Bank of Cyprus announced today (1/9) the group Financial Results for the six months of 2021. Group Chief Executive, P Nikolaou said: “Strong recovery in economic activity marked the second quarter of the year, against the backdrop of increasing vaccination coverage across Cyprus and the relaxation of restrictions. Leveraging on the stronger economic environment in the quarter, our strategy is beginning to deliver results, demonstrated by the improvement in our performance before non-recurring
items which nearly doubled on the prior quarter. At the same time, we further strengthened our balance sheet through the
completion of Project Helix 2, and successfully accessed the markets twice in the quarter, refinancing our Tier 2 capital
notes, as well as early achieving our interim regulatory MREL requirement'.

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Strong recovery underway

• 12.9% GDP growth in 2Q2021
• Continuing to support this recovery; new lending of €894 mn in 1H2021, up 30% yoy
• Tourism demonstrating signs of recovery; July 2021 arrivals +358% yoy or 54% of July 2019 levels
• 78% of the adult population in Cyprus vaccinated with the first dose1 and 74% have completed their
vaccination regime

Positive Operating Performance

• Total income of €152 mn for 2Q2021, up 11% qoq, Operating profit of €57 mn for 2Q2021 up 28% qoq
• Cost of risk of 52 bps for 2Q2021, improved by 14 bps qoq
• Profit after tax and before non-recurring items of €34 mn for 2Q2021 and €51 mn for 1H2021
• After recognising exceptional costs, loss after tax of €7 mn for 2Q2021 and profit after tax of €1 mn for 1H2021

Operating Efficiency

• Total operating expenses2 of €89 mn for 2Q2021, up 7% qoq, reflecting seasonality in prior quarter
• Cost to income ratio2 at 58% for 2Q2021, down 2 p.p. qoq
Good Capital, Strong Liquidity
• CET1 ratio of 14.2%3 and Total Capital ratio of 19.2%3
• MREL interim requirement of 1 Jan 2022 already achieved through the successful refinancing of Tier 2 and the
inaugural issuance of Senior Preferred notes in 2Q2021
• Deposits at €16.8 bn, up 3% qoq; Significant surplus liquidity of €5.7 bn (LCR at 303%)

Balance Sheet Repair Continuing
• €1.3 bn NPE sale (Helix 2 Portfolios A and B) completed in 2Q2021
• NPEs at €1.6 bn (€0.6 bn net)
• Gross NPE ratio reduced to 14.6% (6.4% net); organic NPE reduction of €171 mn in 1H2021
• Coverage improved to 60% over the quarter
• 96% of performing loans4 under expired payment deferrals with an instalment due by 12 August 2021,
presented no arrears


 

Group Chief Executive Statement:

“Strong recovery in economic activity marked the second quarter of the year, against the backdrop of increasing vaccination
coverage across Cyprus and the relaxation of restrictions. Leveraging on the stronger economic environment in the quarter,
our strategy is beginning to deliver results, demonstrated by the improvement in our performance before non-recurring
items which nearly doubled on the prior quarter. At the same time, we further strengthened our balance sheet through the
completion of Project Helix 2, and successfully accessed the markets twice in the quarter, refinancing our Tier 2 capital
notes, as well as early achieving our interim regulatory MREL requirement.

Vaccinations have a catalytic effect, unlocking both the economy and society. 78% of the adult population in Cyprus have
been vaccinated with the first dose and 74% have completed their vaccination regime. Further underscoring our
commitment to continue to support the country’s return to growth, we extended €407 mn of new loans in the quarter,
reaching €894 mn of new loans in the first half of the year, an increase of 30% compared to the same period last year.
During the second quarter of the year, we generated total income of €152 mn and a positive operating result of €57 mn, up
by 28% on the prior quarter. Our cost of risk reduced by a further 14 bps to 52 bps. We delivered a profit after tax and
before non-recurring items of €34 mn. After recognising non-recurring items, the most significant of which are €12 mn of
costs relating to the Tier 2 Capital Notes tender offer and €26 mn of costs relating to the NPE sales of which more than half
will be unwound over time, the overall result for the quarter was a loss after tax of €7 mn. The overall result for the first six
months of the year was a profit of €1 mn.

Our cost to income ratio (excluding levies and contributions) for the second quarter improved by 2 percentage points,
despite a 7% increase in total operating expenses, as a result of the 11% quarterly increase in total income. As previously
disclosed, we anticipate that our cost to income ratio will rise in the near term as revenues remain under pressure and
operating expenses increase due to higher IT/digitisation investment costs before decreasing to our target of mid-50% in
the medium term.

The Bank’s capital position remains sound and comfortably in excess of our regulatory requirements. As at 30 June 2021,
our capital ratios (on a transitional basis) were 19.2% for the Total Capital ratio and 14.2% for CET1 ratio. Following the
successful refinancing of our Tier 2 Capital Notes in April 2021, we proceeded with the inaugural issuance of €300 mn
senior preferred notes in June 2021 thereby early achieving our interim regulatory MREL requirement. Our liquidity position
also remains strong and we operate with €5.7 bn surplus liquidity and an LCR of 303%. Deposits on our balance sheet
increased in the quarter by 3% to €16.8 bn.

The process of balance sheet repair continues. In June 2021 we completed Project Helix 2 and derecognised €1.3 bn NPEs
from our balance sheet. We also organically reduced NPEs by €171 mn in the first half of the year. Overall, since the peak
in 2014, we have now reduced the stock of NPEs by €13.4 bn or 89% to €1.6 bn and the NPE ratio by 48 percentage points,
from 62.9% to 14.6%. We continue to actively explore strategies to accelerate de-risking including further portfolio sales,
and remain on track with achieving a single digit NPE ratio by the end of 2022. At the same time, we continue to closely
monitor the performance of loans which had been granted payment deferrals in the previous year. 96% of performing loans
whose payment deferrals have expired and had an instalment by mid-August, presented no arrears. This is a better
performance than expected, now nearly eight months after deferral expiry, and bodes well for future trends.

Whilst remaining alert to the uncertainties that the pandemic continues to bring, we anticipate the economic recovery to
continue in the second half of the year and into 2022, as economic activity continues to improve. In addition, the
implementation of the Cyprus Recovery and Resilience Plan is expected to support domestic activity and employment
through higher investment and to enhance growth potential through reforms. As the leading bank in Cyprus, we remain
committed to being part of this recovery through the continued support to our customers, colleagues and community, whilst
remaining absolutely committed to our strategic initiatives of completing de-risking, revenue enhancement and cost
optimisation through business transformation in order to deliver shareholder returns in the medium term.”