Bk. Cyprus Hldg Regulatory News (BOCH)

Announcement

Announcement for the Investor Update Event

Nicosia, 8 June 2023

Bank of Cyprus Holdings Public Limited Company ("BOCH" or the "Company" and together with its subsidiaries the "Group") announces that during the Investor Update event in London on Thursday 8 June 2023, it will present and discuss an update of BOCH's outlook.

BOCH has revised its 2023 and 2024 financial targets and raised its ROTE1 guidance to over 17% and over 14% respectively, from over 13% per annum (as previously announced on 20 February 2023). The key driver of the upgrade is the revised expectation for net interest income, primarily to reflect higher for longer rates.

Factoring in the current expectations for the evolution of interest rates (with the ECB deposit facility rate averaging 3% for 2023 and 3.1% for 2024), the net interest income guidance is upgraded and is now expected to exceed €650 mn for 2023 and to fall modestly to over €625 mn for 2024. For 2025 net interest income is expected to be lower than 2024 reflecting a lower projected ECB deposit facility rate of 2.5%. These net interest income targets incorporate assumptions of:

· modest loan growth of c.4% per annum for 2022-2025 in line with expected economic growth;

· careful growth of the fixed income portfolio;

· gradual increase in time and notice deposit pass-through to c.50% by June 2024 (previously expected by December 2023);

· a gradual change in deposit mix towards time and notice deposits to c.50% by December 2024 (previously expected by December 2023) and;

· higher wholesale funding costs.

Simultaneously the Group aims to grow further its capital-light non-interest income activities as well as improve the Group's operating efficiency and invest in the business. The cost to income ratio2 is now expected to fall below 40% for 2023 and then to increase modestly to c.40% for 2024.

The cost of risk target of 50-80 bps for 2023 remains unchanged to weather the ongoing macroeconomic and geopolitical uncertainties and then to normalise at around 40-50 bps over the medium-term, whilst maintaining prudent underwriting standards and meticulous assessment of customers' payment capabilities at all times. Currently, there are no signs of asset quality deterioration.

For 2025, BOCH expects to generate a ROTE1 of over 13% which is equivalent to over 16% based on a 15% CET1 ratio, reflecting lower interest rate assumptions. The NPE ratio is expected to drop further to below 3%.

These returns are expected to increase the Group's equity base, corresponding to a strong organic capital generation of between 200 and 250 bps per annum for 2023-2025, facilitating strong capital ratios and healthy capital buffers. By 31 December 2025, the Group expects its CET1 ratio to stand at c.19%, after deducting expected dividends per its dividend distribution policy3.

The Company's aim to provide sustainable shareholder returns is reiterated. Dividend payments3 are expected to build prudently and progressively over time, towards a payout ratio in the range of 30-50% of the Group's adjusted recurring profitability4.

For further information, please refer to the Investor Update presentation on the website www.bankofcyprus.com (Group/Investor Relations).

For further information, please contact Investor Relations at investors@bankofcyprus.com.

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 or their negative variations, but their absence does not mean that a statement is not forward-looking. Examples of forward-looking statements include, but are not limited to, statements relating to the Group's near term, medium term and longer term future capital requirements and ratios, intentions, beliefs or current expectations and projections about the Group's future results of operations, financial condition, expected impairment charges, the level of the Group's assets, liquidity, performance, prospects, anticipated growth, provisions, impairments, business 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 European Union (EU) Member States, interest rate and foreign exchange fluctuations, legislative, fiscal and regulatory developments, information technology, litigation and other operational risks, adverse market conditions, the impact of outbreaks, epidemics or pandemics, such as the COVID-19 pandemic and ongoing challenges and uncertainties posed by the COVID-19 pandemic for businesses and governments around the world. The Russian invasion of Ukraine has led to heightened volatility across global markets and to the coordinated implementation of sanctions on Russia, Russian entities and nationals. The Russian invasion of Ukraine has caused significant population displacement, and as the conflict continues, the disruption will likely increase. The scale of the conflict and the extent of sanctions, as well as the uncertainty as to how the situation will develop, may have significant adverse effects on the market and macroeconomic conditions, including in ways that cannot be anticipated. This creates significantly greater uncertainty about forward-looking statements. 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 at 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. Changes in our reporting frameworks and accounting standards, including the recently announced reporting changes and the implementation of IFRS 17 'Insurance Contracts', which may have a material impact on the way we prepare our financial statements and (with respect to IFRS 17) may negatively affect the profitability of Group's insurance business.

1. Return on Tangible Equity (ROTE) is calculated as Profit after Tax (annualised) (attributable to the owners of the Company) divided by average Shareholders' equity minus intangible assets.

2. Calculated using total operating expenses which comprise staff costs and other operating expenses. Total operating expenses do not include the special levy on deposits or other levies/contributions and do not include any advisory or other restructuring costs.

3. Any recommendation of a dividend is subject to regulatory approval

4. The Group's profit after tax before non-recurring items (attributable to the owners of the Company) taking into account distributions under other equity instruments such as the annual AT1 coupon.

Group Profile

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. At 31 March 2023, the Bank of Cyprus Group operated through a total of 64 branches in Cyprus, of which 4 operated as cash offices. The Bank of Cyprus Group employed 2,883 staff worldwide. At 31 March 2023, the Group's Total Assets amounted to €25.4 bn and Total Equity was €2.1 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.