Bk. Cyprus Hldg Regulatory News (BOCH)

Allowance for expected loan credit losses

Allowance for expected loan credit losses comprises: (i) allowance for expected credit losses (ECL) on loans and advances to customers (including allowance for expected credit losses on loans and advances to customers classified as non-current assets held for sale), (ii) the residual fair value adjustment on initial recognition of loans and advances to customers (including residual fair value adjustment on initial recognition of loans and advances to customers held for sale), (iii) allowance for expected credit losses on off-balance sheet exposures (financial guarantees and commitments) disclosed on the balance sheet within other liabilities and (iv) the aggregate fair value adjustment on loans and advances to customers classified and measured at FVPL.

Cost to income ratio

Cost to income ratio is calculated as the total staff costs (excluding 'Restructuring costs - Voluntary Staff Exit Plan (VEP)') (on an underlying basis as reconciled in the table further below), special levy on deposits and other levies/contributions and other operating expenses (excluding 'Advisory and other restructuring costs-organic', 'Restructuring and other costs relating to NPE sales', and 'provisions for litigation, claims, regulatory and other matters' (on an underlying basis as reconciled in the table further below) divided by total income as per the underlying basis (as defined below).

Digitally engaged customers ratio

This is the ratio of digitally engaged individual customers to the total number of individual customers. Digitally engaged customers are the individuals who use the digital channels of BOC PCL (mobile banking app, browser and ATMs) to perform banking transactions, as well as digital enablers such as a bank-issued card to perform online card purchases, based on an internally developed scorecard.

Gross loans

Gross Loans comprise: (i) gross loans and advances to customers measured at amortised cost before the residual fair value adjustment on initial recognition (including loans and advances to customers classified as non-current assets held for sale) and (ii) loans and advances to customers classified and measured at FVPL adjusted for the aggregate fair value adjustment.

Gross loans are reported before the residual fair value adjustment on initial recognition relating mainly to loans acquired from Laiki Bank (calculated as the difference between the outstanding contractual amount and the fair value of loans acquired at acquisition).

Interest earning assets

Interest earning assets include: cash and balances with central banks, plus loans and advances to banks, plus net loans and advances to customers (including net loans and advances to customers classified as non-current assets held for sale) (as defined below), plus investments (excluding equities and mutual funds).

Leverage ratio

The leverage ratio is the ratio of tangible total equity (including Other equity instruments) to total assets as presented on the balance sheet.

Loan credit losses

Loan credit losses comprise: (i) credit losses to cover credit risk on loans and advances to customers, (ii) net gains on derecognition of financial assets measured at amortised cost and (iii) net gains on loans and advances to customers at FVPL, for the period.

Loan credit losses charge (cost of risk)

Loan credit losses charge (cost of risk) (year to date) is calculated as the loan credit losses (as defined) (annualised based on year to date days) divided by the average gross loans (as defined). The average gross loans are calculated as the average of the opening balance and the closing balance for the period.

Net fee and commission income over total income

Fee and commission income less fee and commission expense divided by total income (as defined).

Net Interest Margin

Net interest margin is calculated as the net interest income (per the underlying basis) (annualised based on year to date days) divided by the quarterly average interest earning assets (as defined). Quarterly average interest earning assets exclude interest earning assets of any discontinued operations at each quarter end, if applicable.

Net loans and advances to customers

Net loans and advances to customers comprise gross loans (as defined) net of allowance for expected loan credit losses (as defined, but excluding allowance for expected credit losses on off-balance sheet exposures disclosed on the balance sheet within other liabilities).

Net loans to deposits ratio

Net loans to deposits ratio is calculated as the gross loans (as defined) net of allowance for expected loan credit losses (as defined), divided by customer deposits.

New lending

New lending includes the disbursed amounts of the new and existing non-revolving facilities (excluding forborne or re-negotiated accounts) as well as the average year to date change (if positive) of the current accounts and overdraft facilities between the balance at the beginning of the period and the end of the period. Recoveries are excluded from this calculation since their overdraft movement relates mostly to accrued interest and not to new lending.

Non-performing exposures (NPEs)

As per the EBA standards and European Central Bank's (ECB) Guidance to Banks on Non-Performing Loans (which was published in March 2017), NPEs are defined as those exposures that satisfy one of the following conditions: 

(i) The borrower is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due amount or of the number of days past due.

(ii) Defaulted or impaired exposures as per the approach provided in the Capital Requirement Regulation (CRR), which would also trigger a default under specific credit adjustment, diminished financial obligation and obligor bankruptcy.

(iii) Material exposures as set by the Central Bank of Cyprus (CBC), which are more than 90 days past due.

(iv) Performing forborne exposures under probation for which additional forbearance measures are extended.

(v) Performing forborne exposures previously classified as NPES that present more than 30 days past due within the probation period.

From 1 January 2021 two regulatory guidelines came into force that affect NPE classification and Days-Past-Due calculation. More specifically, these are the RTS on the Materiality Threshold of Credit Obligations Past-Due (EBA/RTS/2016/06), and the Guideline on the Application of the Definition of Default under article 178 (EBA/GL/2016/07).

The Days-Past-Due (DPD) counter begins counting DPD as soon as the arrears or excesses of an exposure reach the materiality threshold (rather than as of the first day of presenting any amount of arrears or excesses). Similarly, the counter will be set to zero when the arrears or excesses drop below the materiality threshold. Payments towards the exposure that do not reduce the arrears/excesses below the materiality threshold, will not impact the counter.

For retail debtors, when a specific part of the exposures of a customer that fulfils the NPE criteria set out above is greater than 20% of the gross carrying amount of all on-balance sheet exposures of that customer, then the total customer exposure is classified as non‑performing; otherwise only the specific part of the exposure is classified as non‑performing.

For non‑retail debtors, when an exposure fulfils the NPE criteria set out above, then the total customer exposure is classified as non‑performing.

Material arrears/excesses are defined as follows:

- Retail exposures: Total arrears/excess amount greater than €100

- Exposures other than retail: Total arrears/excess amount greater than €500

and the amount in arrears/excess is at least 1% of the customer's total exposure.

The NPEs are reported before the deduction of allowance for expected loan credit losses (as defined).

Non-recurring items

Non-recurring items as presented in the 'Unaudited Consolidated Income Statement on the underlying basis' relate to: (i) Advisory and other restructuring costs - organic, (ii) Provisions/net loss relating to NPE sales, (iii) Restructuring and other costs relating to NPE sales, and (iv) Restructuring costs - Voluntary Staff Exit Plan (VEP).

NPE coverage ratio

The NPE coverage ratio is calculated as the allowance for expected loan credit losses (as defined) over NPEs (as defined).

NPE ratio

The NPE ratio is calculated as the NPEs (as defined) divided by gross loans (as defined). 

Operating profit

before credit losses and impairments

Operating profit before credit losses and impairments (on an underlying basis) comprises profit before loan credit losses (as defined), impairments of other financial and non-financial assets, provisions for litigation, claims, regulatory and other matters, tax, profit attributable to non-controlling interests and non-recurring items (as defined).

Operating profit return on average assets

Operating profit before credit losses and impairments return on average assets is calculated as the annualised (based on year to date days) operating profit (on an underlying basis) (as defined) divided by the quarterly average of total assets for the relevant period. Average total assets exclude total assets of discontinued operations at each quarter end, if applicable.

Profit/(loss) after tax and before non-recurring items (attributable to the owners of the Company)

Profit/(loss) after tax and before non-recurring items (attributable to the owners of the Company) is the operating profit (as defined) adjusted for loan credit losses (as defined), impairments of other financial and non-financial assets, provisions for litigation, claims, regulatory and other matters, tax and (profit)/loss attributable to non-controlling interests.

Profit/(loss) after tax - organic (attributable to the owners of the Company)

Profit/(loss) after tax - organic (attributable to the owners of the Company) is the profit/(loss) after tax and before non-recurring items (as defined) (attributable to the owners of the Company), except for the 'Advisory and other restructuring costs - organic'.

Return on Tangible Equity (ROTE) after tax and before non-recurring items

Return on Tangible Equity (ROTE) after tax and before non-recurring items is calculated as Profit/(loss) after tax and before non-recurring items (attributable to the owners of the Company) (as defined) per the underlying basis (annualised - (based on year-to-date days)), divided by the quarterly average of Shareholders' equity minus intangible assets at each quarter end.

Return on Tangible Equity (ROTE)

Return on Tangible Equity (ROTE) is calculated as Profit/(loss) after tax (attributable to the owners of the Company) (as defined) per the underlying basis (annualised - (based on year-to-date days)), divided by the quarterly average of Shareholders' equity minus intangible assets at each quarter end.

Total income

Total income on the underlying basis comprises the total of net interest income, net fee and commission income, net foreign exchange gains, net gains/(losses) on financial instruments (excluding net gains on loans and advances to customers at FVPL), insurance income net of claims and commissions, net gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of property and other income (on an underlying basis). A reconciliation of these amounts between the statutory and the underlying bases is disclosed in the Interim Management Report under section 'Group financial results on the underlying basis'.

30 June 2022

31 December 2021

€000

€000

Gross loans and advances to customers as per the underlying basis (as defined above)

11,047,029

10,856,660

Reconciling items:

Residual fair value adjustment on initial recognition (Note 29.4)

(96,070)

(105,678)

Gross loans and advances to customers at amortised cost classified as held for sale (Note 29.4)

(551,806)

(555,789)

Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)

(18,043)

(19,090)

Loans and advances to customers measured at fair value through profit or loss (Note 16)

(282,184)

(281,868)

Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss

(30,560)

(53,700)

Gross loans and advances to customers at amortised cost as per the Consolidated Condensed Interim Financial Statements (Note 16)

10,068,366

9,840,535

30 June 2022

31 December 2021

€000

€000

Gross loans and advances to customers classified as held for sale as per the underlying basis

569,849

574,879

Reconciling items:

Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)

(18,043)

(19,090)

Loans and advances to customers classified as held for sale as per the Consolidated Condensed Interim Financial Statements (Note 19)

551,806

555,789

30 June 2022

31 December 2021

€000

€000

Allowance for expected credit losses on loans and advances to customers (ECL) as per the underlying basis (as defined above)

677,241

791,830

Reconciling items:

Residual fair value adjustment on initial recognition (Note 29.4)

(96,070)

(105,678)

Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss

(30,560)

(53,700)

Allowance for expected credit losses on loans and advances to customers classified as held for sale (Note 19)

(304,599)

(305,419)

Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)

(18,043)

(19,090)

Provisions for financial guarantees and commitments (Note 23)

(21,518)

(21,945)

Allowance for ECL for impairment of loans and advances to customers as per the Consolidated Condensed Interim Financial Statements (Note 16)

206,451

285,998

30 June

2022

31 December 2021

€000

€000

Allowance for expected credit losses on loans and advances to customers (ECL) classified as held for sale as per the underlying basis

322,642

324,509

Reconciling items:

Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)

(18,043)

(19,090)

Allowance for ECL for impairment of loans and advances to customers classified as held for sale as per the Consolidated Condensed Interim Financial Statements (Note 19)

304,599

305,419

30 June

2022

31 December 2021

€000

€000

NPEs as per the underlying basis (as defined above)

1,167,609

1,343,308

Reconciling items:

Loans and advances to customers (NPEs) classified as held for sale (Note 1 below)

(549,681)

(553,619)

Residual fair value adjustment on initial recognition of loans and advances to customers (NPEs) classified as held for sale (Note 2 below)

(18,002)

(19,030)

Loans and advances to customers measured at fair value through profit or loss (NPEs)

(99,979)

(122,972)

POCI (NPEs) (Note 3 below)

(39,731)

(70,814)

Residual fair value adjustment on initial recognition of loans and advances to customers (NPEs) classified as Stage 3 (Note 29.4)

(3,905)

(3,530)

Stage 3 gross loans and advances to customers at amortised cost as per the Consolidated Condensed Interim Financial Statements (Note 29.4)

456,311

573,343

NPE ratio

NPEs (as per table above) (€000)

1,167,609

1,343,308

Gross loans and advances to customers (as per table above) (€000)

11,047,029

10,856,660

Ratio of NPE/Gross loans (%)

10.6%

12.4%

30 June 2022

€000

Gross Loans (as per table 1 (a) above)

11,047,029

Reconciling items:

Gross loans and advances to customers classified as held for sale

(Project Helix 3 and Sinope) (as per table 1 (b) above)

(569,849)

Gross loans and advances to customers - Pro forma

10,477,180

30 June 2022

€000

NPEs (as per table 3 above)

1,167,609

Reconciling items:

Gross loans and advances to customers (NPEs) classified as held for sale (Project Helix 3 and Sinope) (Note 1 of table 3 above)

(549,681)

Residual fair value adjustment on initial recognition of loans and advances to customers (NPEs) classified as held for sale (Project Helix 3 and Sinope) (Note 2 of table 3 above)

(18,002)

NPEs - Pro forma

599,926

NPE ratio - Pro forma

30 June 2022

NPEs - Pro forma (as per table above) (€000)

599,926

Gross loans and advances to customers - Pro forma (as per table above) (€000)

10,477,180

Ratio of NPEs/Gross loans - Pro forma (%)

5.7%

Six months ended

30 June

2022

2021

€000

€000

Loan credit losses as per the underlying basis

23,118

35,237

Reconciling items:

Loan credit losses relating to NPE sales, disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales' under the underlying basis

385

15,210

23,503

50,447

Loan credit losses (as defined) are reconciled to the statutory basis as follows:

Credit losses to cover credit risk on loans and advances to customers (Note 10)

23,959

48,349

Net gains on derecognition of financial assets measured at amortised cost - loans and advances to customers (see further below)

(2,515)

(1,053)

Net losses on loans and advances to customers at FVPL (Note 8)

2,059

3,151

23,503

50,447

Six months ended

30 June

1.1. Net interest income used in the calculation of NIM

2022

2021

€000

Net interest income as per the underlying basis/statutory basis

145,695

152,213

Net interest income used in the calculation of NIM (annualized)

293,805

306,949

1.2.  Interest earning assets

30 June

2022

31 March

2022

31 December

2021

€000

€000

€000

Cash and balances with central banks

9,904,549

9,329,711

9,230,883

Loans and advances to banks

312,308

312,967

291,632

Loans and advances to customers

10,144,099

10,004,197

9,836,405

Loans and advances to customers held for sale

(Note 19)

247,207

247,836

250,370

Prepayments, accrued income and other assets - Deferred consideration receivable ('DPP') (Note 18)

304,268

302,036

299,766

Investments

Debt securities (Note 13)

1,913,771

1,860,853

1,930,388

Less: Investments which are not interest bearing

(5,476)

(5,790)

(5,534)

Total interest earning assets

22,820,726

22,051,810

21,833,910

1.3.  Quarterly average interest earning assets (€000)

- as at 30 June 2022

22,235,482

- as at 30 June 2021

19,651,625

Six months ended

30 June

1.4. Net interest margin (NIM)

2022

2021

Net interest income (annualised) (as per table 1.1 above) (€000)

293,805

306,949

Quarterly average interest earning assets (as per table 1.3 above) (€000)

22,235,482

19,651,625

NIM (%)

1.32%

1.56%

Six months ended

30 June

2022

2021

2.1.1.  Reconciliation of Staff costs

€000

€000

Total Staff costs as per the underlying basis

100,005

100,866

Staff costs - voluntary exit plans and other termination benefits, separately presented under the underlying basis (Note 9)

3,130

-

Total Staff costs as per the statutory basis

103,135

100,866

Six months ended

30 June

2022

2021

2.1.2.  Reconciliation of Other operating expenses

€000

€000

Other operating expenses as per the underlying basis

73,125

69,487

Reclassifications for:

Operating expenses and restructuring costs relating to the NPE sales, presented within 'Restructuring and other costs relating to NPE sales' under the underlying basis

1,389

16,477

Provisions for pending litigations, claims, regulatory and other matters, separately presented under the underlying basis (Note 9)

593

4,360

Advisory and other restructuring costs - organic, separately presented under the underlying basis

5,286

5,264

Other operating expenses as per the statutory basis (Note 9)

80,393

95,588

Six months ended

30 June

2022

2021

2.1.3.  Special levy on deposits and other levies/contributions

€000

€000

Special levy on deposits and other levies/contributions as per the underlying basis/statutory basis

16,507

15,255

Six months ended

30 June

2022

2021

2.2.1.  Reconciliation of Net fee and commission income

€000

€000

Total Net fee and commission income as per the underlying basis/statutory basis

93,639

83,857

Six months ended

30 June

2022

2021

(restated)

2.2.2.  Reconciliation of Net foreign exchange gains, Net losses on financial instruments and Net gains on derecognition of financial assets measured at amortised cost

€000

€000

Net foreign exchange gains, Net losses on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the underlying basis

11,030

8,938

Reclassifications for:

Net losses on loans and advances to customers measured at fair value through profit or loss (FVPL), disclosed within 'Loan credit losses' per the underlying basis (Note 8)

(2,059)

(3,151)

Net gains on derecognition of loans and advances to customers (Table 6 Section 'Reconciliations' above)

2,515

1,053

Net loss on early redemption of subordinated loan stock, disclosed within 'Advisory and other restructuring costs - organic' under the underlying basis (Note 8)

-

(12,433)

Total Net foreign exchange gains, Νet losses on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the statutory basis (see below)

11,486

(5,593)

Net foreign exchange gains as per the statutory basis

11,898

6,550

Net losses on financial instruments as per the statutory basis (Note 8)

(2,060)

(13,196)

Net gains on derecognition of financial assets measured at amortised cost

1,648

1,053

Total Net foreign exchange gains, Net losses on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the statutory basis

11,486

(5,593)

Six months ended

30 June

2022

2021

(restated)

2.3 Total Income as per the underlying basis

€000

€000

Net interest income as per the underlying basis/statutory basis (as per table above)

145,695

152,213

Net fee and commission income as per the underlying basis/statutory basis (as per table above)

93,639

83,857

Net foreign exchange gains, Net losses on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the underlying basis (as per table above)

11,030

8,938

Insurance income net of claims and commissions (as per the statutory basis)

32,869

31,068

Net losses from revaluation and disposal of investment properties and Net gains on disposal of stock of properties (as per the statutory basis)

6,870

5,991

Other income (as per the statutory basis)

8,927

5,854

Total Income as per the underlying basis

299,030

287,921

Six months ended

30 June

2022

2021

2.4 Total Expenses as per the underlying basis

€000

€000

Staff costs as per the underlying basis (as per table above)

100,005

100,866

Special levy on deposits and other levies/contributions as per the underlying basis (as per table above)

16,507

15,255

Other operating expenses as per the underlying basis (as per table above)

73,125

69,487

Total Expenses as per the underlying basis

189,637

185,608

Cost to income ratio

Total expenses (as per table above) (€000)

189,637

185,608

Total income (as per table above) (€000)

299,030

287,921

Total expenses/Total income (%)

63%

64%

30 June

2022

31 March

2022

31 December

2021

€000

€000

€000

Total assets used in the computation of the operating profit return on average assets/per the Interim Consolidated Balance Sheet

25,843,732

25,117,310

24,962,697

Quarterly average total assets (€000)

- as at 30 June 2022

25,307,913

- as at 30 June 2021

22,923,012

2022

2021

(restated)

Annualised total income for the six months ended 30 June (as per table 2.3 above) (€000)

603,016

580,614

Annualised total expenses for the six months ended 30 June (as per table 2.4 above) (€000)

(382,417)

(374,292)

Annualised operating profit for the six months ended 30 June (€000)

220,599

206,322

Quarterly average total assets as at 30 June (€000)

25,307,913

22,923,012

Operating profit return on average assets (annualised) (%)

0.9%

0.9%

2022

2021

Profit after tax and before non-recurring items (attributable to the owners of the Company) per the underlying basis for the six months ended 30 June (as per table below) (€000)

60,278

50,123

Weighted average number of shares in issue during the period, excluding treasury shares (€000) (Note 12)

446,058

446,058

Basic earnings after tax and before non-recurring items per share attributable to the owners of the Company (€ cent)

13,51

11,24

Six months ended

30 June

2022

2021

€000

€000

Profit after tax and before non-recurring items (attributable to the owners of the Company) per the underlying basis

60,278

50,123

Reclassifications for:

Loan credit losses relating to NPE sales, disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales' under the underlying basis (as per table 6 above)

(385)

(15,210)

Operating expenses and restructuring costs relating to the NPE sales, presented within 'Restructuring and other costs relating to NPE sales' under the underlying basis (as per table 2.1.2 above)

(1,389)

(16,477)

Advisory and other restructuring costs - organic, separately presented under the underlying basis (as per table 2.1.2 above)

(5,286)

(5,264)

Staff costs - voluntary exit plan, and other termination benefits, separately presented under the underlying basis (as per table 2.1.1 above)

(3,130)

-

Net loss on early redemption of Subordinated loan stock, disclosed within 'Advisory and other restructuring costs - organic' under the underlying basis (as per table 2.2.2 above) (Note 8)

-

(12,433)

Profit after tax (attributable to the owners of the Company) per the statutory basis

50,088

739

2022

2021

Annualised profit after tax and before non-recurring items (attributable to the owners of the Company) per the underlying basis for the six months ended 30 June (as per table 4.1. above) (€000)

121,555

101,077

Quarterly average tangible total equity as at 30 June (as per table 5.2 below) (€000)

1,668,185

1,648,569

ROTE after tax and before non-recurring items (%)

7.3%

6.1%

5.1 Tangible total equity

30 June

2022

31 March

2022

31 December

2021

€000

€000

€000

Equity attributable to the owners of the Company (as per the statutory basis)

1,849,525

1,849,287

1,838,793

Less: Intangible assets (as per the statutory basis)

(171,403)

(177,612)

(184,034)

Total tangible equity

1,678,122

1,671,675

1,654,759

5.2 Quarterly average tangible total equity (€000)

- as at 30 June 2022

1,668,185

- as at 30 June 2021

1,648,569