 mn as at 30 September 2018, relating to legacy exposures. These exposures are expected to be run down over time and are now categorised as non-core overseas exposures.

In addition to the above, at 31 December 2018 there were overseas exposures of EUR144 mn in Greece (compared to exposures of EUR156 mn at 30 September 2018 and EUR168 mn as at 31 December 2017), not identified as non-core exposures, since they are considered by management as exposures arising in the normal course of business.

In accordance with the Group's strategy to exit from overseas non-core operations, the operations of the branch in Romania were terminated in January 2019, following the completion of deregistration formalities with respective authorities.

B.3. Income Statement Analysis

B.3.1 Total income

 
                                         FY2017                          2Q2018      1Q2018      (4q vs 3q)       (FY) 
EUR mn                   FY2018  represented(2)  4Q2018  3Q2018  represented(2)  represented(2)          +%  Yoy(2) +% 
                       --------  --------------  ------  ------  --------------  --------------  ---------- 
Net interest income         452             544     112     113             114             113         -2%       -17% 
---------------------  --------  --------------  ------  ------  --------------  --------------  ----------  --------- 
Net fee and 
 commission 
 income                     166             174      43      43              41              39          3%        -4% 
Net foreign exchange 
 gains 
 and net gains on 
 financial 
 instrument 
 transactions 
 and loss on 
 disposal/dissolution 
 of subsidiaries and 
 associates                  66              48      14      10              13              29         28%        37% 
Insurance income net 
 of 
 claims and 
 commissions                 53              50      15      13              13              12         22%         5% 
Net gains/(losses) 
 from 
 revaluation and 
 disposal 
 of investment 
 properties 
 and on disposal of 
 stock 
 of properties               18              26       3     (6)               2              19           -       -30% 
Other income                 26              19       9       6               5               6         37%        34% 
---------------------  --------  --------------  ------  ------  --------------  --------------  ----------  --------- 
Non-interest income         329             317      84      66              74             105         28%         4% 
---------------------  --------  --------------  ------  ------  --------------  --------------  ----------  --------- 
Total income                781             861     196     179             188             218          9%        -9% 
---------------------  --------  --------------  ------  ------  --------------  --------------  ----------  --------- 
Net Interest Margin 
 (annualised)(1)          2.48%           3.10%   2.39%   2.47%           2.54%           2.56%      -8 bps    -62 bps 
---------------------  --------  --------------  ------  ------  --------------  --------------  ----------  --------- 
Average interest 
 earning 
 assets (EUR mn)(1)      18,190          17,553  18,468  18,237          17,951          17,981          1%         4% 
---------------------  --------  --------------  ------  ------  --------------  --------------  ----------  --------- 
1. Ignoring the classification of the Helix portfolio of EUR1,148 mn (NBV) 
 and of the Velocity portfolio of EUR6 mn (NBV) as disposal groups held for 
 sale. 
 2. Represented for the disposal of the UK subsidiary. 
p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 
 percentage point 
 

Net interest income (NII) and net interest margin (NIM) for FY2018 amounted to EUR452 mn and 2.48% respectively, when ignoring the classification of the Helix portfolio as a disposal group held for sale. NII was down by 17% compared to EUR544 mn a year earlier, and the yoy decline in NIM of 62 bps reflects the lower volume on loans, pressure on lending rates and the cost of liquidity compliance. The NII for 4Q2018 amounted to EUR112 mn, compared to EUR113 mn in 3Q2018 and the NIM for 4Q2018 was 2.39%, down by 8 bps from 2.47% for 3Q2018, on the same basis, reflecting continued pressure on lending rates.

The NII presented under the underlying basis includes unrecognised interest on previously credit impaired loans which have cured during 4Q2018, amounting to EUR8 mn (EUR33 mn for FY2018). For statutory reporting purposes, for the year ended 31 December 2018, this amount is presented within "Credit losses to cover credit risk on loans and advances to customers" in line with an IFRIC discussion, which has taken place in November 2018 (Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)). Accordingly, the ratios calculated based on the underlying basis, are disclosed without taking into account such reclassification.

Average interest earning assets for FY2018 amounted to EUR18,190 mn, ignoring the classification of the Helix portfolio as a disposal group held for sale, up by 4% yoy. Quarterly average interest earning assets for 4Q2018 amounted to EUR18,468 mn on the same basis, compared to EUR18,237 mn for 3Q2018.

Non-interest income for FY2018 amounted to EUR329 mn, up 4% yoy, mainly comprising net fee and commission income of EUR166 mn, net foreign exchange gains and net gains on financial instrument transactions and loss on disposal/dissolution of subsidiaries and associates of EUR66 mn, net insurance income of EUR53 mn and net gains from revaluation and disposal of investment properties and on disposal of stock of properties of EUR18 mn.

Net fee and commission income for 4Q2018 amounted to EUR43 mn, at the same levels as for 3Q2018. Net fee and commission income for FY2018 amounted to EUR166 mn, compared to EUR174 mn a year earlier, on the same basis, down by 4% yoy, mainly due to the implementation of IFRS 9 under which certain commission income types are not recognised on Stage 3 loans.

Net foreign exchange gains and net gains on financial instrument transactions and loss on disposal/dissolution of subsidiaries and associates of EUR66 mn for FY2018, increased by 37% yoy, mainly due to the gains on disposal of bonds during the 1Q2018 of EUR19 mn.

Net gains from revaluation and disposal of investment properties and on disposal of stock of properties for FY2018 amounted to EUR18 mn, which included a net profit from the disposal of stock of properties of EUR33 mn (REMU gains) and a valuation loss of the Cyreit assets of EUR14 mn. The FY2017 gain was EUR26 mn, of which EUR30 mn related to a net profit from the disposal of stock of properties (REMU gains).

Net gains from revaluation and disposal of investment properties and on disposal of stock of properties for 4Q2018 amounted to EUR3 mn, including net gains from the revaluation of investment properties of EUR2 mn and a net profit from the disposal of stock of properties (REMU gains) of EUR1 mn, compared to net losses of EUR6 mn for 3Q2018, comprising REMU gains of EUR8 mn and a loss on disposal of the Cyreit of EUR14 mn.

Total income for FY2018 amounted to EUR781 mn, compared to EUR861 mn for FY2017, down by 9% yoy, with the reduction reflecting the yoy reduction in NII. Total income for 4Q2018 amounted to EUR196 mn, compared to EUR179 mn for 3Q2018, up by 9% qoq.

B. Preliminary Group Financial Results - Underlying Basis (continued)

B.3. Income Statement Analysis (continued)

B.3.2 Total expenses

 
                                     FY2017                           2Q2018      1Q2018                          (FY) 
EUR mn              FY2018   represented(2)  4Q2018  3Q2018   represented(2)  represented(2)   (4q vs 3q) +   Yoy(2) + 
                  --------  ---------------  ------  ------  ---------------  ---------------  ------------ 
Staff costs          (217)            (205)    (59)    (53)             (53)             (52)           10%         6% 
Other operating 
 expenses            (158)            (154)    (44)    (34)             (43)             (37)           26%         3% 
----------------  --------  ---------------  ------  ------  ---------------  ---------------  ------------  --------- 
Total operating 
 expenses            (375)            (359)   (103)    (87)             (96)             (89)           17%         4% 
----------------  --------  ---------------  ------  ------  ---------------  ---------------  ------------  --------- 
Special levy and 
 contribution 
 to Single 
 Resolution 
 Fund (SRF)           (25)             (23)     (7)     (6)              (5)              (7)           10%        10% 
Total expenses       (400)            (382)   (110)    (93)            (101)             (96)           16%         5% 
                  --------  ---------------  ------  ------  ---------------  ---------------  ------------ 
Cost to income 
 ratio(1)              51%              44%     56%     52%              54%              44%        4 p.p.     7 p.p. 
----------------  --------  ---------------  ------  ------  ---------------  ---------------  ------------  --------- 
Cost to income 
 ratio 
 excluding 
 special levy 
 and 
 contribution to 
 Single 
 Resolution 
 Fund(1)               48%              42%     52%     49%              51%              41%        3 p.p.     6 p.p. 
----------------  --------  ---------------  ------  ------  ---------------  ---------------  ------------  --------- 
11. Ignoring the classification of the Helix portfolio of EUR1,148 mn (NBV) 
 and of the Velocity portfolio of EUR6 mn (NBV) as disposal groups held for 
 sale. 
 2. Represented for the disposal of the UK subsidiary. 
  p.p. = percentage points, bps = basis points, 100 basis points (bps) = 
   1 percentage point 
 

Total expenses for FY2018 were EUR400 mn (compared to EUR382 mn for FY2017), 54% of which related to staff costs

(EUR217 mn), 40% to other operating expenses (EUR158 mn) and 6% (EUR25 mn) to special levy and contribution to Single Resolution Fund (SRF). Total expenses for 4Q2018 were EUR110 mn, compared to EUR93 mn in 3Q2018 (up by 16% qoq).

Total operating expenses for FY2018 were EUR375 mn, increased by 4% yoy, compared to EUR359 mn for FY2017. Total operating expenses for 4Q2018 were EUR103 mn, increased by 17% qoq, compared to EUR87 mn in 3Q2018.

Staff costs of EUR217 mn for FY2018 increased by 6% yoy (compared to EUR205 mn in FY2017), mainly due to the effect of the renewal of the 2017 annual collective agreement with the employees' union. Staff costs for 4Q2018 amounted to EUR59 mn, compared to EUR53 mn in 3Q2018, mainly due to the annual increment granted wholly in the quarter. An amount of EUR4 mn recorded in 4Q2018 relates to previous quarters and one-off transactional staff costs. The renewal of the collective agreement for 2018 remains under discussion.

Other operating expenses for FY2018 were EUR158 mn, increased by 3% yoy. Other operating expenses for 4Q2018 were EUR44 mn, compared to EUR34 mn for 3Q2018, mainly due to the completion of projects ahead of the year-end relating to the Digital Transformation Programme and other professional services.

The cost to income ratio excluding special levy and contribution to Single Resolution Fund for 4Q2018 was 52%, (compared to 49% for 3Q2018), principally reflecting the increase in other operating expenses. Management remain focused on cost reduction.

B. Preliminary Group Financial Results - Underlying Basis (continued)

B.3. Income Statement Analysis (continued)

B.3.3 Profit/(loss) before tax and non-recurring items

 
                                                                                                                  (FY) 
                                           FY2017                          2Q2018      1Q2018      (4q vs 3q)   Yoy(1) 
EUR mn                     FY2018  represented(1)  4Q2018  3Q2018  represented(1)  represented(1)          +%       +% 
                         --------  --------------  ------  ------  --------------  --------------  ---------- 
Operating profit              381             479      86      86              87             122          1%     -21% 
-----------------------  --------  --------------  ------  ------  --------------  --------------  ----------  ------- 
Provision charge            (168)           (780)    (40)    (29)            (41)            (58)         37%     -78% 
(Impairments)/reversal 
 of impairments of 
 other 
 financial and 
 non-financial 
 assets                      (20)            (65)     (7)       1             (6)             (8)           -     -69% 
(Provisions)/reversal 
 of provisions for 
 litigation, 
 regulatory and other 
 matters                     (23)            (93)    (13)    (15)               7             (2)         -4%     -75% 
-----------------------  --------  --------------  ------  ------  --------------  --------------  ----------  ------- 
Total provisions and 
 impairments                (211)           (938)    (60)    (43)            (40)            (68)         45%     -78% 
-----------------------  --------  --------------  ------  ------  --------------  --------------  ----------  ------- 
Share of profit from 
 associates                     9               9       0       4               3               2        -67%       2% 
-----------------------  --------  --------------  ------  ------  --------------  --------------  ----------  ------- 
Profit/(loss) before 
 tax and non-recurring 
 items                        179           (450)      26      47              50              56        -44%        - 
-----------------------  --------  --------------  ------  ------  --------------  --------------  ----------  ------- 
11. Represented for the disposal of the UK subsidiary. 
 

Operating profit for FY2018 was EUR381 mn, compared to EUR479 mn for FY2017, down by 21% yoy, mainly due to the lower volume on loans and pressure on lending rates. Operating profit for 4Q2018 was EUR86 mn, at the same level as for 3Q2018.

The provision charge for FY2018 totalled EUR168 mn, compared to EUR780 mn for FY2017 (down by -78% yoy), as the previous year was affected by the additional provisions of c.EUR500 mn taken in 2Q2017. The provision charge for 4Q2018 totalled EUR40 mn, compared to EUR29 mn for 3Q2018 (up by 37% qoq) and at similar levels to 2Q2018.

The provisioning charge for FY2018, ignoring the classification of the Helix portfolio as a disposal group held for sale, accounted for 1.0% of gross loans, compared to an annualised provisioning charge of 1.0% for 9M2018, on the same basis and to 4.3% for FY2017. An amount of c.EUR500 mn reflecting the one-off effect of the change in the provisioning assumptions was included in the cost of risk for FY2017, but was not annualised. The annualised provisioning charge for 4Q2018, ignoring the classification of the Helix portfolio as a disposal group held for sale, accounted for 1.0% of gross loans, compared to 0.7% for 3Q2018 on the same basis.

At 31 December 2018, accumulated provisions, including fair value adjustment on initial recognition and provisions for off-balance sheet exposures and ignoring the classification of the Helix portfolio as a disposal group held for sale, totalled EUR3,852 mn (compared to EUR3,993 mn at 30 September 2018 and to EUR4,204 mn at 31 December 2017) and accounted for 24.2% of gross loans on the same basis (compared to 24.7% at 30 September 2018 and to 22.4% at 31 December 2017). Ignoring the classification of the Helix portfolio as a disposal group held for sale, the decrease in accumulated provisions in 4Q2018 amounted to EUR141 mn, whilst the decrease in accumulated provisions in the previous quarter amounted to EUR107 mn.

Impairments of other financial and non-financial assets for FY2018 totalled EUR20 mn, compared to EUR65 mn for FY2017 (down by 69% yoy). Impairments of other financial and non-financial assets for 4Q2018 were EUR7 mn, mainly relating to Greek tax receivables (the carrying value of the remaining receivable was c.EUR12 mn), compared to a net reversal for 3Q2018 of EUR1 mn (which included a valuation loss on properties of EUR7 mn and a reversal of previously recognised expected credit losses relating to balances with central banks of EUR8 mn).

Provisions for litigation, regulatory and other matters for FY2018 amounted to EUR23 mn, compared to EUR93 mn for FY2017. The charge for the FY2017 related mainly to redress provisions for the UK operations, a fine imposed by the Cyprus Commission for the Protection of Competition and the increase in provision for litigation for securities issued by BOC PCL between 2007 and 2011.

Provisions for litigation, regulatory and other matters for 4Q2018 amounted to EUR13 mn (compared to EUR15 mn for 3Q2018 (down by 4% qoq)), primarily relating to litigation for securities issued by the BOC PCL between 2007 and 2011 and other provisions for regulatory matters.

B. Preliminary Group Financial Results - Underlying Basis (continued)

B.3. Income Statement Analysis (continued)

B.3.4 (Loss)/profit after tax

 
                                                                                                                  (FY) 
                                            FY2017                           2Q2018      1Q2018        (4q vs   Yoy(1) 
EUR mn                     FY2018   represented(1)  4Q2018  3Q2018   represented(1)   represented(1)   3q) +%       +% 
                         --------  ---------------  ------  ------  ---------------  ---------------  ------- 
Profit/(loss) before 
 tax and 
 non-recurring items          179            (450)      26      47               50               56     -41%        - 
-----------------------  --------  ---------------  ------  ------  ---------------  ---------------  -------  ------- 
Tax                             3             (14)       7       0              (0)              (4)        -        - 
(Profit)/ loss 
 attributable 
 to non-controlling 
 interests                    (0)                3     (3)       1                0                2        -        - 
-----------------------  --------  ---------------  ------  ------  ---------------  ---------------  -------  ------- 
Profit/(loss) after tax 
 and 
 before non-recurring 
 items                        182            (461)      30      48               50               54     -36%        - 
-----------------------  --------  ---------------  ------  ------  ---------------  ---------------  -------  ------- 
Advisory and other 
 restructuring 
 costs - excluding 
 discontinued 
 operations and NPE 
 sale (Helix)                (42)             (29)    (16)    (11)              (7)              (8)      56%      43% 
Profit/(loss) after tax 
 - 
 Organic                      140            (490)      14      37               43               46     -62%        - 
                         --------  ---------------  ------  ------  ---------------  ---------------  ------- 
Profit/(loss) from 
 discontinued 
 operations (UK)                3                0     (1)     (0)                1                3       8%        - 
Restructuring costs 
 relating 
 to NPE sale (Helix)         (18)                -     (1)     (5)              (6)              (6)     -66%        - 
Loss relating to NPE 
 sale 
 (Helix)                    (150)                -       -    (15)            (135)                -        -        - 
Impairment of DTA            (79)             (62)    (79)       -                -                -        -        - 
-----------------------  --------  ---------------  ------  ------  ---------------  ---------------  -------  ------- 
(Loss)/profit after tax     (104)            (552)    (67)      17             (97)               43        -     -81% 
-----------------------  --------  ---------------  ------  ------  ---------------  ---------------  -------  ------- 
1. Represented for the disposal of the UK subsidiary. 
 

The tax credit for 4Q2018 totalled EUR7 mn (compared to EURNil in 3Q2018) comprising mainly reversals of tax provisions relating to prior years. The tax credit for FY2018 totalled EUR3 mn, compared to a tax charge of EUR14 mn for FY2017.

Profit after tax and before non-recurring items for FY2018 was EUR182 mn, compared to a loss of EUR461 mn for FY2017, reflecting the additional provisions of c.EUR500 mn taken in 2Q2017. Profit after tax and before non-recurring items for 4Q2018 was EUR30 mn, compared to a profit of EUR48 mn for 3Q2018.

Advisory and other restructuring costs - excluding discontinued operations and NPE sale (Helix) for FY2018 amounted to EUR42 mn, compared to EUR29 mn a year earlier. Advisory and other restructuring costs excluding discontinued operations and NPE sale (Helix) for 4Q2018 amounted to EUR16 mn, compared to EUR11 mn for 3Q2018.

Profit after tax arising from the organic operations of the Group for FY2018 amounted to EUR140 mn, compared to a loss of EUR490 mn a year earlier, reflecting the additional provisions of c.EUR500 mn taken in 2Q2017. Profit after tax arising from the organic operations of the Group for 4Q2018 amounted to EUR14 mn (compared to EUR37 mn for 3Q2018).

Profit from discontinued operations for FY2018 amounted to EUR3 mn (compared to EURNil for FY2017) and relate to the UK operations sold during the year.

Restructuring costs relating to NPE sale (Helix) for 4Q2018 were EUR1 mn, compared to EUR5 mn for 3Q2018, comprising mainly advisory costs and legal fees. Restructuring costs relating to NPE sale (Helix) for FY2018 amounted to EUR18 mn.

Loss relating to NPE sale (Helix) including transactions costs for FY2018 amounted to EUR150 mn, comprising a loss of EUR15 mn recorded in 3Q2018 and a loss of EUR135 mn recorded in 2Q2018. The loss of EUR15 mn for 3Q2018 related mainly to the effect of discounting following extension of the expected completion date. The loss arising from Helix is expected to decline to c.EUR105 mn, as the time value of money of c.EUR45 mn unwinds to completion.

The impairment of DTA for FY2018 and for 4Q2018 was EUR79 mn (compared to EUR62 mn for FY2017), resulting from the on-going review of the recoverability of the deferred tax asset (DTA). This amount, together with related impairments recorded in prior periods totalling EUR108 mn, is expected to be reversed in 1Q2019, following amendments to the Income Tax legislation in Cyprus.

Loss after tax attributable to the owners of the Company for FY2018 was EUR104 mn, compared to EUR552 mn for FY2017. Loss after tax attributable to the owners of the Company for 4Q2018 was EUR67 mn, compared to a profit of EUR17 mn for 3Q2018.

C. Operating Environment

Economic recovery became firmly entrenched with real GDP rising by 3,9% in 2018 following increases of 4.2% and 4.8% in the preceding two years (Cyprus Statistical Service). GDP growth in 2018 was underpinned by robust expansion in private consumption and services exports particularly tourism. Fixed investments particularly building activity also made an important contribution. On a sectoral basis growth was mainly driven by tourism, trade and transport, construction and professional and business services. The outlook for 2019-2020 remains positive with real GDP expected to rise by 3.3% and 2.7% respectively according to the European Commission (European Economic Forecast, Winter 2019, Interim).

Employment increased by 5.8% yoy, in the first three quarters not-seasonally adjusted, compared with an increase of 3.1% in 2017 (Cyprus Statistical Service). As a result the unemployment rate dropped to an average of 8.6% in the first three quarters from 11% in 2017 and contributed to strong private consumption growth (Eurostat).

Exports of goods and services continued to grow robustly in 2018 rising by 6.4% in real terms, in the first three quarters (Cyprus Statistical Service). Exports are expected to continue to underpin the recovery. Cyprus might also be impacted negatively by Brexit. Cyprus has close trade and investment links with the UK, which means that its economic recovery is vulnerable to any negative impact on the UK economy caused by Brexit.

Regarding prices, consumer inflation accelerated modestly in 2018 to 1.4% from 0.5% in 2017 (Cyprus Statistical Service). This was owed in large to higher global energy prices. Inflation is expected to accelerate further in the medium term as tighter labour market conditions gradually lead to higher wages, but will remain relatively modest by historical standards.

The budget turned to a surplus of 1.8% of GDP in 2017. The budget surplus is estimated at 2.8% of GDP in 2018, according to the European Commission (Post-Programme Surveillance Report Cyprus, Autumn 2018), excluding the impact of banking support measures related to the Cyprus Cooperative Bank (CyCB). The budget surplus will also remain sizable in 2019-2020 according to the European Commission. The budget surplus is driven by buoyant revenue growth underpinned by strong economic activity. Expenditure increases will be driven mainly by public sector pay rises and social transfers, but are expected to lag revenue growth. The budget cost of the ESTIA Scheme - a State-supported scheme to aid the loan repayment of vulnerable groups with non-performing exposures (NPEs) backed by primary residences - will be relatively low and its impact on the budget balance will be marginal.

Gross Government debt is estimated at 105% of GDP in 2018 according to the European Commission, up from 96% in 2017. This followed the placement of EUR3.2 bn Government bonds in the CyCB to facilitate the sale of the good assets of the bank. However, its underlying dynamics remain stable and it is expected to decline significantly in coming years. The debt ratio will decline to 98.4% in 2019 and to 91% in 2020 according to the European Commission (Post-Programme Surveillance Report Cyprus, Autumn 2018).

In the banking sector, the stock of NPEs declined significantly. In the year to October NPEs dropped by 46% or by EUR9.6 bn to EUR11.3 bn, after CyCB transaction and the sale of a package of non-performing loans by the biggest lender, i.e. the Bank (Central Bank of Cyprus). The ratio of NPEs to gross loans dropped to 32.1% at the end of October from 42.5% at the end of December 2017. The ratio of total impairments to total NPEs was 52.2% at the end of October 2018.

In July 2018, the Cyprus government has taken additional steps to address regulatory issues relating to NPEs. Parliament voted on Cyprus government legislative proposals for strengthening the foreclosure and insolvency framework and facilitating the securitisation of NPEs and the sale of loans. Taken together, these measures, along with ESTIA, will support further reductions in the remaining stock of NPEs.

The sovereign risk ratings of the Cyprus government improved considerably. In October 2018 Fitch Ratings upgraded its Long-Term Issuer Default ratings for Cyprus to investment grade (BBB-) with a stable outlook. In September 2018, S&P Global Ratings also upgraded Cyprus to investment grade (BBB-) with stable outlook. In July 2018 Moody's Investors Service upgraded Cyprus' sovereign rating to Ba2 from Ba3. The improvement in the ratings since the crisis in 2013 reflects the government's fiscal consolidation efforts, the generation of primary fiscal surpluses, a gradual stabilisation in the banking sector and the successful implementation of the economic adjustment programme.

D. Business Overview

As the Cypriot operations account for 99% of gross loans and 100% of customer deposits, after the disposal of the UK operations, the Group's financial performance is highly correlated to the economic and operating conditions in Cyprus and will consequently benefit from the country's recovery. Most recently, in January 2019, Moody's Investors Service upgraded the Bank's long-term deposit rating to B3 from Caa1, with a positive outlook. The positive outlook reflects expectations of further improvements in the banks' financial fundamentals, mainly asset quality over the next 12-18 months, in the context of an improved operating environment in Cyprus. In September 2018, Fitch Ratings affirmed their long-term issuer default rating of B- and revised the outlook to positive from stable. At the end of August 2018, Standard and Poor's upgraded their long-term issuer credit rating on the Bank to 'B+' from 'B' and changed the outlook to stable from positive. The key drivers for the ratings were the improvement in the Bank's financial fundamentals, mainly in asset quality, and its funding position.

Tackling the Bank's loan portfolio quality is of utmost importance for the Group. The Group has been successful in engineering restructuring solutions across the spectrum of its loan portfolio, and expects the reduction of residual NPEs (post the NPE sale (Helix)) to continue at a revised pace of c.EUR200 mn per quarter, as portfolio size and business line mix is expected to change radically post execution of Helix. In parallel, the Group continues to actively explore a number of alternatives to accelerate the de-risking of its balance sheet, including further disposals of NPEs and other non-core assets.

Project Helix

In August 2018, the Company reached an agreement for the sale of a Portfolio of loans with a gross book value of

EUR2.8 bn as at 30 June 2018 (of which EUR2.7 bn relate to non-performing loans) secured by real estate collateral. The Portfolio will be transferred to a licensed Cypriot Credit Acquiring Company (the "CyCAC") by the Bank. The shares of the CyCAC will then be acquired by certain funds affiliated with Apollo Global Management LLC (NYSE:APO) (together with its consolidated subsidiaries "Apollo"), the purchaser of the Portfolio. Funds managed by Apollo will provide equity capital in relation to the financing of the purchase of the Portfolio. The purchaser was selected following a competitive sale process. Following a transitional period where servicing is retained by the Bank, it is intended that the servicing of the Portfolio will be carried out by a long-term servicer. Arrangements in relation to the migration of servicing from the Bank to the long-term servicer, including the timing of the migration, remain under discussion between the parties.

The transaction is the first NPL disposal by the Bank and represents a significant milestone in the delivery of the Bank's strategy of improving asset quality through the reduction of NPEs. Following the completion of Project Helix, the Bank's gross NPEs will be 68% lower than its peak in 2014.

The completion of the transaction remains subject to a number of conditions precedent, including mainly regulatory and other approvals, including the ECB agreeing to a SRT benefit from the transaction. All relevant figures and pro forma calculations are based on 31 December 2018 financial results, unless otherwise stated.

Project Velocity

In December 2018, the Bank entered into an agreement with APS Delta s.r.o, to sell a non-performing loan portfolio of primarily retail unsecured exposures, with a contractual balance of EUR245 mn and gross book value of EUR34 mn as at 30 September 2018 (known as "Project Velocity" or the "Sale"). This portfolio comprises of 9,700 heavily delinquent borrowers, including 8,800 private individuals and 900 small-to-medium-sized enterprises. The gross book value of this portfolio as at 31 December 2018 was EUR33 mn.

APS Delta s.r.o is a wholly owned subsidiary of APS Capital Group s.r.o., a company registered in Czech Republic which specialises in the investment, management and recovery of loan portfolios across Central and South-Eastern Europe.

The Sale is part of the Bank's strategy to reduce its stock of non-performing loans and has been conducted at arm's length. Furthermore, the Sale is consistent with ECB guidelines regarding the management of non-performing loans.

The Sale is expected to be neutral to both the profit and loss account and to capital. The Sale is subject to the necessary approvals and is expected to be completed within 2Q2019.

ESTIA

In July 2018, the Government announced ESTIA, a scheme aimed at addressing NPEs backed by primary residence. This Scheme is expected to positively impact c.EUR0.9 bn of retail core NPEs, subject to eligibility criteria and participation rate. This Estia-eligible portfolio refers to the potentially eligible portfolio based on the Bank's available data. Eligibility criteria relate primarily to the OMV of the residence, total income and net wealth of the household. These will act as a clear definition of socially protected borrowers, acting as an enabler against strategic defaulters. In accordance with the Scheme, the eligible loans are to be restructured to the lower of contractual and OMV, and the Government to subsidise one third of the instalment. The terms of the Scheme are subject to finalisation and the Scheme is expected to be launched around the end of 1Q2019.

Sale of Bank of Cyprus UK Limited (BOC UK)

In November 2018, the Company completed the sale of its wholly owned subsidiary bank in the UK, Bank of Cyprus UK Limited ('BOC UK') and its subsidiary Bank of Cyprus Financial Services Ltd ('BOC FS', and together the 'UK Group'), to Cynergy Capital Limited ('Cynergy'), following receipt of the necessary regulatory approvals from the Prudential Regulation Authority (PRA) and the European Central Bank.

The sale consideration amounted to GBP107 mn (c.EUR120 mn) comprising of GBP103 mn base consideration plus a purchase price adjustment of GBP4 mn. Half of the base consideration together with the purchase price adjustment was received upon completion and the remaining half is deferred over 24 months, without any performance conditions attached.

The Group lost control over the UK Group and as a result, it did not consolidate it on and as from 30 September 2018. The sale of the UK Group was completed on 23 November 2018. Comparatives have been represented for the results of the UK Group, from continuing operations to discontinued operations. The representation did not have an impact on the financial performance of the Group.

The sale has an overall positive impact on the Group capital ratios of c.70 bps and is broadly neutral to the profit and loss account, including the recycling to the Income Statement of a foreign currency gain of EUR18 mn previously recorded in the foreign currency translation reserve.

The decision to sell the UK Group was in line with the Group's strategy of delivering value for shareholders and focusing principally on supporting the growing Cypriot economy. In addition, the Group and BOC UK signed an agreement for cooperation in a number of key areas going forward, including continuity of servicing for existing customers. Following completion, BOC UK has been rebranded to 'Cynergy Bank', a name chosen to reflect the bank's Cypriot heritage, combined with a modern and energetic focus.

Other

The strategic focus of the Group is to reshape its business model to grow in the core Cypriot market through prudent new lending. As at 31 December 2018, the Bank's capital position is adequate and is strengthened pro forma for DTC and Helix. The Group expects to continue to be able to support the recovery of the Cyprus economy through the provision of new lending. Growth in new lending in Cyprus is focused on selected industries that are more in line with the Bank's target risk profile, such as tourism, trade, professional services, information/communication technologies, energy, education and green projects.

Aiming at supporting investments by SMEs and mid-caps to boost the Cypriot economy, and create new jobs for young people, the Bank continues to provide joint financed schemes. To this end, the Bank continues its partnership with the European Investment Bank (EIB), the European Investment Fund (EIF), the European Bank for Reconstruction and Development (EBRD) and the Cyprus Government.

Management is also placing emphasis on diversifying income streams by optimising fee income from international transaction services, wealth management and insurance. The Group's insurance companies, EuroLife Ltd and General Insurance of Cyprus Ltd operating in the sectors of life and general insurance respectively, are leading players in the insurance business in Cyprus, with such businesses providing a recurring income, further diversifying the Group's income streams. The insurance income net of insurance claims for FY2018 amounted to EUR53 mn, compared to EUR50 mn for FY2017, contributing to 16% of non-interest income.

In order to further optimise its funding structure, the Bank continues to focus on the shape and cost of deposit franchise, taking advantage of the increased customer confidence towards the Bank, as well as improving macroeconomic conditions.

Post the execution of further NPE reduction, the Bank is focusing on the need to manage costs.

The Bank continues its Digital Transformation Programme in collaboration with IBM, the Bank's Strategic Digital Transformation Partner, which focuses on three strategic pillars: developing digital services and products that enhance customer experience, streamlining internal processes and introducing new ways of working to improve the workplace environment. The Bank has spent the last year establishing the foundations to support the delivery of change. Various new products and features were introduced such as the launch of the new mobile app, the introduction of the 1Bank B2B (business to business) APIs (Application Programming Interface) which are interfaces that enable businesses to enjoy access to 1Bank functionality directly through their own systems without the need to access the 1Bank website. Moreover, the Bank is leading the way in Cyprus in establishing an open banking ecosystem, by being the first bank in Cyprus to launch its PSD2 APIs (Payment Service Directive2, Application Programming Interface) and also by integrating with eight UK banks allowing customers to view their account balances and transactions from the integrated banks together with their Bank of Cyprus accounts through 1Bank. Furthermore, several initiatives are in progress, including enhancing digital channels to improve customer experience, automating internal end to end processes using a BPM (Business Process Management) platform and introducing collaboration and knowledge sharing tools across the organisation.

E. Strategy and Outlook

The Group remains on track for implementing its strategic objectives aiming to become a stronger, safer and a more focused institution capable of supporting the recovery of the Cypriot economy and delivering appropriate shareholder returns in the medium term.

The key pillars of the Group's strategy are to:

   --      Materially reduce the level of delinquent loans 
   --      Further optimise the funding structure 
   --      Maintain an appropriate capital position by internally generating capital 
   --      Focus on the core Cyprus market 
   --      Achieve a lean operating model 
   --      Deliver value to shareholders and other stakeholders 
 
                      KEY PILLARS                                               PLAN OF ACTION 
      1. Materially reduce the level of delinquent 
      loans                                                  *    Sustain momentum in restructuring and continue 
                                                                  reduction of NPEs 
 
 
                                                             *    Focus on terminated portfolios (in Recovery Unit) - 
                                                                  "accelerated consensual foreclosures" 
 
 
                                                             *    Real estate management via REMU 
 
 
                                                             *    Continue to explore alternative measures for 
                                                                  accelerating NPE reduction, such as NPE sales, 
                                                                  securitisations etc. 
                                                        -------------------------------------------------------------- 
      2. Further optimise the funding structure          *    Focus on shape and cost of deposit franchise 
 
                                                        -------------------------------------------------------------- 
      3. Maintain an appropriate capital position        *    Internally generating capital 
 
                                                        -------------------------------------------------------------- 
      4. Focus on core Cyprus market 
                                                             *    Targeted lending in Cyprus into growing sectors to 
                                                                  fund recovery 
 
 
                                                             *    New loan origination, while maintaining lending 
                                                                  yields 
 
 
                                                             *    Revenue diversification via fee income from 
                                                                  international business, wealth, and insurance 
                                                        -------------------------------------------------------------- 
      5. Achieve a lean operating model 
                                                            *    Implementation of digital transformation program 
                                                                 underway, aimed at enhancing productivity through 
                                                                 alternative distribution channels and reducing 
                                                                 operating costs over time 
 
 
                                                            *    Post the execution of further NPE reduction, the Bank 
                                                                 is focusing on the need to manage costs 
                                                        -------------------------------------------------------------- 
      6. Deliver value 
                                                            *    Deliver appropriate medium term risk-adjusted returns 
                                                        -------------------------------------------------------------- 
 

Project Helix and the sale of the UK Group meaningfully change the shape of the Group going forward. Good progress has been achieved towards the completion of Project Helix which is largely dependent on regulatory approvals. Completion is currently expected around the end of 1Q2019 / early 2Q2019. These actions collectively are expected to result in a stronger, safer, more Cyprus focused Bank.

The organic reduction of residual NPEs (post Helix) is expected to continue in the coming quarters at a pace of c.EUR200 mn per quarter, as portfolio size and business line mix is expected to change radically. Furthermore, with the completion of these transactions, the Group's capital ratios are expected to be strengthened.

Please refer to the investors' presentation for the results of the year ended 31 December 2018 pro forma for DTC and Helix.

F. Definitions & Explanations

 
 Accelerated            Following the Regulation (EU) 2016/445 of the ECB 
  phase-in period        of 14 March 2016 on the exercise of options and discretions 
                         available in Union law (ECB/2016/4), the DTA phase-in 
                         period was reduced from 10 to 5 years, with effect 
                         as from the reporting of 31 December 2016. The applicable 
                         rate of the DTA phase-in is 60% for 2017, 80% for 
                         2018 and 100% for 2019 (fully phased-in). 
 
 Accumulated            Comprise (i) provisions for impairment of customer 
  provisions             loans and advances, (ii) the fair value adjustment 
                         on initial recognition of loans acquired from Laiki 
                         Bank and on loans classified at FVPL, and (iii) provisions 
                         for off-balance sheet exposures disclosed on the balance 
                         sheet within other liabilities. 
 
 Advisory and           Comprise mainly: fees of external advisors in relation 
  other restructuring    to: (i) disposal of operations and non-core assets, 
  costs                  (ii) customer loan restructuring activities which 
                         are not part of the effective interest rate and (iii) 
                         the listing on the London Stock Exchange 
 
 AT1                    AT1 (Additional Tier 1) is defined in accordance with 
                         Articles 51 and 52 of the Capital Requirements Regulation 
                         (EU) No 575/2013. 
 
 CET1 capital           CET1 capital ratio (transitional basis) is defined 
  ratio (transitional    in accordance with the Capital Requirements Regulation 
  basis)                 (EU) No 575/2013. 
 
 CET1 fully loaded      The CET1 fully loaded (FL) ratio is defined in accordance 
  (FL)                   with the Capital Requirements Regulation (EU) No 575/2013. 
 
 Contribution           Relates to the contribution made to the Single Resolution 
  to SRF                 Fund. 
 
 Cost to Income         Cost-to-income ratio comprises total expenses (as 
  ratio                  defined) divided by total income (as defined). 
 
 Data from the          The latest data was published on 14 February 2019. 
  Statistical 
  Service of the 
  Republic of 
  Cyprus 
 
 Deferred Tax           The DTA adjustments relate to Deferred Tax Assets 
  Asset (DTA)            totalling EUR302 mn and recognised on tax losses totalling 
  adjustments            EUR2.42 bn and can be set off against future profits 
                         of the Bank until 2028 at a tax rate of 12.5%. There 
                         are tax losses of c.EUR7 bn for which no deferred 
                         tax asset has been recognised. The recognition of 
                         deferred tax assets is supported by the Bank's business 
                         forecasts and takes into account the recoverability 
                         of the deferred tax assets within their expiry period. 
 
 ECB                    European Central Bank 
 
 ELA                    Emergency Liquidity Assistance 
 
 Gross loans            Gross loans are reported before the fair value adjustment 
                         on initial recognition relating to loans acquired 
                         from Laiki Bank (calculated as the difference between 
                         the outstanding contractual amount and the fair value 
                         of loans acquired) amounting to EUR462 mn at 31 December 
                         2018 (compared to EUR480 mn at 30 September 2018, 
                         EUR514 mn at 30 June 2018, EUR566 mn at 31 March 2018 
                         and to EUR668 mn at 31 December 2017). 
 
                         Additionally, gross loans (i) include loans and advances 
                         to customers measured at fair value through profit 
                         and loss of EUR456 mn and (ii) are reported after 
                         the reclassification between gross loans and expected 
                         credit losses on loans and advances to customers classified 
                         as a disposal group held for sale of EUR99 mn. 
 
 Group                  The Group consists f Bank of Cyprus Holdings Public 
                         Limited Company, "BOC Holdings" or the "Company", 
                         its subsidiary Bank of Cyprus Public Company Limited, 
                         the "Bank" and the Bank's subsidiaries. 
 
 Leverage ratio         The leverage ratio is the ratio of tangible total 
                         equity to total assets for the relevant period. 
 
 
 
 
 Market Shares        Both deposit and loan market shares are based on data 
                       from the Central Bank of Cyprus. 
 
                       The Bank is the single largest credit provider in 
                       Cyprus with a market share of 45.4% at 31 December 
                       2018, at the same levels as at 30 September 2018 and 
                       compared to 38.6% at 30 June 2018 and 37.4% at 31 
                       March 2018. 
 
                       The market share on loans was affected as at 30 September 
                       2018 following a decrease in total loans in the banking 
                       sector, mainly attributed to EUR6 bn non-performing 
                       loans of Cyprus Cooperative Bank (CyCB) which remained 
                       to SEDIPES as a result of the agreement between CyCB 
                       and Hellenic Bank. 
 
                       The market share on loans was affected as at 30 June 
                       2018 following a decrease in total loans in the banking 
                       sector of EUR2.1 bn, as reported by CBC, (due to loan 
                       reclassifications, revaluations, exchange rate or 
                       other adjustments). 
 
 Net fee and          Net fee and commission income over total income is 
  commission income    the net fee and commission income divided by the total 
  over total income    income (as defined). 
 
 Net Interest         Net interest margin is calculated as the net interest 
  Margin               income (annualised) divided by the average interest 
                       earning assets. Interest earning assets include: cash 
                       and balances with central banks, plus loans and advances 
                       to banks, plus net customer loans and advances, plus 
                       investments (excluding equities and mutual funds) 
                       and derivatives. 
 
 Net loans and        Loans and advances net of accumulated provisions (as 
  advances             defined). 
 
 Net loan to          Net loan to deposits ratio is calculated as the net 
  deposit ratio        loans and advances to customers divided by customer 
                       deposits, including net loans and deposits held for 
                       sale, where applicable. 
 
 Net Stable Funding   The NSFR is calculated as the amount of "available 
  Ratio (NSFR)         stable funding" (ASF) relative to the amount of "required 
                       stable funding" (RSF), on the basis of Basel III standards. 
                       Its calculation is a SREP requirement. The European 
                       Banking Authority (EBA) is working on finalising the 
                       NSFR and enforcing it as a regulatory ratio under 
                       CRR2. 
 
 Non-interest         Non-interest income comprises Net fee and commission 
  income               income, Net foreign exchange gains and net gains on 
                       other financial instruments and loss on disposal/dissolution 
                       of subsidiaries and associates, Insurance income net 
                       of claims and commissions, Net gains/(losses) from 
                       revaluation and disposal of investment properties 
                       and on disposal of stock of properties, and Other 
                       income. 
 
 Non-performing       According to the EBA reporting standards on forbearance 
  exposures (NPEs)     and non-performing exposures (NPEs), published in 
                       2014, ECB's Guidance to Banks on Non-Performing Loans 
                       published in March 2017 and EBA Guidelines on management 
                       of non-performing and forborne exposures published 
                       in October 2018 and applicable from June 2019, a loan 
                       is considered an NPE 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, or (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 NPEs are reported before the deduction 
                       of accumulated provisions (as defined). 
 
 Non-recurring        Non-recurring items as presented in the 'Unaudited 
  items                Consolidated Income Statement - Underlying basis' 
                       relate to: (i) advisory and other restructuring costs, 
                       (ii) discontinued operations (UK sale), (iii) loss 
                       relating to NPE sale (Helix) and (iv) impairment of 
                       DTA. 
 
 NPE ratio            NPEs ratio is calculated as the NPEs as per EBA (as 
                       defined) divided by gross loans (as defined). 
 
 Operating profit     Comprises profit before total provisions and impairments 
                       (as defined), share of profit from associates, tax, 
                       (profit)/loss attributable to non-controlling interests 
                       and non-recurring items (as defined). 
 
 
 Operating profit        Operating profit return on average assets is calculated 
  return on average       as the annualised operating profit (as defined) divided 
  assets                  by the average of total assets for the relevant period. 
 
 Phased-in Capital       In accordance with the legislation in Cyprus which 
  Conservation            has been set for all credit institutions, the applicable 
  Buffer (CCB)            rate of the CCB is 1.25% for 2017, 1.875% for 2018 
                          and 2.5% for 2019 (fully phased-in). 
 
 Pro forma for           Relates to the conversion of Deferred Tax Assets (DTA) 
  DTC                     to Deferred Tax Credits (DTC) as per CRR Article 39(2), 
                          following legislative amendments adopted by the Cyprus 
                          Parliament on 1 March 2019, allowing for a release 
                          of capital. According to Cyprus Law, for a law of 
                          the Parliament to become effective it must be published 
                          in the Official Gazette of the Republic and, unless 
                          another date is provided by the law itself, a law 
                          comes into operation upon such publication. In normal 
                          circumstances, a law is published in the Official 
                          Gazette of the Republic some days after it is adopted 
                          by Parliament. 
 
 Pro forma for           Relates to both pro forma for DTC (as defined) and 
  DTC and Helix           pro forma for Helix (as defined), in this order. 
 
 Pro forma for           In addition to the impact from Project Helix, this 
  Helix                   pro forma also includes the impact from the agreement 
                          for the sale of a portfolio of retail unsecured NPEs, 
                          with gross book value EUR33 mn as at 31 December 2018, 
                          known as Project Velocity. 
 
 Profit/(loss)           Excludes non-recurring items (as defined) 
  after tax and 
  before non-recurring 
  items 
 
 Provision charge        The provision charge comprises provisions for impairments 
                          of customer loans and provisions for off-balance sheet 
                          exposures, net of gain/(loss) on derecognition of 
                          loans and advances to customers and changes in expected 
                          cash flows. 
 
 Provisioning            Provisioning charge (cost of risk) (year to date) 
  charge (cost            is calculated as the provision charge (as defined) 
  of risk)                divided by average gross loans (the average balance 
                          calculated as the average of the opening balance and 
                          the closing balance). An amount of c.EUR500 mn reflecting 
                          the one-off effect of the change in the provisioning 
                          assumptions was included in the cost of risk for FY2017, 
                          but was not annualised. 
 
 Provisioning            Provisioning coverage ratio for NPEs is calculated 
  coverage ratio          as accumulated provisions (as defined) over NPEs (as 
  for NPEs                defined). 
 
 Quarterly average       Average of interest earning assets as at the beginning 
  interest earning        and end of the relevant quarter. Interest earning 
  assets                  assets include: cash and balances with central banks, 
                          plus loans and advances to banks, plus net customer 
                          loans and advances, plus investments (excluding equities 
                          and mutual funds) and derivatives. 
 
 Qoq                     Quarter on quarter change 
 
 Special levy            Relates to the special levy on deposits of credit 
                          institutions in Cyprus. 
 Total Capital           Total capital ratio is defined in accordance with 
  ratio                   the Capital Requirements Regulation (EU) No 575/2013. 
 
 Total expenses          Total expenses comprise staff costs, other operating 
                          expenses and the special levy and contribution to 
                          the Single Resolution Fund. It does not include 'advisory 
                          and other restructuring costs-excluding discontinued 
                          operations and NPE sale (Helix)' or any restructuring 
                          costs or loss relating to NPE sale (Helix). 
 
                          'Advisory and other restructuring costs-excluding 
                          discontinued operations and NPE sale (Helix)' amount 
                          to EUR42 mn for FY2018 (EUR16 mn for 4Q2018, EUR11 
                          mn for 3Q2018, EUR7 mn for 2Q2018 and EUR8 mn for 
                          1Q2018) and EUR29 mn for the year ended 31 December 
                          2017. Restructuring costs relating to NPE sale (Helix) 
                          amount to EUR18 mn for FY2018 (EUR1 mn for 4Q2018, 
                          EUR5 mn for 3Q2018, EUR6 mn for 2Q2018 and EUR6 mn 
                          for 1Q2018) and EURNil for the year ended 31 December 
                          2017. Loss relating to NPE sale (Helix) amounts to 
                          EUR150 mn for FY2018 (EURNil for 4Q2018, EUR15 mn 
                          for 3Q2018, EUR135 mn for 2Q2018 and EURNil for 1Q2018) 
                          and EURNil for the year ended 31 December 2017. 
 
 Total income            Total income comprises net interest income and non-interest 
                          income (as defined). 
 
 Total provisions        Total provisions and impairments comprise provision 
  and impairments         charge (as defined), plus (provisions)/reversal of 
                          provisions for litigation, regulatory and other matters 
                          plus (impairments)/reversal of impairments of other 
                          financial and non-financial assets. 
 
 Underlying basis        Statutory basis adjusted for certain items as detailed 
                          in the Basis of Presentation. 
 
 Write offs              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. 
 Yoy                     Year on year change 
 
 
 
 

Basis of Presentation

This announcement covers the results of Bank of Cyprus Holdings Public Limited Company, "BOC Holdings" or "the Company", its subsidiary Bank of Cyprus Public Company Limited, the "Bank" and together with the Bank's subsidiaries, the "Group", for the year ended 31 December 2018.

At 31 December 2016, the Bank was listed on the CSE and the Athens Exchange. On 18 January 2017, BOC Holdings, incorporated in Ireland, was introduced in the Group structure as the new holding company of the Bank. On 19 January 2017, the total issued share capital of BOC Holdings was admitted to listing and trading on the LSE and the CSE.

Financial information presented in this announcement is being published for the purposes of providing preliminary Group financial results for the year ended 31 December 2018. The financial information in this preliminary announcement is not audited and does not constitute statutory financial statements of BOC Holdings within the meaning of section 340 of the Companies Act 2014. The Group statutory financial statements for the year ended 31 December 2018 are expected to be delivered to the Registrar of Companies of Ireland within 28 days of 30 September 2019 (as at the date of this report, such statutory financial statements have not been reported on by independent auditors of BOC Holdings). The Board of Directors approved this financial information on 3 March 2019. BOC Holdings' most recent statutory financial statements for the purposes of Chapter 4 of Part 6 of the Companies Act 2014 of Ireland for the year ended 31 December 2017, upon which the auditors have given an unqualified audit report, were published on 27 March 2018 and have been annexed to the annual return and delivered to the Registrar of Companies of Ireland.

Statutory basis: Statutory information is set out on pages 4-5. However, a number of factors have had a significant effect on the comparability of the Group's financial position and results. Accordingly, the results are also presented on an underlying basis.

Underlying basis: The statutory results are adjusted for certain items (as described on pages 9-10) to allow a comparison of the Group's underlying performance, as set out on pages 6-8.

The financial information included in this announcement is not audited by the Group's external auditors.

This announcement and the presentation for the Preliminary Group Financial Results for the year ended 31 December 2018 have been posted on the Group's website www.bankofcyprus.com (Investor Relations/Financial Results).

Definitions: The Group uses a number of definitions in the discussion of its business performance and financial position which are set out in section F.

The Preliminary Group Financial Results for the year ended 31 December 2018 are presented in Euro (EUR) and all amounts are rounded as indicated. A comma is used to separate thousands and a dot is used to separate decimals.

Forward Looking Statements

This document contains certain forward-looking statements which can usually be identified by terms used such as "expect", "should be", "will be" and similar expressions or variations thereof. These forward-looking statements include, but are not limited to, statements relating to the Group's intentions, beliefs or current expectations and projections about the Group's future results of operations, financial condition, liquidity, performance, prospects, anticipated growth, provisions, impairments, strategies and opportunities. By their nature, forward-looking statements involve risk and uncertainty because they relate to events, and depend upon circumstances, that will or may occur in the future. Factors that could cause actual business, strategy and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements made by the Group include, but are not limited to: general economic and political conditions in Cyprus and other EU Member States, interest rate and foreign exchange fluctuations, legislative, fiscal and regulatory developments and information technology, litigation and other operational risks. Should any one or more of these or other factors materialise, or should any underlying assumptions prove to be incorrect, the actual results or events could differ materially from those currently being anticipated as reflected in such forward looking statements. The forward-looking statements made in this document are only applicable as from the date of publication of this document. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statement contained in this document to reflect any change in the Group's expectations or any change in events, conditions or circumstances on which any statement is based.

Contacts

For further information please contact:

Investor Relations

+ 357 22 122239

investors@bankofcyprus.com

The Bank of Cyprus Group is the leading banking and financial services group in Cyprus, providing a wide range of financial products and services which include retail and commercial banking, finance, factoring, investment banking, brokerage, fund management, private banking, life and general insurance. The Bank of Cyprus Group operates through a total of 112 branches in Cyprus. Bank of Cyprus also has representative offices in Russia, Ukraine and China. The Bank of Cyprus Group employs 4,146 staff worldwide. At 31 December 2018, the Group's Total Assets amounted to EUR22.1 bn and Total Equity was EUR2.4 bn. The Bank of Cyprus Group comprises Bank of Cyprus Holdings Public Limited Company, its subsidiary Bank of Cyprus Public Company Limited and its subsidiaries.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR CKQDNABKKNNK

(END) Dow Jones Newswires

March 04, 2019 02:01 ET (07:01 GMT)

Bank Of Cyprus Holdings ... (LSE:BOCH)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024 Haga Click aquí para más Gráficas Bank Of Cyprus Holdings ....
Bank Of Cyprus Holdings ... (LSE:BOCH)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024 Haga Click aquí para más Gráficas Bank Of Cyprus Holdings ....