1Q2020 Group Financial Results

RNS Number : 9067N

Bank of Cyprus Holdings PLC

26 May 2020

Announcement

Group Financial Results for the quarter ended 31 March 2020

Nicosia, 26 May 2020

Key Highlights for the quarter ended 31 March 2020

COVID-19

· Safeguarding health of staff and customers, while ensuring operational resilience of the Bank

· Supporting both customers affected by COVID-19 and wider Cypriot economy

· Gradual relaxation of restrictive measures; currently in second phase

· Additional 88 bps of cost of risk (€28 mn) for 1Q2020 reflecting deterioration of macroeconomic outlook

· NPE portfolio sale delayed due to prevailing market and operational conditions

· Current focus on proactively assessing the impact of COVID-19 on loan portfolio

Good Capital and Liquidity Position

· Total Capital ratio of 17.7% and CET1 ratio of 14.3% (IFRS 9 transitional)

· Significant surplus liquidity of €3.0 bn

Continued Balance Sheet Repair in 1Q2020

· Organic NPE reduction of €142 mn for 1Q2020, despite COVID-19 lockdown in March 2020

· NPEs reduced to €3.7 bn (€1.6 bn net)

· Gross NPE ratio reduced to 29% (net NPE ratio at 15%)

· Coverage increased to 56%; total coverage at 124% when including collateral

· Sale of €133 mn NPEs (Velocity 2) completed in May 2020; capital neutral

Operational efficiency

· Cost to income ratio (excluding special levy and contributions to SRF and DGF) reduced to 58%, following the successful completion of Voluntary Staff Exit Plan in 4Q2019

· Total operating expenses reduced to €84 mn for 1Q2020, down by 14% qoq

· 70% of customers currently digitally engaged

Performance in 1Q2020

· New lending of €451 mn for 1Q2020 (up 2% qoq)

· Total Income of €145 mn, Operating profit of €52 mn for 1Q2020

· Loan credit losses of €64 mn in 1Q2020 (cost of risk at 200 bps), including COVID-related charge of €28 mn

· Underlying result of a loss after tax from organic operations of €23 mn for 1Q2020

· Loss after tax of €26 mn for 1Q2020

Group Chief Executive Statement

"We are closely monitoring the effects of COVID-19 on both the global and Cypriot economy. The Government's swift and decisive reaction to the outbreak of COVID-19 in Cyprus has successfully contained the spread of the pandemic in the country and today the health situation is stable. As we announce our first quarter results, less than a month after the release of the 2019 results, Cyprus has already entered a phased approach to exiting from lockdown with the gradual relaxation of containment measures, and we have already seen a parallel movement in economic activity.

Whilst uncertainty for the outlook remains, our priorities remain clear; to support our customers impacted by COVID-19, as well as the wider Cypriot economy, whilst safeguarding the health of our colleagues and customers. From the beginning of the crisis, we have stepped up our engagement with our customers to understand their new financial position and needs, in order to find effective ways to support them.

Our results this quarter reflect the continued progress against our core objective of balance sheet repair. We further reduced our NPEs organically by €142 mn, despite the COVID-19 lockdown in March 2020. Since the peak in 2014, we have now reduced the stock of NPEs by 75% to €3.7 bn, representing 29% of gross loans (15% on a net NPE basis). NPE coverage has now increased to 56% and total coverage including collateral is at 124%. Additionally, in May 2020, amidst the COVID-19 crisis, we completed Project Velocity 2, relating to the sale of €133 mn NPEs.

The Bank's capital position remains good and in excess of our regulatory requirements. As at 31 March 2020, our capital ratios (IFRS 9 transitional) were Total Capital ratio of 17.7% and CET1 of 14.3%, against an amended CET1 requirement of 9.7% following the regulator's capital easing measures for COVID-19.

We continue to operate with significant liquidity surplus of €3.0 bn. New lending in the first quarter reached €451 mn, 2% higher compared to the previous quarter, helping to support the local economy.

Our cost to income ratio improved by five percentage points this quarter to 58%, following the successful completion of the Voluntary Staff Exit Plan last October. Overall, total operating expenses reduced by 14% compared to the previous quarter, enabled by our enhanced digital transformation. Currently, 70% of our customers are digitally engaged.

In the first quarter of the year, we generated total income of €145 mn and a positive operating result of €52 mn. The underlying result for the quarter however, was a loss of €23 mn and the overall result a loss of €26 mn, impacted by the higher loan credit losses of €64 mn to reflect deterioration of the macroeconomic outlook (COVID-related loan credit losses of €28 mn - additional cost of risk of 88 bps).

The economic outlook has deteriorated with the impact of COVID-19, and we are seeing this in reduced levels of activity in transactions and lower demand for new loans. The economic effects are expected to have a negative impact on the Group's 2020 financial performance. The full impact remains uncertain and will be driven by the duration of COVID-19 restrictions, the successful reopening of the economy and the timing and shape of the economic recovery.

Our strategy remains clear. We continue our efforts to strengthen the balance sheet, improve our asset quality and enhance the efficiency of our operations through cost reduction enabled by digital transformation. The Group is well positioned, with a good capital base and strong liquidity position, and stands ready to support this recovery and the Cypriot economy."

Panicos Nicolaou

Update on COVID-19

The Group is closely monitoring developments in, and the effects of COVID-19 on both the global and Cypriot economy. On the basis of currently available information, the Group is not in a position to accurately assess the magnitude of the impact of COVID-19 on the Group's operations and financial results, as this will principally depend on the rate and extent of the spread of the virus, its direct and indirect impact on customers and the effectiveness of the regulatory and fiscal measures taken to support the economy and mitigate the impact of the virus.

Despite the lower transactional income and lower demand for loans currently observed, the on-going economic uncertainty means that the Group does not have sufficient visibility about the impact of COVID-19 on its operations or financial results, and therefore, is currently not in a position to provide guidance for the current financial year. However, the Group's good capital base and strong liquidity, position it to be able to support its customers through this period of extreme volatility.

Pandemic Plan and Operational Impact due to COVID-19

COVID-19 is a health crisis, presenting an unprecedented external economic shock. The Bank's priorities are clear.

Key priorities

• Safeguarding the health of staff and customers, while ensuring operational resilience of the Bank

• Supporting customers affected by COVID-19 and wider Cypriot economy

• Provision of liquidity to affected businesses and households to alleviate short term cash flow burden

Measures taken to Safeguard Health and Safety

• Establishment of a committee to monitor COVID-19 measures, trace incidents and to provide regular updates to staff

• Implementation of Health and Safety measures in line with the guidelines and recommendations issued by Ministry of Health

• Special purpose leave for employees that belong to vulnerable groups

• Enhanced intensive clean-ups, a precautionary disinfection procedure is in place throughout the Bank

• Shipment of masks, gloves and sanitisers to branches

• Participation in Government's COVID-19 testing schemes

Measures taken to Ensure Operational Resilience

• Activation of the Pandemic Plan to ensure operational resilience and no disruption of the day-to-day activities

• Splitting the operations of critical units to separate locations and provision of remote access availability

• Branch network operated on a rotational basis, as a precautionary measure until 4 May 2020, when first phase of relaxation measured commenced

• 28% of staff (excluding branches) currently working remotely, compared to 44% during the lockdown period

• Digital service channels provide alternative solutions for customers for carrying out daily banking transactions online

• 70% of customers are currently digitally engaged

Supporting customers affected by COVID-19 and wider Cypriot economy through the provision of liquidity to alleviate short term cash flow burden

• Implementation of moratorium of loan instalments (both capital and interest) for nine months, available to all customers (both businesses and private individuals) with less than 30 days past due as at 29 February 2020, as per the Government measures

• Over 24,000 applications received to date (c.€5.8 bn, representing 63% of gross loans excluding legacy)

• Provision of liquidity to affected businesses and households to alleviate short term cash flow burden through:

• New set of measures expected to be announced, to replace Government guaranteed facilities proposal now withdrawn

• Short term funding based on Central Bank of Cyprus (CBC) directive

• Other lending products

For further information please refer to the sections B 'Operating Environment' and C 'Business Overview' on pages 23-27.

A. Group Financial Results - Underlying Basis
Unaudited Interim Condensed Consolidated Income Statement
€ mn	1Q2020	1Q2019¹	4Q2019¹	qoq +%	yoy +%
Net interest income	85	85	84	2%	0%
Net fee and commission income	38	37	39	-1%	4%
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates	6	10	4	37%	-45%
Insurance income net of claims and commissions	11	12	16	-28%	-8%
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties	1	4	6	-87%	-79%
Other income	4	8	7	-39%	-45%
Total income	145	156	156	-7%	-7%
Staff costs	(49)	(56)	(53)	-9%	-12%
Other operating expenses	(35)	(41)	(43)	-20%	-17%
Special levy and contributions to Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF)	(9)	(6)	(7)	50%	45%
Total expenses	(93)	(103)	(103)	-10%	-10%
Operating profit	52	53	53	0%	0%
Loan credit losses	(64)	(47)	(29)	120%	36%
Impairments of other financial and non-financial assets	(4)	(1)	(13)	-65%	-
Provisions for litigation, claims, regulatory and other matters	(2)	(0)	(7)	-72%	-
Total loan credit losses, impairments and provisions	(70)	(48)	(49)	43%	49%
(Loss)/profit before tax and non-recurring items	(18)	5	4	-	-
Tax	(2)	(2)	(2)	3%	-40%
Profit attributable to non-controlling interests	(0)	(0)	(0)	-	-
(Loss)/profit after tax and before non-recurring items (attributable to the owners of the Company)	(20)	3	2	-	-
Advisory and other restructuring costs - organic	(3)	(6)	(8)	-56%	-48%
Loss after tax - organic (attributable to the owners of the Company)	(23)	(3)	(6)	-	-
Restructuring costs - Voluntary Staff Exit Plan (VEP)	-	-	(81)	-	-
Provisions/net loss relating to NPE sales, including restructuring expenses²	(3)	(5)	(86)	-97%	-31%
Share of profit from associates (CNP)	-	2	-	-	-
Reversal of impairment of DTA and impairment of other tax receivables	-	101	(13)	-	-
(Loss)/profit after tax (attributable to the owners of the Company)	(26)	95	(186)	-86%	-


Unaudited Interim Condensed Consolidated Income Statement - Key Performance Ratios
Key Performance Ratios	1Q2020	1Q2019¹	4Q2019¹	qoq +%	yoy +%
Net Interest Margin (annualised)	1.95%	1.88%	1.87%	+8 bps	+7 bps
Cost to income ratio	64%	66%	67%	-3 p.p.	-2 p.p.
Cost to income ratio excluding special levy and contributions to SRF and DGF	58%	62%	63%	-5 p.p.	-4 p.p.
Operating profit return on average assets (annualised)	1.0%	1.0%	1.0%	-	-
Basic losses per share attributable to the owners of the Company - organic (€ cent)	(5.14)	(0.88)	(1.26)	(3.88)	(4.26)
Basic (losses)/earnings per share attributable to the owners of the Company (€ cent)	(5.81)	21.23	(41.67)	35.86	(27.04)
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis, in order to separate out the impact of this non-recurring transaction. 2. 'Provisions/net loss relating to NPE sales including restructuring expenses' refer to the net loss on transactions completed during FY2019, net loan credit losses on transactions under consideration at 31 December 2019 and 31 March 2020, as well as the restructuring costs relating to these trades. For further details please refer to Section A.2.4. p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Commentary on Underlying Basis

The financial information presented in this Section provides an overview of the Group financial results for the quarter ended 31 March 2020 on the 'underlying basis' which the management believes it best fits the true measurement of the performance and position of the Group. Reconciliations are included in section F.1 'Reconciliation of Income Statement between statutory basis and underlying basis' and in section G 'Definitions & explanations', to allow for the comparability of the underlying basis to statutory information.

In addition, the following change was made in the underlying basis, when compared with previous disclosures.

Project Helix (from Unaudited Interim Condensed Consolidated Income Statement, footnote 1)

Reclassifications effected to comparative information were made so that items relating to the NPE sale (Project Helix) are disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales, including restructuring expenses' under the underlying basis. Specifically, net interest income of €17 mn, fee and commission income of €3 mn, total expenses of €15 mn (comprising staff costs of €1 mn, operating expenses of €12 mn and restructuring costs of €2 mn), as well as loan credit losses of €10 mn, relating to the quarter ended 31 March 2019, are disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales, including restructuring expenses' under the underlying basis.


Unaudited Interim Condensed Consolidated Balance Sheet
€ mn	31.03.2020		31.12.2019		+%
Cash and balances with central banks	4,399		5,060		-13%
Loans and advances to banks	455		321		42%
Debt securities, treasury bills and equity investments	1,948		1,906		2%
Net loans and advances to customers	10,597		10,722		-1%
Stock of property	1,373		1,378		0%
Investment properties	134		136		-2%
Other assets	1,501		1,574		-5%
Non-current assets and disposal groups held for sale	24		26		-9%
Total assets	20,431		21,123		-3%
Deposits by banks	395		533		-26%
Repurchase agreements	170		168		1%
Customer deposits	16,246		16,692		-3%
Subordinated loan stock	255		272		-6%
Other liabilities	1,130		1,169		-3%
Total liabilities	18,196		18,834		-3%

Shareholders' equity	1,986		2,040		-3%
Other equity instruments	220		220		-
Total equity excluding non-controlling interests	2,206		2,260		-2%
Non-controlling interests	29		29		0%
Total equity	2,235		2,289		-2%
Total liabilities and equity	20,431		21,123		-3%

Key Balance Sheet figures and ratios		31.03.2020		31.12.2019		+
Gross loans (€ mn)		12,709		12,822		-1%
Allowance for expected loan credit losses (€ mn)		2,109		2,096		1%
Customer deposits (€ mn)		16,246		16,692		-3%
Loans to deposits ratio (net)		65%		64%		+1 p.p.
NPE ratio		29%		30%		-1 p.p.
NPE coverage ratio		56%		54%		+2 p.p.
Leverage ratio		10.1%		10.0%		+0.1 p.p.
Capital ratios and risk weighted assets		31.03.2020		31.12.2019		+
Common Equity Tier 1 (CET1) ratio (transitional for IFRS 9)¹		14.3%		14.8%		-50 bps
Total capital ratio		17.7%		18.0%		-30 bps
Risk weighted assets (€ mn)		12,599		12,890		-2 %
1.The CET1 FL ratio as at 31 March 2020 (including the full impact of IFRS 9) amounts to 12.9% (compared to 13.1% as at 31 December 2019). p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 p.p.

A.1. Balance Sheet Analysis

A.1.1 Capital Base

Total equity excluding non-controlling interests totalled €2,206 mn at 31 March 2020, compared to €2,260 mn at 31 December 2019. Shareholders' equity totalled €1,986 mn at 31 March 2020, compared to €2,040 mn at 31 December 2019.

The Common Equity Tier 1 capital (CET1) ratio on an IFRS 9 transitional basis stood at 14.3% at 31 March 2020, compared to 14.8% at 31 December 2019. During 1Q2020 the CET1 ratio was negatively affected mainly by the phasing-in of IFRS 9 transitional arrangements, a decrease in revaluation reserves and increased loan credit losses, and was positively affected by the pre-provision income and the decrease in risk weighted assets (RWAs).

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 back to CET1 at the end of the five years. The impact on the capital position for the year 2018 was 5% of the impact on the impairment amounts from the initial application of IFRS 9, increasing to 15% (cumulative) for the year 2019 and to 30% (cumulative) for the year 2020.

The CET1 ratio on a fully loaded basis (including the full impact of IFRS 9) amounted to 12.9% as at 31 March 2020, compared to 13.1% as at 31 December 2019. 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.

The Total Capital ratio stood at 17.7% as at 31 March 2020, compared to 18.0% as at 31 December 2019.

The Group's capital ratios are above the Supervisory Review and Evaluation Process (SREP) requirements.

Following the annual SREP performed by the European Central Bank (ECB) in 2019 and based on the final 2019 SREP decision received in December 2019, the Group's minimum phased-in CET1 capital ratio was set at 11.0% (comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement (in the form of CET1), the Capital Conservation Buffer of 2.5% (fully phased-in as of 1 January 2019) and the Other Systemically Important Institution Buffer of 1.0%) and the overall Total Capital requirement at 14.5%, comprising an 8.0% Pillar I requirement (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 3.0% Pillar II requirement (in the form of CET1), the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 1.0%. The ECB has also provided non-public guidance for an additional Pillar II CET1 buffer. Pillar II add-on capital requirements derive from the context of the SREP, which is a point in time assessment, and are therefore subject to change over time. The final 2019 SREP decision became effective on 1 January 2020.

Further to the effects of COVID-19 on both the global and Cypriot economy, the ECB announced a package of positive measures in March 2020 that should help to support the capital position of banks. The ECB's capital easing measures for COVID-19 increase the Group's CET1 buffer by 131 bps following the frontloading of the new rules on the Pillar II Requirement composition, to allow banks to use Additional Tier 1 (AT1) capital and Tier 2 (T2) capital to meet Pillar II Requirements and not only by CET1, initially scheduled to come into effect in January 2021. As a result, the Group's minimum phased-in CET1 capital ratio is set at 9.7%. The Bank received an amendment to the December 2019 SREP decision to this respect effective as of 12 March 2020. The Total SREP capital requirement remains unchanged at 14.5%.

Further analysis on the recent developments on the regulatory capital ratios due to the COVID-19 outbreak are set out further below.

In accordance with the provisions of the Macroprudential Oversight of Institutions Law of 2015, the CBC is 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 is being phased-in gradually, having started 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. In April 2020, the CBC decided to delay the phasing-in (0.5%) of the O-SII buffer on 1 January 2021 and 1 January 2022 by 12 months. Consequently, the O-SII buffer will be fully phased-in on 1 January 2023, instead of 1 January 2022 as originally set.

The European Banking Authority (EBA) final guidelines on SREP and supervisory stress testing and the Single Supervisory Mechanism's (SSM) 2018 SREP methodology provide that own funds held for the purposes of Pillar II Guidance cannot be used to meet any other capital requirements (Pillar I, Pillar II requirements or the combined buffer requirement), and therefore cannot be used twice. Following the annual SREP performed by the ECB in 2019 and based on the final 2019 ECB decision received in December 2019, the new provisions are effective from January 2020.

Based on the SREP decisions of prior years, the Company and the Bank were under a regulatory prohibition for equity dividend distribution and therefore no dividends were declared or paid during years 2019 and 2018. Following the 2019 SREP decision, the Company and the Bank are still under equity dividend distribution prohibition. This prohibition does not apply if the distribution is made via the issuance of new ordinary shares to the shareholders, which are eligible as CET1 capital. No prohibition applies to the payment of coupons on any AT1 capital instruments issued by the Company or the Bank.

Share premium reduction

Bank

The Bank will proceed (subject to approvals mainly by the ECB and the Court of Cyprus) with a capital reduction process which will result in the reclassification of c.€619 mn of the Bank's share premium balance as distributable reserves, which shall be available for distribution to the shareholders of the Bank, resulting in total net distributable reserves of c.€800 mn on a pro forma basis (31 December 2019). The reduction of capital will not have any impact on regulatory capital or the total equity position of the Bank or the Group.

The distributable reserves 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.

Company

The Company (Bank of Cyprus Holdings PLC) will proceed (subject to approval by the shareholders, the ECB and the Irish High Court) with a capital reduction process which will result in the reclassification of €700 mn of the Company's share premium as distributable reserves. This will increase the distributable reserves of the Company to c.€1 bn on a pro forma basis (31 December 2019). The capital reduction has been proposed as a special resolution for approval by shareholders at the Company's Annual General Meeting scheduled on 26 May 2020. The capital reduction will not have any impact on regulatory capital or the total equity position of the Company, the Bank or the Group.

The distributable reserves provide the basis for the calculation of distributable items under the CRR, which provides that coupons on AT1 capital instruments may only be funded from distributable items.

Legislative amendments for the conversion of DTA to DTC

Legislative amendments allowing for the conversion of specific deferred tax assets (DTA) into deferred tax credits (DTC) were adopted by the Cyprus Parliament on 1 March 2019 and published in the Official Gazette of the Republic on 15 March 2019. The law amendments cover the utilisation of income tax 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 amendments resulted in an improved regulatory capital treatment, under CRR, of the DTA amounting to c.€285 mn or a CET1 uplift of c.190 bps in March 2019.

The Group understands that, in response to concerns raised by the European Commission with regard to the provision of state aid arising out of the treatment of such tax losses, the Cyprus Government is considering the adoption of modifications to the Law, potentially including requirements for an additional annual fee over and above the 1.5% annual guarantee fee already acknowledged, to maintain the conversion of such DTAs into tax credits. In anticipation of such modifications the Group recorded an additional amount of €13 mn in 4Q2019 by way of an estimated additional fee (for the years 2018 and 2019), bringing the total guarantee fee recognised for FY2019 to €19 mn.

Project Helix

In June 2019, Project Helix was completed resulting in a positive impact of c.140 bps on both the Group's CET1 and Total Capital ratios, mainly from the release of risk weighted assets. Project Helix had an overall net positive impact on the Group capital ratios of c.60 bps.

Sale of investment in CNP Cyprus Insurance Holdings Ltd

In October 2019, the sale of the Group's investment in its associate CNP Cyprus Insurance Holdings Limited ("CNP") was completed, resulting in a positive impact of c.30 bps on both the Group's CET1 and Total Capital ratios, mainly from the release of risk weighted assets. The shareholding had been acquired as part of the acquisition of certain operations of Laiki Bank in 2013 and was sold to CNP Assurances S.A. for a cash consideration of €97.5 mn.

Voluntary Staff Exit Plan

In October 2019, the Group completed a voluntary staff exit plan (VEP) at a total cost of €81 mn, recorded in the consolidated income statement in 4Q2019, resulting in a negative impact of c.60 bps on both the Group's CET1 and Total Capital ratios.

Further NPE sales in the future

Against the backdrop of market volatility arising out of the COVID-19 pandemic, the Group continues to work with its advisers towards the sale of a portfolio of NPEs in the future. Due to prevailing market and operational conditions, this process is likely to take longer than originally anticipated. In the context of IFRS 9, the Bank recognised additional loan credit losses of €75 mn in 4Q2019, with a negative capital impact of 46 bps, as a result of the anticipated balance sheet de-risking through further NPE sales in the future. On completion of an NPE trade, the Group's capital ratios would benefit from any associated RWA reduction, subject to regulatory approval.

Implications on capital from the Outbreak of COVID-19

The Group is closely monitoring developments in, and the effects of COVID-19 on both the global and Cypriot economy. The ECB has announced a package of positive measures that should help to support the capital position of the Bank, in order to secure favourable conditions of financing for the economy with the aim to mitigate the effects of the crisis. Specifically, the measures increase the Group's capital base available to absorb potential losses due to the crisis. In addition, the early adoption of CRD V for the composition of the Pillar II Requirement provide flexibility regarding the Group's compliance with the minimum capital requirement of Pillar II.

Following the ECB's capital easing measures for COVID-19 announcements, the Bank received a relevant decision amending the 2019 SREP decision in April 2020 and effective as of 12 March 2020 forthe frontloading of the new rules on the Pillar II Requirement composition, to allow banks to use Additional Tier 1 (AT1) capital and Tier 2 (T2) capital to meet Pillar II Requirements and not only by CET1, initially scheduled to come into effect in January 2021, which increased the Group's CET1 buffer by 131 bps. The Total SREP capital requirement remains unchanged. In addition, the ECB allows banks to operate temporarily below the level of Pillar II Guidance, the capital conservation buffer (CCB) and the countercyclical buffer. It is noted that the countercyclical buffer is 0% for Cypriot banks.

In addition, in April 2020 the CBC decided to delay the phasing-in of the 1 January 2021 O-SII buffer (0.5% for the Bank) by 12 months. Consequently, the O-SII buffer will be fully phased-in on 1 January 2023, instead of 1 January 2022 as originally set.

Since 31 March 2020 the mark-to market valuation resulting from the fluctuation of the prices of the debt securities in the portfolio held at FVOCI decreased by €5 mn by 20 May 2020, following the COVID-19 outbreak and the resultant volatile market and economic environment. This change is recognised directly in equity i.e. through Other Comprehensive Income (OCI).

Furthermore, on 20 May 2020, the Group held Cyprus sovereign debt securities of a nominal amount of €735 mn (compared to €542 mn on 31 March 2020), of which €337 mn is held at FVOCI portfolio and €398 mn is held at amortised cost portfolio. The increase since the quarter end is mainly due to the Group's participation on the issuance of 52-week treasury bills of the Cyprus Government in April 2020.

A.1.2 Regulations and Directives

A.1.2.1 Revised rules on capital and liquidity (CRR II and CRD V)

On 27 June 2019, the revised rules on capital and liquidity (CRR II and CRD V) came into force. As an amending regulation, the existing provisions of CRR apply, unless they are amended by CRR II. Member states are required to transpose the CRD V into national law. Certain provisions took immediate effect (primarily relating to Minimum Requirement for Own Funds and Eligible Liabilities, MREL), but most changes will start to apply from mid-2021. Certain aspects of CRR II are dependent on final technical standards to be issued by the EBA and adopted by the European Commission. The key changes introduced consist of, among others, changes to qualifying criteria for CET1, AT1 and Tier 2 instruments, introduction of requirements for MREL and a binding Leverage Ratio requirement and a Net Stable Funding Ratio (NSFR).

A.1.2.2 Bank Recovery and Resolution Directive (BRRD)

Minimum Requirement for Own Funds and Eligible Liabilities (MREL)

The Bank Recovery and Resolution Directive (BRRD) requires that from January 2016 EU member states shall apply the BRRD's provisions requiring EU credit institutions and certain investment firms to maintain a minimum requirement for own funds and eligible liabilities (MREL), subject to the provisions of the Commission Delegated Regulation (EU) 2016/1450. On 27 June 2019, as part of the reform package for strengthening the resilience and resolvability of European banks, the BRRD Ι came into effect and must be transposed into national law. In addition, certain provisions on MREL have been introduced in CRR Ι which also came into force on 27 June 2019 as part of the reform package and took immediate effect.

The Bank has received formal notification from the CBC in its capacity as National Resolution Authority, of the final decision by the Single Resolution Board (SRB), for the binding minimum requirement for own funds and eligible liabilities (MREL) for the Bank, determined as the preferred resolution point of entry. The MREL requirement has been set at 28.36% of risk weighted assets as of 30 June 2019 and must be met by 31 December 2025. This MREL requirement would be equivalent to 18.54% of total liabilities and own funds (TLOF) as at 30 June 2019. The MREL requirement is in line with the Bank's expectations, and largely in line with its funding plans.

This decision is based on the current legislation, it is expected to be updated annually and could be subject to subsequent changes by the resolution authorities, especially considering the developments of the BRRD and its transposition into the local legislation.

The MREL ratio of the Bank as at 31 March 2020, calculated according to SRB's eligibility criteria currently in effect and based on the Bank's internal estimate, stood at 18.09% of RWAs.

A.1.3 Funding and Liquidity

Funding

Funding from Central Banks

At 31 March 2020 and at 31 December 2019, the Bank had no funding from central banks. At 31 December 2018, the Bank's funding from central banks amounted to €830 mn, which related to ECB funding, comprising solely of funding through the Targeted Longer-Term Refinancing Operations (TLTRO II). In 3Q2019, the Bank decided to early repay the ECB funding of €830 mn, given its comfortable liquidity position.

Deposits

Customer deposits totalled €16,246 mn at 31 March 2020, compared to €16,692 mn at 31 December 2019, reduced by 3% in the first quarter.

The Bank's deposit market share in Cyprus reached 34.8% as at 31 March 2020, compared to 35.1% as at 31 December 2019. Customer deposits accounted for 80% of total assets and 89% of total liabilities at 31 March 2020.

The net Loans to Deposit ratio (L/D) stood at 65% as at 31 March 2020, compared to 64% as at 31 December 2019. The L/D ratio had reached a peak of 151% as at 31 March 2014.

Subordinated Loan Stock

At 31 March 2020 the Bank's subordinated loan stock (including accrued interest) amounted to €255 mn (compared to €272 mn at 31 December 2019) and relates to unsecured subordinated Tier 2 Capital Notes of nominal value €250 mn, issued by the Bank in January 2017.

Liquidity

At 31 March 2020 the Group Liquidity Coverage Ratio (LCR) stood at 219% (compared to 208% at 31 December 2019), in compliance with the minimum regulatory requirement of 100%.

The liquidity surplus at 31 March 2020 amounted to €3.0 bn, compared to €3.2 bn at 31 December 2019. The decrease in 1Q2020 is mainly driven by the reduction in deposits.

The Net Stable Funding Ratio (NSFR) has not yet been introduced. It will be enforced as a regulatory ratio under CRR II in 2021, with the limit set at 100%. At 31 March 2020, the Group's NSFR, on the basis of Basel Ι standards, stood at 126% (compared to 127% at 31 December 2019).

Implications on liquidity from the Outbreak of COVID-19

Resulting from the outbreak of COVID-19, the ECB has announced a positive package of measures including that the ECB will allow banks to temporarily operate below the LCR minimum requirement. In addition, the ECB decided on additional longer-term refinancing operations (LTROs) through a full-spread fixed-rate auction equal to the average deposit facility interest rate. Similarly, the ECB announced that for the TLTRO III operation in June 2020, considerably more favourable terms will be applied during the period from June 2020 to June 2021 to all TLTRO III operations outstanding during that same time.

On 18 March 2020 the Governing Council of the ECB decided to launch a new Pandemic Emergency Purchase Programme (PEPP) for an amount of €750 bn and purchases will be conducted until the end of 2020. Furthermore, it was decided to expand the range of eligible assets under the Corporate Sector Purchase Programme (CSPP) to non-financial commercial paper and to ease the collateral standards by adjusting the main risk parameters of the collateral framework.

A.1.4 Loans

Group gross loans totalled €12,709 mn at 31 March 2020, compared to €12,822 mn at 31 December 2019. Gross loans in Cyprus totalled €12,634 mn at 31 March 2020 accounting for 99% of Group gross loans, compared to €12,736 mn at 31 December 2019, also accounting for 99% of Group gross loans.

New loans granted in Cyprus reached €451 mn for 1Q2020, compared to €443 mn for 4Q2019 (up by 2% qoq) and to €563 mn for 1Q2019 (down by 20% yoy).

At 31 March 2020, the Group net loans and advances to customers totalled €10,597 mn (compared to €10,722 mn at 31 December 2019).

The Bank is the single largest credit provider in Cyprus with a market share of 41.0% at 31 March 2020, compared to 41.1% at 31 December 2019.

A.1.5 Loan portfolio quality

Tackling the Group's loan portfolio quality remains the top priority for management. The Group has continued to make steady progress across all asset quality metrics and the loan restructuring activity has continued. 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 €142 mn or 4% during 1Q2020 to €3,738 mn at 31 March 2020 (compared to €3,880 mn at 31 December 2019), despite the COVID-19 lockdown in March 2020. The Group has recorded organic NPE reductions for twenty consecutive quarters.

The NPEs account for 29% of gross loans as at 31 March 2020, compared to 30% at 31 December 2019, an improvement of 1 p.p. qoq. The NPE coverage ratio improved to 56% at 31 March 2020, compared to 54% at 31 December 2019, an improvement of 2 p.p. qoq. When taking into account tangible collateral at fair value, NPEs are fully covered.

	31.03.2020		31.12.2019
	€ mn	% gross loans	€ mn	% gross loans
NPEs as per EBA definition	3,738	29.4%	3,880	30.3%

Of which, in pipeline to exit:	365	2.9%	428	3.3%
-NPEs with forbearance measures, no arrears¹
1. The analysis is performed on a customer basis.

Project Helix

In June 2019, the Group announced the completion of Project Helix, that refers to the sale of a portfolio of loans with a gross book value of €2.8 bn (of which €2.7 bn related to non-performing loans) secured by real estate collateral to certain funds affiliated with Apollo Global Management LLC, the agreement for which was announced on 28 August 2018. Cash consideration of c.€1.2 bn was received on completion, reflecting adjustments resulting from, inter alia, loan repayments received on the Helix portfolio since the reference date of 31 March 2018. The participation of the Bank in the senior debt in relation to financing the transaction was syndicated down from the initial level of €450 mn to c.€45 mn, representing c.4% of the total acquisition funding. Upon completion, the NPE ratio was reduced by c.11 p.p. to 33% as at 30 June 2019, c.70% lower than its peak in 2014.

ESTIA

In July 2018 the Government announced a scheme aimed at addressing NPEs backed by primary residence, known as ESTIA (the 'Scheme'). The ESTIA eligible portfolio of c.€0.8 bn of retail core NPEs as at 31 March 2020, referred to the potentially eligible portfolio following on-going detailed assessment based on the Bank's available data on Open Market Value (OMV) and NPE status. These 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 the contractual balance and the OMV. The Government subsidises one third of the instalment of the restructured loan, subject to the borrowers servicing their restructured loans.

The Scheme is expected to resolve part of the ESTIA-eligible portfolio (€42 mn as at 15 May 2020), to identify non-viable customers for which alternative restructuring solutions are being considered, including by the Government (€30 mn as at 15 May 2020), and to facilitate the resolution of the remaining customers (€746 mn as at 15 May 2020), mainly by focusing on realising collateral through consensual and non-consensual foreclosures.

Over 75% of the applications submitted by 31 December 2019 by value currently remain incomplete. Following the outbreak of COVID-19, the deadline for borrowers to complete their application has been extended by three months to June 2020.

Project Velocity 1

In June 2019, the Bank completed the sale of a non-performing loan portfolio of primarily retail unsecured exposures, with a contractual balance of €245 mn and a gross book value of €34 mn as at the reference date of 30 September 2018 (known as Project Velocity 1) to APS Delta s.r.o. This portfolio comprised 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 the date of disposal was €30 mn. The sale was broadly neutral to both the profit and loss and to capital.

Project Velocity 2

In January 2020, the Bank entered into an agreement with B2Kapital Cyprus Ltd, to sell a non-performing loan portfolio of primarily retail unsecured exposures, with a contractual balance of €398 mn and gross book value of €144 mn as at the reference date of 31 August 2019, known as Project Velocity 2. This portfolio comprised c.10.000 borrowers, including c.8.400 private individuals and c.1.600 small-to-medium-sized enterprises.As at 31 December 2019, this portfolio was classified as a disposal group held for sale, with a gross book value of €139 mn. Following a change in the perimeter, the revised portfolio had a gross book value of €133 mn as at 31 March 2020 and was classified as a disposal group held for sale at the quarter end. A reversal of impairment of €1 mn for 1Q2020 was recorded under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis income statement (compared to a reversal of impairment of €6 mn for 4Q2019). The sale was completed in early May 2020 and was capital neutral on completion.

Additional strategies to accelerate de-risking

The Group continues to assess the potential to accelerate the decrease in NPEs on its balance sheet through additional sales of NPEs in the future. To that extent the Group continues to review the feasibility of NPE reduction structures with the aim of identifying the option that best meets the Group's strategic objectives. The preparation phase involves defining the relevant NPE portfolio, evaluation of real estate collaterals, data remediation and enhancement of data tapes, borrower information memorandums, legal due diligence and transaction structuring options. For the purposes of completing the workstreams outlined above and in order to conclude on the best possible structure, the Group has engaged international advisors, and is continuing to engage in discussions with various third parties, that may be interested in pursuing a possible collaboration with the Group. A range of potential outcomes is possible, including outright sales (including the Bank retaining a portion of the related financing). The Group is not committed to any outcome arising from these third party discussions.

As at 31 March 2020, a portfolio of credit facilities related to Helix with gross book value of €45 mn (compared to €46 mn as at 31 December 2020), of mainly secured non-performing exposures (known as 'Helix Tail') was classified as a disposal group held for sale.

Following the outbreak of COVID-19, the Group is now focused on arresting any potential asset quality deterioration. Once economic conditions normalise, the Group expects to resume its efforts to improve its asset quality position by seeking solutions, both organic and inorganic, to make the Bank a stronger and safer institution, capable of continuing to support the local economy.

A.1.6 Real Estate Management Unit (REMU)

The Real Estate Management Unit (REMU) on-boarded €12 mn of assets in 1Q2020 (down by 73% yoy), 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 organic disposals of €14 mn in 1Q2020 (compared to €48 mn in 4Q2019), resulting in a profit on disposal of €1 mn for 1Q2020.

During the quarter ended 31 March 2020, the Group executed sale-purchase agreements (SPAs) with contract value of €16 mn (89 properties), compared to €150 mn (125 properties) for 4Q2019. In addition, the Group had signed SPAs for disposals of assets with contract value of €49 mn as at 31 March 2020, compared to €36 mn as at 31 December 2019.

Completion of Project Helix

With the completion of Project Helix in 2Q2019, properties with a carrying value of €109 mn, which were included in the portfolio for the NPE sale (Helix), were derecognised as of 30 June 2019. As at 31 March 2019, properties with carrying value of €98 mn were included in the portfolio for the NPE sale (Helix), compared to €74 mn as at 31 December 2018, due to adjustments made to the portfolio of assets.

Change in classification of properties which are leased out under operating leases

In 2019, the Group decided to classify certain leased properties acquired in exchange of debt and leased out under operating leases as 'Investment Properties' (measured at fair value under IAS 40) instead of 'Stock of property' (measured at the lower of cost and net realisable value under IAS 2). The change was applied retrospectively, resulting in the restatement of comparatives (as at 31 December 2018). This change had no material impact on the Group's comparative retained earnings and a cumulative impact of €1 mn gain was recognised in the Group's income statement under 'Net gains from revaluation and disposal of investment properties and on disposal of stock of properties' in 2019. The reclassified properties continue to be managed by REMU.

Assets held by REMU

As at 31 March 2020, assets held by REMU had a carrying value of €1,484 mn (comprising properties of €1,373 mn classified as 'Stock of property' and €111 mn as 'Investment Properties'), compared to €1,490 mn as at 31 December 2019 (comprising properties of €1,378 mn classified as 'Stock of property' and €112 mn as 'Investment Properties').

In addition to assets held by REMU, properties classified as 'Investment properties' with carrying value of €23 mn as at 31 March 2020 (compared to €24 mn as at 31 December 2019), relate to legacy properties held by the Bank before the set-up of REMU in January 2016.

Assets held by REMU (Group) € mn	1Q2020	1Q2019	4Q2019	qoq +%	yoy +%
Opening balance	1,490	1,530	1,513	-2%	-3%
On-boarded assets (including construction cost)	12	45	37	-67%	-73%
Sales	(14)	(30)	(48)	-71%	-54%
Impairment loss	(4)	(2)	(12)	-68%	100%
Transfer to non-current assets and disposal groups held for sale	-	(1)	-	-	-
Closing balance	1,484	1,542	1,490	-0%	-4%

Analysis by type and country	Cyprus	Greece	Romania	Total
31 March 2020 (€ mn)
Residential properties	183	26	0	209
Offices and other commercial properties	197	29	6	232
Manufacturing and industrial properties	72	32	0	104
Hotels	24	0	-	24
Land (fields and plots)	625	7	3	635
Golf courses and golf-related property	280	-	-	280
Total	1,381	94	9	1,484

	Cyprus	Greece	Romania	Total
31 December 2019 (€ mn)
Residential properties	182	26	0	208
Offices and other commercial properties	200	29	6	235
Manufacturing and industrial properties	73	32	0	105
Hotels	24	0	-	24
Land (fields and plots)	628	7	3	638
Golf courses and golf-related property	280	-	-	280
Total	1,387	94	9	1,490

A.1.7 Non-core overseas exposures

The remaining non-core overseas net exposures (including both on-balance sheet and off-balance sheet exposures) at 31 March 2020 are as follows:

€ mn	31 March 2020	31 December 2019
Greece	137	139
Romania	24	25
Russia	16	19
Total	177	183

The Group continues its efforts for further deleveraging and disposal of non-essential assets and operations in Greece, Romania and Russia.

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.

In addition to the above, as at 31 March 2020, there were overseas exposures of €265 mn in Greece, relating to both loans and properties (at similar levels to 31 December 2019), not identified as non-core exposures, since they are considered by management as exposures arising in the normal course of business.

A.2. Income Statement Analysis

A.2.1 Total income

€ mn	1Q2020	1Q2019¹	4Q2019¹	qoq +%	yoy +%
Net interest income	85	85	84	2%	0%
Net fee and commission income	38	37	39	-1%	4%
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates	6	10	4	37%	-45%
Insurance income net of claims and commissions	11	12	16	-28%	-8%
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties	1	4	6	-87%	-79%
Other income	4	8	7	-39%	-45%
Non-interest income	60	71	72	-16%	-15%
Total income	145	156	156	-7%	-7%
Net Interest Margin (annualised)	1.95%	1.88%	1.87%	+8 bps	+7 bps
Average interest earning assets (€ mn)	17,539	18,243	17,721	-1%	-4%
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis, in order to separate out the impact of this non-recurring transaction. p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Net interest income (NII) for 1Q2020 amounted to €85 mn (broadly flat yoy and qoq) and includes increased interest cash collections not previously recognised of c.€4 mn. Net interest margin (NIM) for 1Q2020 stood at 1.95%, up by 7 bps yoy, positively impacted by the reduction in volume and cost of deposits. An amount of c.€12 mn relating to a one - off charge included in 'Net interest income' under the statutory basis for 4Q2019, is presented within 'Loan credit losses' under the underlying basis, which is related to a change in the method of amortising arrangement fees given that this was a non-recurring item.

Quarterly average interest earning assets for 1Q2020 amounted to €17,539 mn, compared to €17,721 mn for 4Q2019, (down by 1% qoq) and to €18,243 mn for 1Q2019 (down by 4% yoy). The qoq decrease is mainly driven by the reduction of liquid assets resulting from the reduced volume of deposits. The yoy decrease is mainly driven by the reduction of liquid assets following repayment of ECB funding (TLTRO) in September 2019, as well as to the reduction in net loans.

Non-interest income for 1Q2020 amounted to €60 mn (down by 15% yoy), comprising net fee and commission income of €38 mn, net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates of €6 mn, net insurance income of €11 mn, net gains from revaluation and disposal of investment properties and on disposal of stock of properties of €1 mn and other income of €4 mn.

Net fee and commission income for 1Q2020 amounted to €38 mn, compared to €37 mn for 1Q2019 and to €39 mn for 4Q2019. Net fee and commission income comprises 44% of transactional income that is negatively affected by the effects of the COVID-19 outbreak.

Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates of €6 mn for 1Q2020, comprising net foreign exchange gains of €9 mn and net losses on financial instrument transactions of €3 mn, decreased by 45% yoy and increased by 37% qoq. The decrease yoy is mainly driven by net revaluation losses in 1Q2020 compared to net revaluation gains in 1Q2019. The increase qoq is mainly driven by higher net foreign exchange gains.

Net insurance income of €11 mn for 1Q2020, at similar levels as for 1Q2019, but decreased by 28% qoq, primarily due to negative market performance following the outbreak of COVID-19 and higher insurance claims.

Net gains from revaluation and disposal of investment properties and on disposal of stock of properties for 1Q2020 amounted to €1 mn relating mainly to net gains on disposal of stock of properties (REMU gains) impacted by the COVID-19 lockdown, compared to €6 mn in the previous quarter and to €4 mn in 1Q2019. REMU profit remains volatile.

Total income for 1Q2020 amounted to €145 mn, compared to €156 mn for both 1Q2019 and 4Q2019 (down by 7% both yoy and qoq).

A.2.2 Total expenses

€ mn	1Q2020	1Q2019¹	4Q2019¹	qoq +%	yoy +%
Staff costs	(49)	(56)	(53)	-9%	-12%
Other operating expenses	(35)	(41)	(43)	-20%	-17%
Total operating expenses	(84)	(97)	(96)	-14%	-14%
Special levy and contributions to Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF)	(9)	(6)	(7)	50%	45%
Total expenses	(93)	(103)	(103)	-10%	-10%
Cost to income ratio	64%	66%	67%	-3 p.p.	-2 p.p.
Cost to income ratio excluding special levy and contributions to SRF and DGF	58%	62%	63%	-5 p.p.	-4 p.p.
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis, in order to separate out the impact of this non-recurring transaction.
p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Total expenses for 1Q2020 were €93 mn (compared to €103 mn for 1Q2019 and 4Q2019, down by 10% both yoy and qoq), 53% of which related to staff costs (€49 mn), 37% to other operating expenses (€35 mn) and 10% (€9 mn) to special levy and contributions to Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF). The yoy and qoq decrease is driven by lower staff costs and other operating expenses.

Total operating expenses for 1Q2020 were €84 mn, compared to €97 mn for 1Q2019 and €96 mn for 4Q2019 (down by 14% both yoy and qoq).

Staff costs of €49 mn for 1Q2020 decreased by 9% qoq (compared to €53 mn in 4Q2019 ) and by 12% yoy (compared to €56 mn in 1Q2019), mainly driven by the completion of the voluntary staff exit plan (VEP) in 4Q2019, through which c.11% of the Group's full-time employees were approved to leave at a total cost of €81 mn, recorded in the consolidated income statement in 4Q2019.

Following the completion of the VEP, the gross annual savings are estimated at c.€28 mn or c.13% of staff costs (excluding the c.100 persons relating to the Helix transaction). The annual savings net of the impact from the renewal of the collective agreement for 2019 and 2020, are estimated at €23 mn or 11% of staff costs.

The Group employed 3,566 persons as at 31 March 2020 (compared to 3,672 as at 31 December 2019, including c.100 persons relating to the Helix transaction who were transferred to the buyer upon full migration in January 2020). The staff costs related to these persons are included under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis.

Other operating expenses for 1Q2020 were €35 mn, decreased by 20% qoq (€43 mn in 4Q2019) and by 17% yoy (€41 mn in 1Q2019), mainly due to lower consultancy and property-related expenses in 1Q2020.

Special levy and contributions to Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF) for 1Q2020 was €9 mn, compared to €7 mn in 4Q2019 (increased by 50% qoq) and €6 mn in 1Q2019 (increased by 45% yoy). The increase is driven by the contribution of the Bank to the Deposit Guarantee Fund (DGF) of €3 mn. This contribution relates to the first half of 2020 and in line with IFRSs, it is recorded in 1Q2020.

As from 1 January 2020 and until 3 July 2024 the Bank is subject to contribution to the Deposit Guarantee Fund (DGF) on a semi-annual basis. The contributions are calculated based on the Risk Based Methodology (RBM) as approved by the management committee of the Deposit Guarantee and Resolution of Credit and Other Institutions Schemes (DGS) and is publicly available on the CBC's website. In line with the RBM, the contributions are broadly calculated on the covered deposits of all authorised institutions and the target level is to reach at 0.8% of these deposits by 3 July 2024.

The cost to income ratioexcluding special levy and contributions to Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF) for 1Q2020 was 58%, compared to 63% in 4Q2019 and 62% in 1Q2019, principally reflecting a 14% reduction in total operating expenses both yoy and qoq.

A.2.3 (Loss)/profit before tax and non-recurring items

€ mn	1Q2020	1Q2019¹	4Q2019¹	qoq +%	yoy +%
Operating profit	52	53	53	0%	0%
Loan credit losses	(64)	(47)	(29)	120%	36%
Impairments of other financial and non-financial assets	(4)	(1)	(13)	-65%	-
Provisions for litigation, claims, regulatory and other matters	(2)	(0)	(7)	-72%	-
Total loan credit losses, impairments and provisions	(70)	(48)	(49)	43%	49%
(Loss)/profit before tax and non-recurring items	(18)	5	4	-	-
Cost of risk	2.00%	1.44%	0.89%	+111 bps	+56 bps
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis, in order to separate out the impact of this non-recurring transaction.
p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Operating profit for 1Q2020 was €52 mn, at similar levels to the previous quarter and to 1Q2019.

The loan credit losses for 1Q2020 totalled €64 mn, compared to €29 mn for 4Q2019 (up by 120% qoq) and compared to €47 mn for 1Q2019 (up by 36% yoy). The 1Q2020 charge of €64 mn, includes €28 mn reflecting the initial impact of IFRS 9 Forward Looking Information (FLI) driven by the deterioration of the macroeconomic outlook, as a result of the economic effects of the COVID-19 outbreak. The change in the macroeconomic assumptions has led to the migration of c.€435 mn loans from Stage 1 to Stage 2.

The 4Q2019 charge of €29 mn includes an amount of c.€12 mn relating to a one - off charge for a change in the method of amortising arrangement fees. This amount is included in 'Net interest income' under the statutory basis and presented within 'Loan credit losses' under the underlying basis, given that this was a non-recurring item.

The annualised loan credit losses charge (cost of risk) for 1Q2020 accounted for 2.00% of gross loans, of which 88 bps reflect the deterioration of the macroeconomic outlook, compared to a loan credit losses charge of 1.12% for FY2019.

At 31 March 2020, the allowance for expected loan credit losses, including residual fair value adjustment on initial recognition and credit losses on off-balance sheet exposures totalled €2,109 mn (compared to €2,096 mn at 31 December 2019) and accounted for 16.6% of gross loans (compared to 16.3% at 31 December 2019). The increase in the allowance for expected loan credit losses in 1Q2020 amounted of €13 mn, whilst the increase in the previous quarter amounted to €10 mn.

Impairments of other financial and non-financial assets for 1Q2020 amounted to €4 mn, compared to €13 mn for 4Q2019 (down by 65% qoq) and to €1 mn in 1Q2019. Impairments of other financial and non-financial assets for 1Q2020 primarily related to loss on revaluation of properties.

Provisions for litigation, claims, regulatory and other matters for 1Q2020 totalled €2 mn, compared to €7 mn for 4Q2019 and Nil in 1Q2019.

A.2.4 (Loss)/profit after tax (attributable to the owners of the Company)

€ mn	1Q2020	1Q2019¹	4Q2019¹	qoq +%	yoy +%
(Loss)/profit before tax and non-recurring items	(18)	5	4	-	-
Tax	(2)	(2)	(2)	3%	-40%
Profit attributable to non-controlling interests	(0)	(0)	(0)	-	-
(Loss)/profit after tax and before non-recurring items (attributable to the owners of the Company)	(20)	3	2	-	-
Advisory and other restructuring costs - organic	(3)	(6)	(8)	-56%	-48%
Loss after tax - organic (attributable to the owners of the Company)	(23)	(3)	(6)	-	-
Restructuring costs - Voluntary Staff Exit Plan (VEP)	-	-	(81)	-	-
Provisions/net loss relating to NPE sales, including restructuring expenses²	(3)	(5)	(86)	-97%	-31%
Share of profit from associates (CNP)	-	2	-	-	-
Reversal of impairment of DTA and impairment of other tax receivables	-	101	(13)	-	-
(Loss)/profit after tax (attributable to the owners of the Company)	(26)	95	(186)	-86%	-
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Provisions/net loss relating to NPE sales, including restructuring expenses' in the underlying basis, in order to separate out the impact of this non-recurring transaction. 2. 'Provisions/net loss relating to NPE sales including restructuring expenses' refer to the net loss on transactions completed during FY2019, net loan credit losses on transactions under consideration at 31 December 2019 and 31 March 2020, as well as the restructuring costs relating to these trades.For further details please see analysis below.

The tax charge for 1Q2020 is €2 mn, at similar levels to 4Q2019 and 1Q2019.

Loss after tax and before non-recurring items (attributable to the owners of the Company) for 1Q2020 was €20 mn, compared to a profit of €2 mn for 4Q2019 and €3 mn for 1Q2019.

Advisory and other restructuring costs - organic for 1Q2020 amounted to €3 mn, compared to €8 mn for 4Q2019 and €6 mn for 1Q2019.

Loss after tax arising from the organic operations (attributable to the owners of the Company) for 1Q2020 amounted to €23 mn, compared to €6 mn for 4Q2019 and to €3 mn for 1Q2019.

Restructuring costs relating to theVoluntary Staff Exit Plan (VEP) amounted to €81 mn for 4Q2019. For further details please refer to Section A.2.2 'Total expenses'.

Provisions/net loss relating to NPE sales, including restructuring expenses for 1Q2020 amounts to €3 mn (compared to €86 mn for 4Q2019) and relates mainly to restructuring expenses for NPE sales. The amount of €86 mn for 4Q2019 includes the net result of the sale of the Helix portfolio (including the interest income, non-interest income, staff costs, other operating expenses and loan credit losses) of a loss of €6 mn, as well as a reversal of impairment of €6 mn resulting from the sale of the Velocity 2 portfolio. Also, additional loan credit losses within the context of IFRS 9 of €75 mn were recorded in 4Q2019 as a result of the anticipated balance sheet de-risking through further NPE sales in the future. Restructuring costs related to these projects totalling €10 mn for 4Q2019 were also included.

Share of profit from associates totalled €2 mn for 1Q2019 and related to the share of profit from CNP Cyprus Insurance Holdings Limited (CNP). In October 2019, the Group completed the sale of its entire shareholding of 49.9% in its associate CNP, that had been acquire d as part of the acquisition of certain operations of Laiki Bank in 2013, for a cash consideration of €97.5 mn.

The reversal of impairment of DTA and impairment of other tax receivables totalled €101 mn for 1Q2019, comprising the net positive impact of €109 mn following amendments to the Income Tax legislation in Cyprus adopted in March 2019, and an impairment of €8 mn relating to Greek tax receivables adversely impacted from legislative changes. The carrying value of the remaining receivable as at 31 March 2020 and 31 December 2019 was c.€5 mn. In addition, levy in the form of a guarantee fee of €13 mn was recorded in 4Q2019 in relation to the right to convert tax losses into a tax credit. For further information, please refer to Section A.1.1. Capital Base, 'Legislative amendments for the conversion of DTA to DTC'.

Loss after tax attributable to the owners of the Company for 1Q2020 was €26 mn, compared to a loss of €186 mn for 4Q2019 and to a profit of €95 mn for 1Q2019.

B. Operating Environment

The COVID-19 outbreaks, both domestically and globally, have up-ended the initial economic projections. The IMF now expects the global economy to contract by 3% in 2020, which is worse than during the 2008-2009 financial crisis. This contrasts with its February update that was anticipating a 3% growth instead, in the global economy. Likewise, the US is expected to contract by 5.9% in 2020 and the Euro Area by 7.5%. For Cyprus the IMF now expects the economy to contract by 6.5% in the year, compared with earlier projections for growth of 2.9%. Strong recoveries are expected in 2021 provided the pandemic fades away in the second half of 2020 and containment measures are gradually unwound. The IMF expects growth of 5.8% in the global economy in 2021 under a baseline scenario. Likewise, the Cyprus economy is expected to grow by 5.6% in 2021.

The Cyprus economy has achieved considerable progress in the programme years, and the recovery that started in 2015 continued uninterruptedly into 2019. Real GDP increased by 3.2% in 2019 following an increase of 4.1% in 2018. The unemployment rate had dropped to 7% in 2019 from over 16% in 2014. Up until the end of 2019 an improving labour market, bank recapitalisations, lower borrowing costs and firmer external demand had bolstered purchasing power and construction activity. The business environment overall experienced uninterrupted improvement in this period.

In 2020 economic activity is expected to be held back as tourism inflows are severely impacted. Based on flash estimates, real GDP increased by 0.8% seasonally adjusted in the first quarter of the year compared with an increase of 3.4% in the same period the year before. From monthly figures the average unemployment rate was 6.1% in the quarter with an uptick in March. Tourist arrivals declined by 31% in the quarter and by 67% in March alone, with the travel ban taking effect from about the middle of the month onwards. Tourist receipts dropped by 38.9% in the same period and by 73.5% in March. Car registrations, a gauge of consumer demand, dropped by 29% in January-April after dropping by 36% in March and by 82% in April. Economic sentiment turned negative in March and April. The economic sentiment indicator was down by 12.2% on average in January-April 2020 dropping by 32.4% in April. In the banking sector new lending to businesses and households remained at about the same levels, and slightly higher in January-April, compared with the same period the year before.

Fiscal policy

In 2020 the Government budget is expected to post a steep deficit as a result of the measures the Government announced in response to the COVID-19 pandemic and economic contraction. According to the Stability Programme 2020-2023 as published in early May, the fiscal impact of these measures in 2020 is estimated at 4.4% of GDP.

Measures taken by the Cyprus Government are broadly in line with those taken by other governments in Europe and around the world with differences in terms of size. These measures include support for short-time work, tax forbearance and household income support. Liquidity support measures not included in the budget calculations include the freeze on loan repayments until the end of the year. An initial scheme for bank loan guarantees has been withdrawn after disagreements in Parliament.

Total Government revenue is expected to drop as the economy contracts in the year and tax revenues are lost. However, the decline in revenues is expected to be mitigated by higher social security contributions resulting from increased contributions in the context of the National Health System. Given a drop in nominal GDP, the ratio of revenues are expected to rise according to the Stability Programme thus containing the potential deterioration of the fiscal deficit. The final deficit will be determined by the actual performance of the economy and any additional support measures that may be introduced in the year that are now not budgeted for.

According to the Ministry of Finance (Stability Programme 2020-2023, April 2020), the budget deficit is estimated at 4.2% of GDP in 2020 with public debt rising to 116.8%. The steep rise in the debt ratio also reflects the recent revision of the Annual Financing Programme targeted for the pandemic crisis and the decline in nominal GDP. The budget deficit can be expected to narrow gradually over 2021-2022 as the economy strengthens and the Government reduces spending as a share of GDP.

In 2008-2012, the underlying dynamics in public finances were unstable. Public debt was rising driven by large unsustainable budget deficits whilst economic activity was stagnating. Currently the situation is vastly different. Public debt is higher in absolute terms compared to 2012, but prior to the virus outbreak, the combination of relatively high growth rates, large budget surpluses and low debt service costs, were supporting a sustained decline. This declining trend will be halted in 2020-2021 as a result of the pandemic induced recession, but it is expected to resume as growth returns.

European Union support

European institutions have stepped up efforts to tackle the crisis. The European Commission has suspended the fiscal and state aid rules paving the way for member states to incur deficits without punitive repercussions. The ECB launched a new wave of net asset purchases and introduced a €750 bn Pandemic Emergency Purchase Programme. The Bank's supervisory authority eased capital requirements providing relief to banks and relaxed the rules around non-performing loans. The Pandemic Emergency Purchase Programme with its flexible framework, paves the way for massive bond-buying this year ensuring funding conditions remain favourable for countries facing a rapid deterioration in their public finances.

The Eurogroup of Eurozone finance ministers concluded a package of fiscal stimulus in early April for a total of €540 bn. This package includes credit lines from the ESM for €240 bn; loan guarantees from the EIB for an additional €200 bn; and labour market support for €100 bn in the so-called SURE programme introduced by the European Commission.

In a more recent development French President Emmanuel Macros and German Chancellor Angela Merkel published a joint statement on how to fund Europe's recovery from the COVID-19 pandemic. The proposal calls for a €500 bn borrowing by the European Commission to be distributed as grants not loans, to the areas and industries most affected by the pandemic. This is mutual debt and is subject to the approval of all 27 countries of the European Union.

Banking sector and non-performing loans

In the banking sector, total loans to residents and non-residents alike, were €33.6 bn at the end of March 2020. This corresponds to 164.5% of 2020 estimated nominal GDP. Total loans consisted of €7.1 bn to non-residents and €26.5 bn to residents or €26.2 bn excluding the Government. The latter, which include more than €9 bn in non-performing, were 128% of nominal GDP.

The stock of NPLs declined from €20.9 bn at the end of December 2017 to €10.4 bn as at end-December 2018 after the sale of loans by the Bank (Project Helix) and the resolution of the Cyprus Cooperative Bank. This is a drop of €10.5 bn in the period. This drop originated from SMEs for €4.3 bn and from households for €5.8 bn an additional €0.3 bn came from other sectors. The stock of NPLs dropped to €9.5 bn at the end of November 2019. This consisted of €4.9 bn from households and €3.7 bn from SMEs. Other non-financial companies and the financial companies comprised the remaining €1 bn.

The ratio of NPLs to gross loans was 28.6% in November 2019 from 30.5% at end December-2018 reflecting a further drop in both non-performing loan and loans outstanding. The share of restructured facilities was 44.2% and the coverage ratio stood at 54.6% at the end of November.

Sovereign ratings

The sovereign risk ratings of the Cyprus Government improved considerably in recent years reflecting expectations of a sustained decline in public debt as a ratio to GDP, expected further declines in non-performing exposures and a more stable price environment following a protracted period of deflation and low inflation. In November 2018 Fitch Ratings upgraded its Long-Term Issuer Default ratings for Cyprus to investment grade (BBB-) with stable outlook. In October 2019, Fitch affirmed its rating and upgraded its outlook to positive. In July 2018 Moody's Investors Service upgraded Cyprus' sovereign rating to Ba2 from Ba3 with a stable outlook. In September 2019 Moody's affirmed its rating and upgraded its outlook to positive. S&P Global Ratings maintains an investment grade rating (BBB-) with a stable outlook since September 2018, which was affirmed in March 2020.

In April 2020, Fitch affirmed its rating and revised its outlook to stable, reflecting the significant impact the global COVID-19 pandemic might have on the Cyprus economy and fiscal position. In April 2020 Moody's Investors Service issued an Update on their credit opinion for the Cyprus Sovereign and revised their forecasts for the Cyprus economy in view of the coronavirus outbreak. According to the Update, the outbreak will weigh on near term growth and fiscal prospects but the impact on the credit profile is expected to be temporary.

C. Business Overview

As the Cypriot operations account for 99% of gross loans and 100% of customer deposits, the Group's financial performance is highly correlated to the economic and operating conditions in Cyprus. In June 2019, Moody's Investors Service affirmed the Bank's long-term deposit rating of B3 (positive outlook) and in July 2019, Standard and Poor's affirmed their long-term issuer credit rating on the Bank of 'B+' (stable outlook). In November 2019, Fitch Ratings affirmed their long-term issuer default rating of B- (positive outlook). In April 2020, Fitch Ratings revised their outlook to negative, reflecting the significant impact the outbreak of COVID-19 might have on the Cypriot economy and consequently the Bank.

In common with other European banks, the persistently low interest rate environment continues to present a challenge to the Group's profitability. As a consequence of the current challenging economic conditions resulting from the COVID-19 outbreak, the Group has updated its macroeconomic assumptions underlying the IFRS 9 calculation of loan credit losses for 1Q2020 in line with the relevant regulatory guidance, resulting in increased organic loan credit losses for 1Q2020 of €28 mn. Under the base scenario, the Bank is expecting the Cypriot economy to contract by 6.9% in 2020, with gradual recovery from 2021 onwards, with GDP growth of 5.4% for 2021. The Bank's projections are in line with those published by the IMF, the Cyprus Ministry of Finance, the EBRD, the European Commission and the Economics Research Centre of the University of Cyprus.

Net fee and commission income for 1Q2020 amounts to €38 mn, of which 44% is estimated to relate to transactional activity. Despite the lower transactional income and lower demand for loans currently observed, the on-going economic uncertainty means that the Group does not have sufficient visibility about the impact of COVID-19 on its operations or financial results, and therefore, is currently not in a position to provide guidance for the current financial year. However, the Group's good capital base and strong liquidity, position it to be able to support its customers through this period of extreme volatility.

The Group's medium-term strategic priorities remain clear, with a sustained focus on strengthening its balance sheet, and improving asset quality and efficiency in order to continue to play a vital role in supporting the Cypriot economy.

In light of the recent outbreak of COVID-19, the Group is taking all appropriate measures, in line with guidelines and recommendations issued by the Ministry of Health, to protect the health of both staff and customers, while ensuring the operational resilience of the Bank.

Upon the outbreak of COVID-19, the Pandemic Incident Management Plan (PIMP) of the Group was invoked and a dedicated team is monitoring the situation domestically and globally and provide guidance on health and safety measures, travel advice and business continuity for our Group. Local government guidelines are being followed in response to the virus. Also, the potential economic implications for the sectors where the Group is active in are being assessed in order to identify possible mitigating actions.

In accordance with the Pandemic Plan, the Group has adopted a set of measures to ensure minimum disruption to its operations. The measures comprise rules for quarantine for employees who are vulnerable due to health conditions and for those who have returned from epicentres of the infection. The Group has replaced face-to-face meetings with telecommunications, adjusting the customary etiquette of personal contact, including those with customers. Staff for critical functions has been split into separate locations. In addition, to ensure continuity of business, many employees are working from home and the remote access capability has been updated significantly. Additionally, the Group follows strict rules of hygiene, increased intensity of cleaning and disinfection of spaces, and other measures to protect the health and safety of staff and customers.

As the leading financial institution in the country, the Group has a good capital position and a significant liquidity surplus of €3 bn as it heads into uncertain times, to support its customers and the economy to recover from this shock. The Bank has considerable experience in managing challenging circumstances. The Management maintains its relentless focus on asset quality, funding, capital and efficiency to ensure the Bank maintains its financial strength, but remains equally flexible to adjust its short term priorities as needed to react to the emerging conditions of these unprecedented times. The Management's investment in the digital transformation programme has strengthened the Group's operational resilience and enabled the full deployment of digital service channels to customers. For further information, please refer to the section "Digital Transformation" below.

In addition, the package of policy measures announced by the ECB and the European Commission, as well as the unprecedented fiscal and other measures of the Cyprus Government, should help reduce the negative impact and support the recovery of the Cypriot economy.

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. Following the outbreak of COVID-19 the Group is now focused on arresting any potential asset quality deterioration. Once economic conditions normalise, the Group expects to resume its efforts to improve its asset quality position by seeking solutions, both organic and inorganic, to make the Bank a stronger and safer institution, capable of continuing to support the local economy.

The July 2018 foreclosure law amendments have expedited the process and limited options to frustrate execution. In July 2019, the Cyprus Parliament voted through certain changes to the 2018 law which, in the most part, seek to (a) provide additional checks and balances where banks are seeking to foreclose small loans (<€350 thousand) secured by a principal private residence, and (b) extend the foreclosure timetable by extending various notice periods. These amendments have not yet passed into law, as the President of the Republic has referred these to the Supreme Court, based on legal advice from the Attorney General that elements thereof are unconstitutional. Discussions are on-going, including, inter alia, with the Ministry of Finance, the CBC and the Financial Ombudsman, aiming to introduce amendments to the foreclosure and loan restructuring framework that are acceptable to all stakeholders. Following the outbreak of COVID-19, the foreclosure process has been suspended until 31 August 2020, in line with the latest decision of the Association of Cyprus Banks.

The strategic focus of the Group on asset quality, funding, capital and efficiency aims to ensure that it maintains its financial strength. During the quarter ended 31 March 2020, new lending amounted to €451 mn (increased by 2% qoq). To date, growth in new lending in Cyprus has been focused on selected industries more in line with the Bank's target risk profile, such as tourism, trade, real estate, professional services, information/communication technologies, energy, education and green projects. Until recently, the Group has also been exploring ways to grow its new lending, including careful, modest new lending in shipping, syndicated loans, as well as other initiatives, however, following the outbreak of COVID-19, new lending is focused on supporting the Cypriot economy.

Following the outbreak of COVID-19, the sectors most adversely affected initially are expected to be tourism, trade, transport and construction. The Group has a well - diversified performing loan portfolio. As at 31 March 2020, the Group's performing loan book exposure to tourism was limited to €1.0 bn, out of a total performing loan book of €9.2 bn. Respectively, the Group's performing loan book exposure to trade was also €1.0 bn, whilst to construction was limited to €0.5 bn. At the same time, the Group had only a small performing loan book exposure to the oil and gas industry of c.€45 mn.

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, as such business have been providing a stable, recurring fee income, further diversifying the Group's income streams. The insurance income net of claims and commissions for 1Q2020 amounted to €11 mn, down by 8% yoy, contributing to 19% 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. The cost of deposits has been reduced by 65 bps to 11 bps over the last 27 months. In addition, liquidity fees for specific customer groups have been introduced in March 2020.

A key focus of the Group remains the active management of funding costs and on-going running expenses. The Digital Transformation Programme that started in 2017 has begun to deliver an improved customer experience (see section below), whilst the branch footprint rationalisation continued in 4Q2019, further improving the Bank's operating model. The number of branches was reduced by 18% in 2019 and the branch network is now less than half the size it was in 2013. The management remains focused on further improvement in efficiency.

Digital Transformation

As part of its vision to be the leading financial hub in Cyprus, the Bank continues its Digital Transformation Programme, which focuses on three strategic pillars: developing digital services and products that enhance the customer experience, streamlining internal processes, and introducing new ways of working to improve the workplace environment.

In recent months, various new features were introduced on the new mobile app, to enhance self-service functionalities. Users can now retrieve a forgotten user id, set a new passcode in case they forgot their old one and activate their subscription without having to contact the bank. Additionally, users can now purchase a Digipass through the mobile app, a verification instrument that allows them to perform a variety of transactions securely. Finally, customers can now register for a subscription to the Bank's digital channels without having to fill in a physical form or visit a branch. Integration with modern payment solutions has been made easier as users can now add their Visa cards to the BoC Wallet (Android) through the mobile app directly.

Moreover, the launch of the new Cards and Payments systems has been completed. This is expected to offer customised solutions and improve the customer banking experience. For example, it is expected to offer new features through mobile banking in 2020, such as the ability for the customer to freeze their credit or debit card in the event of a loss (freeze and unfreeze), and the ability to determine a maximum limit for specific transactions.

The adoption of digital products and services continued to grow and gain momentum in 2019. As at the end of 2019, 78% of the number of transactions involving deposits, cash withdrawals and internal/external transfers were performed through digital channels (compared to 67% two years earlier). Regarding the use of mobile banking, the number of active users increased by 20% in 2019, compared to the previous year.

In 2020, as a result of the COVID-19 restrictive measures, a reduction in cash withdrawals and deposits performed through the branch network has been observed. An increase in the adoption of digital products and services and in digital subscriber penetration has also been observed as more customers have gained access to digital channels and more cards have been issued. As at the end of April 2020, 70% of customers were digitally engaged (up by 10 p.p. from 60% since the digital transformation programme was initiated in September 2017). A further increase is expected in 2Q2020 driven by the increase in the number of subscribers and the number of cards that have been issued. Within this context, the Bank has launched various initiatives aiming to provide better, faster and safer services. Such initiatives include amongst others the issuance of debit cards free of charge and on a fast track basis until the end of May 2020, the provision of SMS Digipass devices free of charge, and the ability for new customers to apply for account opening via the Bank's website.

As part of the Bank's ambition to be one of the cornerstones of the digital economy, customers have been enabled to authorise the release of their identification details to the Government, using the internet banking credentials thus enabling a digital registration on the Government Gateway Portal (Ariadni) where they can use electronic services that are made available by the Government of Cyprus (up until now citizens needed to be physically present to identify themselves).

In addition, the Bank has taken the necessary actions to enable customers to purchase Qualified Digital Signature certificates, which can be used to digitally sign Bank, Government as well as any other document that requires a signature, eliminating the need of physical presence and enhancing the customer experience. It should be noted that the Bank is one of the first banks in Europe to offer a fully digital application process to acquire a Qualified Digital Signature certificate.

Furthermore, changes in the workplace, with the introduction of new technologies and tools that will drastically change the employee experience, improving collaboration and knowledge sharing across the organisation, are expected to be seen in 2020.

D. Strategy and Outlook

The strategic objectives for the Group are 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:

· Arrest any asset quality deterioration resulting from the outbreak of COVID-19 and further reduce the level of delinquent loans upon normalisation of market and operational conditions

· Achieve a lean operating model

· Maintain an appropriate capital position by internally generating capital

· Further optimise the funding structure

· Focus on the core Cyprus market

· Deliver value to shareholders and other stakeholders

KEY PILLARS	ACTION TAKEN IN 1Q2020 and 2019	PLAN OF ACTION
1. Arrest any asset quality deterioration resulting from the outbreak of COVID-19 and further reduce the level of delinquent loans upon normalisation of market and operational conditions	• Please refer to Sections A.1.5 'Loan Portfolio Quality' and A.1.6 'Real Estate Management Unit'	• Focus on realising collateral via consensual and non -consensual foreclosures • Real estate management via REMU • Continue to explore alternative measures for accelerating NPE reduction, such as NPE sales, securitisations etc
2. Achieve a lean operating model	• Please refer to Section A.2.4 '(Loss)/profit after tax (attributable to the owners of the Company)' and Section A.2.2 'Total expenses' for further details in relation to the voluntary staff exit plan that took place in 4Q2019 and Section C 'Business Overview'	• Implementation of Digital Transformation Programme underway, aimed at enhancing productivity through alternative distribution channels and reducing operating costs over time • Management remains focused on further improvement in efficiency
3. Maintain an appropriate capital position	• Please refer to Section A.1.1 'Capital Base'	• Internally generating capital
4. Further optimise the funding structure	• Please refer to Section A.1.3 'Funding and Liquidity'	• Focus on shape and cost of deposit franchise • Introduction of liquidity fees
5. Focus on core Cyprus market	• Please refer to Sections A.1.4 'Loans', A.2.1 'Total income' and C 'Business Overview'	• Targeted lending in Cyprus into growing sectors to fund recovery • New loan origination, while maintaining lending yields • Revenue diversification via fee and commission income from international banking, wealth and insurance which provides stable, recurring income
6. Deliver value	• Please refer to page 7 for the Key Balance Sheet figures and ratios, as well as the Capital ratios and risk weighted assets	• Deliver appropriate medium-term risk-adjusted returns

E. Statutory Financial Results

Unaudited Interim Consolidated Income Statement

	Three months ended 31 March
	2020	2019 (restated)
	€000	€000

Turnover	207,575	240,815
Interest income	101,673	126,967
Income similar to interest income	12,487	13,199
Interest expense	(17,217)	(26,313)
Expense similar to interest expense	(12,017)	(11,807)
Net interest income	84,926	102,046
Fee and commission income	40,107	42,239
Fee and commission expense	(2,063)	(3,210)
Net foreign exchange gains	8,662	6,869
Net (losses)/gains on financial instrument transactions and disposal/dissolution of subsidiaries	(3,812)	3,953
Insurance income net of claims and commissions	11,404	12,413
Net losses from revaluation and disposal of investment properties	(284)	(212)
Net gains on disposal of stock of property	1,103	4,208
Other income	4,465	8,075
	144,508	176,381
Staff costs	(49,051)	(57,099)
Special levy on deposits on credit institutions in Cyprus, contribution to Single Resolution Fund and other levies	(9,195)	(12,091)
Other operating expenses	(42,593)	(60,831)
	43,669	46,360
Net gains on derecognition of financial assets measured at amortised cost	954	2,848
Credit losses to cover credit risk on loans and advances to customers	(63,802)	(59,822)
Credit losses of other financial instruments	(662)	(7,441)
Impairment of non-financial assets	(3,803)	(1,389)
Loss before share of (loss)/profit from associates	(23,644)	(19,444)
Share of (loss)/profit from associates	(438)	2,228
Loss before tax	(24,082)	(17,216)
Income tax	(1,726)	112,353
(Loss)/profit after tax for the period	(25,808)	95,137

Attributable to:
Owners of the Company	(25,912)	94,690
Non-controlling interests	104	447
(Loss)/profit for the period	(25,808)	95,137

Basic and diluted (loss)/profit per share attributable to the owners of the Company (€ cent)

(5.8)

21.2

Unaudited Interim Consolidated Statement of Comprehensive Income

	Three months ended 31 March
	2020	2019
	€000	€000
(Loss)/profit for the period	(25,808)	95,137
Other comprehensive income (OCI)
OCI that may be reclassified in the consolidated income statement in subsequent periods
Fair value reserve (debt instruments)
Net (losses)/gains on investments in debt instruments measured at fair value through OCI (FVOCI)	(25,643)	6,951
Transfer to the consolidated income statement on disposal	(1,971)	396
	(27,614)	7,347
Foreign currency translation reserve
Profit/(loss) on translation of net investment in foreign branches and subsidiaries	19,766	(6,809)
(Loss)/profit on hedging of net investments in foreign branches and subsidiaries	(19,087)	6,019
Transfer to the consolidated income statement on dissolution of foreign subsidiary	105	-
	784	(790)
Total OCI that may be reclassified in the consolidated income statement in subsequent periods	(26,830)	6,557
OCI not to be reclassified in the consolidated income statement in subsequent periods
Fair value reserve (equity instruments)
Share of net gains from fair value changes of associates	-	2,156
Net gains on investments in equity instruments designated at FVOCI	94	176
	94	2,332
Property revaluation reserve
Deferred Tax	(901)	29

Actuarial losses on the defined benefit plans
Remeasurement losses on defined benefit plans	(126)	(1,991)
Total OCI not to be reclassified in the consolidated income statement in subsequent periods	(933)	370
Other comprehensive (loss)/income for the period net of taxation	(27,763)	6,927
Total comprehensive (loss)/income for the period	(53,571)	102,064

Attributable to:
Owners of the Company	(53,429)	101,599
Non-controlling interests	(142)	465
Total comprehensive (loss)/income for the period	(53,571)	102,064

Unaudited Interim Consolidated Balance Sheet

	31 March 2020	31 December 2019
Assets	€000	000
Cash and balances with central banks	4,398,781	5,060,042
Loans and advances to banks	455,284	320,881
Derivative financial assets	20,065	23,060
Investments	1,724,850	1,682,869
Investments pledged as collateral	222,752	222,961
Loans and advances to customers	10,596,536	10,721,841
Life insurance business assets attributable to policyholders	416,209	458,852
Prepayments, accrued income and other assets	264,351	243,930
Stock of property	1,372,858	1,377,453
Deferred tax assets	341,333	379,126
Investment properties	134,112	136,197
Property and equipment	283,850	288,054
Intangible assets	173,864	178,946
Investments in associates and joint venture	1,959	2,393
Non-current assets and disposal groups held for sale	23,988	26,217
Total assets	20,430,792	21,122,822
Liabilities
Deposits by banks	395,609	533,404
Repurchase agreements	169,673	168,129
Derivative financial liabilities	70,174	50,593
Customer deposits	16,245,575	16,691,531
Insurance liabilities	594,364	640,013
Accruals, deferred income, other liabilities and other provisions	316,493	324,246
Pending litigation, claims, regulatory and other matters	102,225	108,094
Subordinated loan stock	254,850	272,170
Deferred tax liabilities	46,768	46,015
Total liabilities	18,195,731	18,834,195
Equity
Share capital	44,620	44,620
Share premium	1,294,358	1,294,358
Revaluation and other reserves	181,160	210,701
Retained earnings	466,403	490,286
Equity attributable to the owners of the Company	1,986,541	2,039,965
Other equity instruments	220,000	220,000
Total equity excluding non‑controlling interests	2,206,541	2,259,965
Non‑controlling interests	28,520	28,662
Total equity	2,235,061	2,288,627
Total liabilities and equity	20,430,792	21,122,822

Comparative information was restated as follows:

· Following the change in 2019 in the classification of long-term leased properties with rental yield at market level which are leased out under operating leases as investment properties, gain on disposal of these properties of €192 thousand was reclassified from 'Net gains on disposal of stock of property' to 'Net losses from revaluation and disposal of investment properties' during the three months ended 31 March 2019. The disclosures on the change in the classification are presented in the Consolidated Financial Statements for the year ended 31 December 2019 within the Annual Financial Report.

· 'Fee and commission income' and 'Fee and commission expense' as restated, include elimination of intragroup amounts between 'Fee and commission income' and 'Fee and commission expense' amounting to €539 thousand.

· Levy in the form of a guarantee fee relating to the revised income tax legislation of €5,753 thousand has been reclassified from 'Fee and commission expense' to 'Special levy on deposits on credit institutions in Cyprus, contribution to Single Resolution Fund and other levies'.

· Comparative information for turnover was restated to include 'Net gains on disposal of stock of property' in the turnover, the effect of the change in the classification of properties which are leased out under operating leases and the effect of the change in the fee and commission income as described above.

The above restatements are consistent with the presentation of such amounts in the Consolidated Financial Statements for the year ended 31 December 2019 within the 2019 Annual Financial Report and these did not have an impact on the results for the period or the equity of the Group.

Unaudited Interim Consolidated Statement of Changes in Equity

	Attributable to the shareholders of the Company									Other equity instruments	Non- controlling interests	Total equity
	Share capital	Share premium	Treasury shares	Retained earnings	Property revaluation reserve	Financial instruments fair value reserve	Life insurance in-force business reserve	Foreign currency translation reserve	Total	Other equity instruments	Non- controlling interests	Total equity
	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000
1 January 2020	44,620	1,294,358	(21,463)	490,286	79,286	33,900	102,051	16,927	2,039,965	220,000	28,662	2,288,627
(Loss)/profit for the period	-		-	(25,912)	-	-	-	-	(25,912)	-	104	(25,808)
Other comprehensive (loss)/income after tax for the period	-		-	(126)	(676)	(27,499)	-	784	(27,517)	-	(246)	(27,763)
Total comprehensive (loss)/income after tax for the period	-		-	(26,038)	(676)	(27,499)	-	784	(53,429)	-	(142)	(53,571)
Decrease in value of in-force life insurance business	-	-	-	2,457	-	-	(2,457)	-	-	-	-	-
Tax on decrease in value of in-force life insurance business	-	-	-	(307)	-	-	307	-	-	-	-	-
Change in the holding of Undertakings for Collective Investments in Transferable Securities (UCITS) Fund	-	-	-	5	-	-	-	-	5	-	-	5
31 March 2020	44,620	1,294,358	(21,463)	466,403	78,610	6,401	99,901	17,711	1,986,541	220,000	28,520	2,235,061

	Attributable to the shareholders of the Company									Other equity instruments	Non- controlling interests	Total equity
	Share capital	Share premium	Treasury shares	Retained earnings	Property revaluation reserve	Financial instruments fair value reserve	Life insurance in-force business reserve	Foreign currency translation reserve	Total	Other equity instruments	Non- controlling interests	Total equity
	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000
1 January 2019	44,620	1,294,358	(21,463)	591,941	79,433	15,289	101,001	16,151	2,121,330	220,000	25,998	2,367,328
Profit for the period	-	-	-	94,690	-	-	-	-	94,690	-	447	95,137
Other comprehensive (loss)/income after tax for the period	-	-	-	(1,991)	22	9,668	-	(790)	6,909	-	18	6,927
Total comprehensive income/(loss) after tax for the period	-	-	-	92,699	22	9,668	-	(790)	101,599	-	465	102,064
Increase in value of in-force life insurance business	-	-	-	(800)	-	-	800	-	-	-	-	-
Tax on increase in value of in-force life insurance business	-	-	-	100	-	-	(100)	-	-	-	-	-
31 March 2019	44,620	1,294,358	(21,463)	683,940	79,455	24,957	101,701	15,361	2,222,929	220,000	26,463	2,469,392

F. Notes

F.1 Reconciliation of income statement between statutory and underlying basis

€ million	Underlying basis	NPE Sales	Other	Statutory basis
Net interest income	85	-	-	85
Net fee and commission income	38	-	-	38
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries	6	-	(1)	5
Insurance income net of claims and commissions	11	-	-	11
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties	1	-	-	1
Other income	4	-	-	4
Total income	145	-	(1)	144
Total expenses	(93)	(3)	(5)	(101)
Operating profit	52	(3)	(6)	43
Loan credit losses	(64)	-	1	(63)
Impairments of other financial and non-financial assets	(4)	-	-	(4)
Provisions for litigation, claims, regulatory and other matters	(2)	-	2	-
Loss before tax and non-recurring items	(18)	(3)	(3)	(24)
Tax	(2)	-	-	(2)
Profit attributable to non-controlling interests	(0)	-	-	(0)
Loss after tax and before non-recurring items (attributable to the owners of the Company)	(20)	(3)	(3)	(26)
Advisory and other restructuring costs-organic	(3)	-	3	-
Loss after tax - organic* (attributable to the owners of the Company)	(23)	(3)	-	(26)
Provisions/net loss relating to NPE sales, including restructuring expenses	(3)	3	-	-
Loss after tax (attributable to the owners of the Company)	(26)	-	-	(26)

*This is the loss after tax (attributable to the owners of the Company), before the provisions/net loss relating to NPE sales, including restructuring expenses.

The reclassification differences between the statutory basis and underlying basis mainly relate to the impact from 'non-recurring items' and are explained as follows:

NPE sales

· Total expenses include restructuring costs of €3 million mainly relating to the sale of portfolio of NPEs and are presented within 'Provisions/net loss relating to NPE sales, including restructuring expenses' under the underlying basis.

Other reclassifications

· Advisory and other restructuring costs of approximately €3 million included in 'Other operating expenses' under the statutory basis are separately presented under the underlying basis since they represent one-off items.

· Provisions for litigation, claims, regulatory and other matters amounting to €2 million included in 'Other operating expenses' under the statutory basis, are separately presented under the underlying basis, since they mainly relate to cases that arose outside the normal activities of the Group.

· Net losses on loans and advances to customers at FVPL of €1 million included in 'Loan credit losses' under the underlying basis are included in 'Net gains on financial instrument transactions and disposal/dissolution of subsidiaries' under the statutory basis. Their classification under the underlying basis is consistent to the net losses on loans and advances to customers at amortised cost.

F.2 Customer deposits

The analysis of customer deposits is presented below:

	31 March 2020	31 December 2019
By type of deposit	€000	€000
Demand	7,438,461	7,595,231
Savings	1,648,093	1,567,344
Time or notice	7,159,021	7,528,956
	16,245,575	16,691,531
By geographical area
Cyprus	16,245,575	16,691,531

By currency
Euro	14,584,183	15,009,828
US Dollar	1,281,668	1,286,292
British Pound	287,345	288,289
Russian Rouble	22,343	30,113
Swiss Franc	10,771	10,803
Other currencies	59,265	66,206
	16,245,575	16,691,531
By customer sector
Corporate	1,099,297	1,117,222
Global corporate	714,437	691,550
SMEs	746,483	770,655
Retail	9,965,445	10,140,920
Restructuring
- Corporate	43,346	52,421
- SMEs	21,427	28,222
- Retail other	9,615	10,507
Recoveries
- Corporate	5,245	6,140
International banking services	3,304,392	3,543,315
Wealth management	335,888	330,579
	16,245,575	16,691,531

Deposits by geographical area are based on the originator country of the deposit.

F.3 Loans and advances to customers

	31 March 2020	31 December 2019
	€000	€000
Gross loans and advances to customers at amortised cost	12,001,884	12,008,146
Allowance for ECL for impairment of loans and advances to customers	(1,692,457)	(1,655,598)
Loans and advances to customers at amortised cost	10,309,427	10,352,548
Loans and advances to customers measured at FVPL	287,109	369,293
	10,596,536	10,721,841

F.4 Credit risk concentration of gross loans and advances to customers

Industry and business lines concentrations and geographical analysis of Group gross loans and advances to customers at amortised cost are presented in the tables below:

31 March 2020	Cyprus	Other countries	Total	Residual fair value adjustment on initial recognition	Gross loans at amortised cost after residual fair value adjustment on initial recognition
By economic activity	€000	€000	€000	€000	€000
Trade	1,345,760	11,760	1,357,520	(16,498)	1,341,022
Manufacturing	454,746	2,803	457,549	(4,583)	452,966
Hotels and catering	950,556	848	951,404	(17,343)	934,061
Construction	818,215	3,019	821,234	(10,492)	810,742
Real estate	1,135,606	23,997	1,159,603	(14,608)	1,144,995
Private individuals	5,887,253	900	5,888,153	(108,600)	5,779,553
Professional and other services	779,479	31,039	810,518	(20,832)	789,686
Other sectors	755,646	685	756,331	(7,472)	748,859
	12,127,261	75,051	12,202,312	(200,428)	12,001,884
By business line
Corporate	1,977,108	21,199	1,998,307	(19,453)	1,978,854
Global corporate	1,927,092	45,702	1,972,794	(16,006)	1,956,788
SMEs	1,136,957	7,364	1,144,321	(16,240)	1,128,081
Retail
- housing	2,839,896	-	2,839,896	(40,462)	2,799,434
- consumer, credit cards and other	891,694	786	892,480	1,531	894,011
Restructuring
- corporate	269,540	-	269,540	(2,657)	266,883
- SMEs	299,926	-	299,926	(4,266)	295,660
- retail housing	335,250	-	335,250	(2,878)	332,372
- retail other	176,366	-	176,366	(2,577)	173,789
Recoveries
- corporate	100,282	-	100,282	(2,671)	97,611
- SMEs	445,762	-	445,762	(16,308)	429,454
- retail housing	887,357	-	887,357	(37,353)	850,004
- retail other	676,874	-	676,874	(37,173)	639,701
International banking services	130,224	-	130,224	(1,342)	128,882
Wealth management	32,933	-	32,933	(2,573)	30,360
	12,127,261	75,051	12,202,312	(200,428)	12,001,884

31 December 2019	Cyprus	Other countries	Total	Residual fair value adjustment on initial recognition	Gross loans at amortised cost after residual fair value adjustment on initial recognition
By economic activity	€000	€000	€000	€000	€000
Trade	1,334,506	11,092	1,345,598	(16,375)	1,329,223
Manufacturing	456,129	3,222	459,351	(4,659)	454,692
Hotels and catering	932,435	840	933,275	(17,436)	915,839
Construction	838,388	3,272	841,660	(10,821)	830,839
Real estate	1,131,179	23,777	1,154,956	(14,760)	1,140,196
Private individuals	5,892,821	929	5,893,750	(110,332)	5,783,418
Professional and other services	797,044	41,970	839,014	(22,745)	816,269
Other sectors	741,858	683	742,541	(4,871)	737,670
	12,124,360	85,785	12,210,145	(201,999)	12,008,146
By business line
Corporate	1,970,656	22,371	1,993,027	(18,212)	1,974,815
Global corporate	1,862,119	53,972	1,916,091	(16,342)	1,899,749
SMEs	1,118,499	8,632	1,127,131	(16,827)	1,110,304
Retail
- housing	2,834,411	-	2,834,411	(41,724)	2,792,687
- consumer, credit cards and other	893,199	810	894,009	1,835	895,844
Restructuring
- corporate	323,670	-	323,670	(2,545)	321,125
- SMEs	322,284	-	322,284	(5,007)	317,277
- retail housing	353,593	-	353,593	(3,059)	350,534
- retail other	181,768	-	181,768	(2,723)	179,045
Recoveries
- corporate	93,299	-	93,299	(2,692)	90,607
- SMEs	449,559	-	449,559	(15,981)	433,578
- retail housing	882,311	-	882,311	(37,654)	844,657
- retail other	670,787	-	670,787	(37,256)	633,531
International banking services	134,940	-	134,940	(1,288)	133,652
Wealth management	33,265	-	33,265	(2,524)	30,741
	12,124,360	85,785	12,210,145	(201,999)	12,008,146

The loans and advances to customers in Cyprus include lending exposures to Greek entities granted by BOC PCL in Cyprus in its normal course of business with a carrying value of €182,697 thousand (31 December 2019: €184,130 thousand) and lending exposures in Cyprus with collaterals in Greece with a carrying value of €82,732 thousand (31 December 2019: €80,324 thousand).

Loans and advances to customers classified as held for sale

Industry and business lines concentrations and geographical analysis of Group loans and advances to customers at amortised cost classified as held for sale are presented in the tables below:

31 March 2020	Cyprus	Other countries	Total	Residual fair value adjustment on initial recognition	Gross loans at amortised cost after residual fair value adjustment on initial recognition
By economic activity	€000	€000	€000	€000	€000
Trade	19,138	-	19,138	(1,215)	17,923
Manufacturing	6,599	-	6,599	(319)	6,280
Hotels and catering	5,628	-	5,628	(551)	5,077
Construction	11,273	-	11,273	(590)	10,683
Real estate	1,436	-	1,436	(153)	1,283
Private individuals	111,175	-	111,175	(6,239)	104,936
Professional and other services	17,654	-	17,654	(1,410)	16,244
Other sectors	5,527	-	5,527	(264)	5,263
	178,430	-	178,430	(10,741)	167,689
By business line
Corporate	360	-	360	1	361
SMEs	3	-	3	-	3
Retail
- consumer, credit cards and other	18	-	18	(1)	17
Restructuring
- corporate	6,313	-	6,313	(89)	6,224
- SMEs	1,169	-	1,169	(2)	1,167
- retail housing	23	-	23	(1)	22
- retail other	7,082	-	7,082	(210)	6,872
Recoveries
- corporate	18,217	-	18,217	(851)	17,366
- SMEs	23,107	-	23,107	(1,308)	21,799
- retail housing	5,859	-	5,859	(581)	5,278
- retail other	116,205	-	116,205	(7,693)	108,512
International banking services	74	-	74	(6)	68
	178,430	-	178,430	(10,741)	167,689

Loans and advances to customers classified as held for sale (continued)

31 December 2019	Cyprus	Other countries	Total	Residual fair value adjustment on initial recognition	Gross loans at amortised cost after residual fair value adjustment on initial recognition
By economic activity	€000	€000	€000	€000	€000
Trade	19,263	-	19,263	(1,224)	18,039
Manufacturing	6,649	-	6,649	(322)	6,327
Hotels and restaurants	5,725	-	5,725	(561)	5,164
Construction	11,187	-	11,187	(595)	10,592
Real estate	1,416	-	1,416	(153)	1,263
Private individuals	117,137	-	117,137	(6,474)	110,663
Professional and other services	18,068	-	18,068	(1,490)	16,578
Other sectors	5,519	-	5,519	(264)	5,255
	184,964	-	184,964	(11,083)	173,881
By business line
Corporate	710	-	710	-	710
SMEs	5	-	5	-	5
Retail
- consumer, credit cards and other	330	-	330	-	330
Restructuring
- corporate	7,706	-	7,706	(88)	7,618
- SMEs	1,157	-	1,157	(2)	1,155
- retail housing	1,142	-	1,142	(15)	1,127
- retail other	41,996	-	41,996	(1,884)	40,112
Recoveries
- corporate	18,493	-	18,493	(853)	17,640
- SMEs	21,997	-	21,997	(1,306)	20,691
- retail housing	5,316	-	5,316	(564)	4,752
- retail other	86,039	-	86,039	(6,365)	79,674
International banking services	73	-	73	(6)	67
	184,964	-	184,964	(11,083)	173,881

F.5 Analysis of loans and advances to customers by staging

The following tables present the Group's loans and advances to customers at amortised cost by staging and by business line concentration:

31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	6,524,224	2,128,637	2,937,478	611,973	12,202,312
Residual fair value adjustment on initial recognition	(75,299)	(20,594)	(16,213)	(88,322)	(200,428)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	6,448,925	2,108,043	2,921,265	523,651	12,001,884

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	1,546,720	354,456	56,445	40,686	1,998,307
Global corporate	1,429,394	361,877	144,656	36,867	1,972,794
SMEs	766,782	330,902	34,283	12,354	1,144,321
Retail
- housing	2,081,153	643,996	102,685	12,062	2,839,896
- consumer, credit cards and other	552,376	270,969	49,625	19,510	892,480
Restructuring
- corporate	31,038	46,485	172,013	20,004	269,540
- SMEs	28,003	48,419	204,986	18,518	299,926
- retail housing	594	7,601	318,205	8,850	335,250
- retail other	224	1,804	167,249	7,089	176,366
Recoveries
- corporate	-	-	82,246	18,036	100,282
- SMEs	-	-	370,734	75,028	445,762
- retail housing	-	-	712,866	174,491	887,357
- retail other	169	18	509,392	167,295	676,874
International banking services	71,182	48,661	10,172	209	130,224
Wealth management	16,589	13,449	1,921	974	32,933
	6,524,224	2,128,637	2,937,478	611,973	12,202,312

Residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	(19,460)	(926)	1,237	(304)	(19,453)
Global corporate	(10,771)	(5,089)	401	(547)	(16,006)
SMEs	(11,447)	(3,998)	(108)	(687)	(16,240)
Retail
- housing	(33,490)	(6,397)	(160)	(415)	(40,462)
- consumer, credit cards and other	1,321	227	185	(202)	1,531
Restructuring
- corporate	16	(1,403)	(1,142)	(128)	(2,657)
- SMEs	(96)	(578)	(2,321)	(1,271)	(4,266)
- retail housing	-	(33)	(2,002)	(843)	(2,878)
- retail other	-	21	(1,172)	(1,426)	(2,577)
Recoveries
- corporate	-	-	(277)	(2,394)	(2,671)
- SMEs	-	-	(2,660)	(13,648)	(16,308)
- retail housing	-	-	(3,606)	(33,747)	(37,353)
- retail other	-	-	(4,463)	(32,710)	(37,173)
International banking services	(315)	(1,008)	(19)	-	(1,342)
Wealth management	(1,057)	(1,410)	(106)	-	(2,573)
	(75,299)	(20,594)	(16,213)	(88,322)	(200,428)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	1,527,260	353,530	57,682	40,382	1,978,854
Global corporate	1,418,623	356,788	145,057	36,320	1,956,788
SMEs	755,335	326,904	34,175	11,667	1,128,081
Retail
- housing	2,047,663	637,599	102,525	11,647	2,799,434
- consumer, credit cards and other	553,697	271,196	49,810	19,308	894,011
Restructuring
- corporate	31,054	45,082	170,871	19,876	266,883
- SMEs	27,907	47,841	202,665	17,247	295,660
- retail housing	594	7,568	316,203	8,007	332,372
- retail other	224	1,825	166,077	5,663	173,789
Recoveries
- corporate	-	-	81,969	15,642	97,611
- SMEs	-	-	368,074	61,380	429,454
- retail housing	-	-	709,260	140,744	850,004
- retail other	169	18	504,929	134,585	639,701
International banking services	70,867	47,653	10,153	209	128,882
Wealth management	15,532	12,039	1,815	974	30,360
	6,448,925	2,108,043	2,921,265	523,651	12,001,884

31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	7,020,377	1,523,823	3,038,733	627,212	12,210,145
Residual fair value adjustment on initial recognition	(75,508)	(20,455)	(16,516)	(89,520)	(201,999)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	6,944,869	1,503,368	3,022,217	537,692	12,008,146

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	1,643,073	248,464	60,676	40,814	1,993,027
Global corporate	1,467,004	263,296	149,464	36,327	1,916,091
SMEs	849,347	226,351	40,463	10,970	1,127,131
Retail
- housing	2,237,619	435,853	149,257	11,682	2,834,411
- consumer, credit cards and other	644,345	169,440	60,826	19,398	894,009
Restructuring
- corporate	32,992	61,896	198,152	30,630	323,670
- SMEs	49,279	55,902	195,681	21,422	322,284
- retail housing	2,613	3,881	336,931	10,168	353,593
- retail other	430	607	173,213	7,518	181,768
Recoveries
- corporate	-	-	74,899	18,400	93,299
- SMEs	-	-	374,671	74,888	449,559
- retail housing	-	-	706,060	176,251	882,311
- retail other	216	-	503,408	167,163	670,787
International banking services	76,253	45,300	12,805	582	134,940
Wealth management	17,206	12,833	2,227	999	33,265
	7,020,377	1,523,823	3,038,733	627,212	12,210,145

Residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	(18,187)	(963)	1,241	(303)	(18,212)
Global corporate	(10,924)	(4,871)	-	(547)	(16,342)
SMEs	(11,522)	(4,374)	(244)	(687)	(16,827)
Retail
- housing	(35,575)	(5,653)	(237)	(259)	(41,724)
- consumer, credit cards and other	2,303	(377)	64	(155)	1,835
Restructuring
- corporate	(113)	(1,351)	(833)	(248)	(2,545)
- SMEs	(86)	(557)	(2,266)	(2,098)	(5,007)
- retail housing	(9)	(15)	(2,039)	(996)	(3,059)
- retail other	-	-	(1,134)	(1,589)	(2,723)
Recoveries
- corporate	-	-	(262)	(2,430)	(2,692)
- SMEs	-	-	(2,625)	(13,356)	(15,981)
- retail housing	-	-	(3,668)	(33,986)	(37,654)
- retail other	-	-	(4,390)	(32,866)	(37,256)
International banking services	(288)	(983)	(17)	-	(1,288)
Wealth management	(1,107)	(1,311)	(106)	-	(2,524)
	(75,508)	(20,455)	(16,516)	(89,520)	(201,999)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	1,624,886	247,501	61,917	40,511	1,974,815
Global corporate	1,456,080	258,425	149,464	35,780	1,899,749
SMEs	837,825	221,977	40,219	10,283	1,110,304
Retail
- housing	2,202,044	430,200	149,020	11,423	2,792,687
- consumer, credit cards and other	646,648	169,063	60,890	19,243	895,844
Restructuring
- corporate	32,879	60,545	197,319	30,382	321,125
- SMEs	49,193	55,345	193,415	19,324	317,277
- retail housing	2,604	3,866	334,892	9,172	350,534
- retail other	430	607	172,079	5,929	179,045
Recoveries
- corporate	-	-	74,637	15,970	90,607
- SMEs	-	-	372,046	61,532	433,578
- retail housing	-	-	702,392	142,265	844,657
- retail other	216	-	499,018	134,297	633,531
International banking services	75,965	44,317	12,788	582	133,652
Wealth management	16,099	11,522	2,121	999	30,741
	6,944,869	1,503,368	3,022,217	537,692	12,008,146

The following table presents the Group's loans and advances to customers at amortised cost before residual fair value adjustment on initial recognition by staging and geographical analysis.

31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	€000	€000	€000	€000	€000
Cyprus	6,523,507	2,128,637	2,863,144	611,973	12,127,261
Other countries	717	-	74,334	-	75,051
	6,524,224	2,128,637	2,937,478	611,973	12,202,312

31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	€000	€000	€000	€000	€000
Cyprus	7,019,591	1,523,823	2,953,734	627,212	12,124,360
Other countries	786	-	84,999	-	85,785
	7,020,377	1,523,823	3,038,733	627,212	12,210,145

Loans and advances to customers classified as held for sale

The following tables present the Group's loans and advances to customers at amortised cost classified as held for sale by staging and by business line concentration.

31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	25	929	147,580	29,896	178,430
Residual fair value adjustment on initial recognition	-	12	(3,250)	(7,503)	(10,741)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	25	941	144,330	22,393	167,689

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	-	360	-	-	360
SMEs	-	-	-	3	3
Retail
- consumer, credit cards and other	-	-	18	-	18
Restructuring
- corporate	20	569	4,742	982	6,313
- SMEs	5	-	960	204	1,169
- retail housing	-	-	23	-	23
- retail other	-	-	5,774	1,308	7,082
Recoveries
- corporate	-	-	14,437	3,780	18,217
- SMEs	-	-	16,771	6,336	23,107
- retail housing	-	-	4,677	1,182	5,859
- retail other	-	-	100,159	16,046	116,205
International banking services	-	-	19	55	74
	25	929	147,580	29,896	178,430

Loans and advances to customers classified as held for sale (continued)

Residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	-	-	1	-	1
Retail
- consumer, credit cards and other	-	-	(1)	-	(1)
Restructuring
- corporate	-	12	(2)	(99)	(89)
- SMEs	-	-	-	(2)	(2)
- retail housing	-	-	(1)	-	(1)
- retail other	-	-	(31)	(179)	(210)
Recoveries
- corporate	-	-	(213)	(638)	(851)
- SMEs	-	-	(357)	(951)	(1,308)
- retail housing	-	-	(211)	(370)	(581)
- retail other	-	-	(2,435)	(5,258)	(7,693)
International banking services	-	-	-	(6)	(6)
	-	12	(3,250)	(7,503)	(10,741)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	-	360	1	-	361
SMEs	-	-	-	3	3
Retail
- consumer, credit cards and other	-	-	17	-	17
Restructuring
- corporate	20	581	4,740	883	6,224
- SMEs	5	-	960	202	1,167
- retail housing	-	-	22	-	22
- retail other	-	-	5,743	1,129	6,872
Recoveries
- corporate	-	-	14,224	3,142	17,366
- SMEs	-	-	16,414	5,385	21,799
- retail housing	-	-	4,466	812	5,278
- retail other	-	-	97,724	10,788	108,512
International banking services	-	-	19	49	68
	25	941	144,330	22,393	167,689

Loans and advances to customers classified as held for sale (continued)

31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	176	807	153,608	30,373	184,964
Residual fair value adjustment on initial recognition	-	13	(3,402)	(7,694)	(11,083)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	176	820	150,206	22,679	173,881

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	-	360	350	-	710
SMEs	-	-	2	3	5
Retail
- consumer, credit cards and other	139	47	144	-	330
Restructuring
- corporate	20	397	6,164	1,125	7,706
- SMEs	7	1	952	197	1,157
- retail housing	4	-	1,128	10	1,142
- retail other	6	2	37,281	4,707	41,996
Recoveries
- corporate	-	-	14,757	3,736	18,493
- SMEs	-	-	15,749	6,248	21,997
- retail housing	-	-	4,154	1,162	5,316
- retail other	-	-	72,908	13,131	86,039
International banking services	-	-	19	54	73
	176	807	153,608	30,373	184,964

Residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By Business line	€000	€000	€000	€000	€000
Restructuring
- corporate	-	13	(2)	(99)	(88)
- SMEs	-	-	-	(2)	(2)
- retail housing	-	-	(9)	(6)	(15)
- retail other	-	-	(732)	(1,152)	(1,884)
Recoveries
- corporate	-	-	(214)	(639)	(853)
- SMEs	-	-	(357)	(949)	(1,306)
- retail housing	-	-	(200)	(364)	(564)
- retail other	-	-	(1,888)	(4,477)	(6,365)
International banking services	-	-	-	(6)	(6)
	-	13	(3,402)	(7,694)	(11,083)

Loans and advances to customers classified as held for sale (continued)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By Business line	€000	€000	€000	€000	€000
Corporate	-	360	350	-	710
SMEs	-	-	2	3	5
Retail
- consumer, credit cards and other	139	47	144	-	330
Restructuring
- corporate	20	410	6,162	1,026	7,618
- SMEs	7	1	952	195	1,155
- retail housing	4	-	1,119	4	1,127
- retail other	6	2	36,549	3,555	40,112
Recoveries
- corporate	-	-	14,543	3,097	17,640
- SMEs	-	-	15,392	5,299	20,691
- retail housing	-	-	3,954	798	4,752
- retail other	-	-	71,020	8,654	79,674
International banking services	-	-	19	48	67
	176	820	150,206	22,679	173,881

The following table presents the staging of the Group's gross loans and advances to customers at amortised cost before residual fair value adjustment on initial recognition classified as held for sale as at 31 March 2020 and 31 December 2019 by geographical analysis:

31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	€000	€000	€000	€000	€000
Cyprus	25	929	147,580	29,896	178,430
	25	929	147,580	29,896	178,430

31 December 2019	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2019	€000	€000	€000	€000	€000
Cyprus	176	807	153,608	30,373	184,964
	176	807	153,608	30,373	184,964

F.6 Credit losses to cover credit risk on loans and advances to customers

	Three months ended 31 March
	2020	2019
	€000	€000
Impairment loss net of reversals on loans and advances to customers	65,569	69,798
Recoveries of loans and advances to customers previously written off	(7,536)	(8,302)
Changes in expected cash flows	6,691	(179)
Financial guarantees and commitments	(922)	(1,495)
	63,802	59,822

The movement in ECL of loans and advances, including the loans and advances to customers held for sale, and the closing balance analysis by staging, is as follows:

31 March 2020	Cyprus	Other countries	Total
31 March 2020	€000	€000	€000
1 January	1,742,103	61,447	1,803,550
Foreign exchange and other adjustments	1,913	(3,366)	(1,453)
Write offs	(42,589)	(8,888)	(51,477)
Interest provided not recognised in the income statement	24,464	(4,207)	20,257
Charge for the period	56,914	8,655	65,569
31 March	1,782,805	53,641	1,836,446
Stage 1	25,422	-	25,422
Stage 2	44,392	-	44,392
Stage 3	1,502,448	53,641	1,556,089
POCI	210,543	-	210,543
Total	1,782,805	53,641	1,836,446

31 March 2019	Cyprus	Other countries	Total
	€000	€000	€000
1 January	3,315,259	146,746	3,462,005
Foreign exchange and other adjustments	1,719	3,489	5,208
Write offs	(104,071)	2,123	(101,948)
Interest provided not recognised in the income statement	41,058	2,243	43,301
Charge for the period	68,151	1,647	69,798
31 March	3,322,116	156,248	3,478,364
Stage 1	30,087	3	30,090
Stage 2	57,531	-	57,531
Stage 3	2,805,551	156,245	2,961,796
POCI	428,947	-	428,947
Total	3,322,116	156,248	3,478,364

The impairment loss net of reversals on loans and advances to customers in Cyprus, including the loans and advances to customers held for sale, by staging for the period is presented in the table below:

	Three months ended 31 March
	2020	2019
	€000	€000
Stage 1	11,812	(4,050)
Stage 2	10,220	2,449
Stage 3	34,882	69,752
	56,914	68,151

The impairment loss net of reversal on loans and advances to customers in 'Οther countries' for the periods ended 31 March 2020 and 31 March 2019 relates to Stage 3 loans and advances to customers.

The credit losses of loans and advances to customers include credit losses relating to loans and advances to customers classified as held for sale. Their balance by staging and geographical analysis is presented in the table below:

31 March 2020	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2020	€000	€000	€000	€000	€000
Cyprus	4	139	126,442	17,404	143,989
	4	139	126,442	17,404	143,989
Collectively assessed	4	139	126,442	17,404	143,989

31 March 2019	Stage 1	Stage 2	Stage 3	POCI	Total
31 March 2019	€000	€000	€000	€000	€000
Cyprus	8,167	26,381	1,306,685	192,034	1,533,267
Other countries	-	-	52,531	-	52,531
	8,167	26,381	1,359,216	192,034	1,585,798
Collectively assessed	8,167	26,381	1,359,216	192,034	1,585,798

The above tables do not include the residual fair value adjustments on initial recognition of loans acquired from Laiki Bank as this forms part of the gross carrying amount and ECL on financial guarantees which are part of other liabilities on the balance sheet.

During the three months ended 31 March 2020 the total non‑contractual write‑offs recorded by the Group amounted to €52,124 thousand (three months ended 31 March 2019: €56,244 thousand).

Assumptions have been made about the future changes in property values, as well as the timing for the realisation of the collateral, taxes and expenses on the repossession and subsequent sale of the collateral as well as any other applicable haircuts. Indexation has been used to estimate updated market values of properties, while assumptions were made on the basis of a macroeconomic scenario for future changes in property values.

At 31 March 2020 the weighted average haircut (including liquidity haircut and selling expenses) used in the collectively assessed provision calculation for loans and advances to customers excluding those classified as held for sale is c.32% under the baseline scenario (31 December 2019: c.32%, excluding those classified as held for sale).

The timing of recovery from real estate collaterals used in the collectively assessed provision calculation for loans and advances to customers has been estimated to be on average seven years under the baseline scenario (31 December 2019: average seven years), excluding those classified as held for sale.

For the calculation of individually assessed allowances for ECL, the timing of recovery of collaterals as well as the haircuts used are based on the specific facts and circumstances of each case.

For Stage 3 customers, the calculation of individually assessed allowances for ECL is the weighted average of three scenarios; base, adverse and favourable. The base scenario focuses on the following variables, which are based on the specific facts and circumstances of each customer: the operational cash flows, the timing of recovery of collaterals and the haircuts from the realisation of collateral. The base scenario is used to derive additional scenarios for either better or worse cases. Under the adverse scenario operational cash flows are decreased by 50%, applied haircuts on real estate collateral are increased by 50% and the timing of recovery of collaterals is increased by one year with reference to the baseline scenario. Under the favourable scenario, applied haircuts are decreased by 5%, with no change in the recovery period with reference to the baseline scenario. Assumptions used in estimating expected future cash flows (including cash flows that may result from the realisation of collateral) reflect current and expected future economic conditions and are generally consistent with those used in the Stage 3 collectively assessed exposures. In the case of loans and advances to customers held for sale at 31 March 2020, the Group has taken into consideration the timing of expected sale and the estimated sale proceeds in determining the ECL. Amounts previously written off which are expected to be recovered through sale, are presented in 'Recoveries of loans and advances to customers previously written off'.

For the calculation of expected credit losses three scenarios were used; base, adverse and favourable with 50%, 30% and 20% probability respectively.

Any positive cumulative average future change in forecasted property values was capped to zero for the three months ended 31 March 2020 and the year 2019. This applies to all scenarios.

The above assumptions are also influenced by the ongoing regulatory dialogue BOC PCL maintains with its lead regulator, the ECB, and other regulatory guidance and interpretations issued by various regulatory and industry bodies such as the ECB and the EBA, which provide guidance and expectations as to relevant definitions and the treatment/classification of certain parameters/assumptions used in the estimation of allowance for ECL.

Any changes in these assumptions or differences between assumptions made and actual results could result in significant changes in the estimated amount of ECL of loans and advances to customers.

F.7 Rescheduled loans and advances to customers

	Cyprus	Other countries	Total
31 March 2020	€000	€000	€000
Stage 1	266,118	110	266,228
Stage 2	384,756	-	384,756
Stage 3	1,511,402	31,630	1,543,032
POCI	199,514	-	199,514
	2,361,790	31,740	2,393,530


31 December 2019
Stage 1	357,658	114	357,772
Stage 2	299,448	-	299,448
Stage 3	1,567,155	33,253	1,600,408
POCI	202,502	-	202,502
	2,426,763	33,367	2,460,130

F.8 Credit risk disclosures

According to the European Banking Authority's (EBA) standards and European Central Bank's (ECB) Guidance to Banks on Non-Performing loans (which was published in March 2017), Non-Performing Exposures (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, distress restructuring 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 under probation that present more than 30 days past due within the probation period.

Exposures include all on and off balance sheet exposures, except those held for trading, and are categorised as such for their entire amount without taking into account the existence of collateral.

The following materiality criteria are applied:

· When the problematic exposures of a customer that fulfil the NPE criteria set out above are 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 problematic part of the exposure is classified as non-performing.

· Material arrears/excesses are defined as follows:

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

- Exposures other than retail: Total arrears/excesses are greater than €500

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

NPEs may cease to be considered as non-performing only when all of the following conditions are met:

(i) The extension of forbearance measures does not lead to the recognition of impairment or default.

(ii) One year has passed since the forbearance measures were extended.

(iii) Following the forbearance measures and according to the post-forbearance conditions, there is no past due amount or concerns regarding the full repayment of the exposure.

(iv) No unlikely-to-pay criteria exist for the debtor.

(v) The debtor has made post-forbearance payments of a non-insignificant amount of capital (different capital thresholds exist according to the facility type).

The tables below present the analysis of loans and advances to customers in accordance with the EBA standards.

31 March 2020	Gross loans and advances to customers				Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions
	Group gross customer loans and advances	Of which NPEs	Of which exposures with forbearance measures		Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions	Of which NPEs	Of which exposures with forbearance measures
	Group gross customer loans and advances	Of which NPEs	Total exposures with forbearance measures	Of which NPEs		Of which NPEs	Total exposures with forbearance measures	Of which on NPEs
	€000	€000	€000	€000	€000	€000	€000	€000
Loans and advances to customers
General governments	59,836	-	-	-	3,382	-	-	-
Other financial corporations	128,053	23,376	18,561	2,347	16,215	10,059	1,761	498
Non-financial corporations	6,165,853	1,308,949	1,071,435	683,985	739,727	659,039	317,666	305,545
Of which: Small and Medium sized Enterprises² (SMEs)	4,657,343	1,034,985	761,451	547,721	639,762	569,496	271,341	260,919
Of which: Commercial real estate	4,232,700	809,082	733,482	444,405	453,140	389,145	204,944	195,944
Non-financial corporations by sector
Construction	803,219	246,618			146,545
Wholesale and retail trade	1,305,630	368,880			189,470
Accommodation and food service activities	1,071,733	49,422			49,770
Real estate activities	1,254,196	271,669			137,152
Manufacturing	443,596	107,195			64,716
Other sectors	1,287,479	265,165			152,074
Households	6,182,219	2,228,126	1,534,772	1,200,332	1,180,101	1,101,155	539,706	522,940
Of which: Residential mortgage loans²	4,801,399	1,753,585	1,255,187	977,790	863,266	796,618	411,335	397,954
Of which: Credit for consumption²	767,775	278,185	174,632	147,680	164,223	160,013	74,046	71,833
	12,535,961	3,560,451	2,624,768	1,886,664	1,939,425	1,770,253	859,133	828,983
Loans and advances to customers as held for sale	178,430	177,467	42,889	42,869	154,730	154,596	37,041	37,038
Total on-balance sheet	12,714,391	3,737,918	2,667,657	1,929,533	2,094,155	1,924,849	896,174	866,021

31 December 2019	Gross loans and advances to customers				Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions
	Group gross customer loans and advances	Of which NPEs	Of which exposures with forbearance measures		Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions	Of which NPEs	Of which exposures with forbearance measures
	Group gross customer loans and advances	Of which NPEs	Total exposures with forbearance measures	Of which NPEs		Of which NPEs	Total exposures with forbearance measures	Of which on NPEs
	€000	€000	€000	€000	€000	€000	€000	€000
Loans and advances to customers
General governments	56,921	1	-	-	3,389	-	-	-
Other financial corporations	124,343	27,459	18,489	2,366	17,542	14,843	1,466	462
Non-financial corporations	6,271,155	1,382,074	1,216,902	737,602	753,848	686,025	348,577	337,290
Of which: Small and Medium sized Enterprises ⁴	4,662,994	1,073,846	786,069	556,483	636,820	576,635	271,110	261,229
Of which: Commercial real estate	4,270,225	858,998	767,008	480,382	457,622	402,751	219,952	211,902
Non-financial corporations by sector
Construction	823,276	265,879			144,336
Wholesale and retail trade	1,294,815	371,613			185,720
Accommodation and food service activities	1,055,448	50,116			44,823
Real estate activities	1,266,772	296,406			153,802
Professional, scientific and technical activities	425,134	90,832			53,916
Other sectors	1,405,710	307,228			171,251
Households	6,192,505	2,285,998	1,577,249	1,245,937	1,148,304	1,080,696	526,423	513,772
Of which: Residential mortgage loans ⁴	4,808,202	1,811,698	1,291,083	1,021,084	842,389	783,146	401,561	392,046
Of which: Credit for consumption ⁴	770,552	280,584	177,047	151,313	158,044	156,642	71,357	70,065
	12,644,924	3,695,532	2,812,640	1,985,905	1,923,083	1,781,564	876,466	851,524
Loans and advances to customers classified as held for sale	184,964	183,974	45,191	45,028	159,035	158,998	37,438	37,429
Total on-balance sheet	12,829,888	3,879,506	2,857,831	2,030,933	2,082,118	1,940,562	913,904	888,953

F.9 Pending litigation, claims, regulatory and other matters

The Group in the ordinary course of business , is subject to enquiries and examinations, requests for information, audits, investigations and legal and other proceedings by regulators, governmental and other public bodies, actual and threatened, relating to the suitability and adequacy of advice given to clients or the absence of advice, lending and pricing practices, selling and disclosure requirements, record keeping, filings and a variety of other matters. Further as part of its disposal process of certain of its operations, has provided various representations, warranties and indemnities to the buyers. These relate to, among other things, the ownership of the loans, the validity of the liens, tax exposures and other matters agreed with the buyers. In addition, as a result of the deterioration of the Cypriot economy and banking sector in 2012 and the subsequent Restructuring of BOC PCL in 2013 as a result of the bail-in Decrees, BOC PCL is subject to a large number of proceedings and investigations that either precede, or result from the events that occurred during the period of the bail-in Decrees. Most ongoing investigations and proceedings of significance relate to matters arising during the period prior to the issue of the bail-in Decrees. Provisions have been recognised for those cases where the Group is able to estimate probable losses. Any provision recognised does not constitute an admission of wrongdoing or legal liability. While the outcome of these matters is inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of legal proceedings and regulatory and other matters.

F.10 Liquidity regulation

The Group has to comply with provisions on the Liquidity Coverage Ratio (LCR) under CRD IV/CRR (as supplemented by relevant Regulations). It also monitors its position against the Net Stable Funding Ratio (NSFR) as proposed under Basel III and expected to become a regulatory indicator when Capital Requirements Regulation 2 (CRR2) is enforced with the limit set at 100%.

The LCR is designed to promote short-term resilience of a Group's liquidity risk profile by ensuring that it has sufficient high quality liquid resources to survive an acute stress scenario lasting for 30 days. The NSFR has been developed to promote a sustainable maturity structure of assets and liabilities.

As at 31 March 2020 the Group was in compliance with all regulatory liquidity requirements. As at 31 March 2020, the LCR stood at 219% for the Group (compared to 208% at 31 December 2019) and was in compliance with the minimum regulatory requirement of 100%. As at 31 March 2020 the Group's NSFR, on the basis of the Basel Ι standards, was 126% (compared to 127% at 31 December 2019).

F.11 Liquidity reserves

The below table sets out the Group's liquidity reserves:

Composition of the liquidity reserves	31 March 2020			31 December 2019
	Internal Liquidity reserves	Liquidity reserves as per LCR Delegated Reg (EU) 2015/61 LCR eligible		Internal Liquidity reserves	Liquidity reserves as per LCR Delegated Reg (EU) 2015/61 LCR eligible
	Internal Liquidity reserves	Level 1	Level 2A	Internal Liquidity reserves	Level 1	Level 2A
	€000	€000	€000	€000	€000	€000
Cash and balances with central banks	4,238,207	4,238,207	-	4,898,360	4,898,361	-
Nostro and placements with banks	258,166	-	-	147,086	-	-
Liquid investments	1,253,308	1,122,653	141,769	1,214,197	1,115,196	124,763
Available ECB Buffer	1,156,409	-	-	1,116,249	-	-
Total	6,906,090	5,360,860	141,769	7,375,892	6,013,557	124,763

Internal Liquidity Reserves present the total liquid assets as defined in BOC PCL's Liquidity Policy. Liquidity reserves as per LCR Delegated Regulation (EU) 2015/61 present the liquid assets as per the definition of the aforementioned regulation i.e. High Quality Liquid Assets (HQLA).

Under Liquidity reserves as per LCR, Nostro and placements with banks are not included, as they are not considered HQLA (they are part of the LCR Inflows).

Liquid investments under the Liquidity reserves as per LCR are shown at market values reduced by standard weights as prescribed by the LCR regulation. Liquid investments under Internal Liquidity reserves include all LCR and/or ECB eligible investments and are shown at market values net of haircut based on ECB haircuts and methodology.

Finally, available ECB buffer is not part of the Liquidity reserves as per LCR, since the assets in the ECB collateral pool are not LCR eligible but only eligible as collateral for Eurosystem credit operations.

The Liquidity Reserves are managed by Group Treasury.

Resulting from the outbreak of COVID-19, the ECB has adopted a broad set of policy measures to mitigate the economic impact of the crisis and to ensure that its directly supervised banks can continue to fulfil their role in funding the real economy. A high-level description of the main measures which have a direct or indirect impact on the liquidity position of banks is described below.

The ECB announced that it will allow banks to operate temporarily below the defined level of 100% of the LCR.

In addition, the package included a set of collateral easing measures, which resulted in increasing the banks' borrowing capacity at the ECB operations and improving the liquidity buffers due to the lower haircuts applied to the ECB eligible collaterals the bank holds, that comprises of bonds and Additional Credit Claims (ACC). The collateral easing packages are designed as temporary measures (with the exception of part of the haircut reduction on ACCs which is permanent) that will remain in place until September 2021 with the flexibility to be extended or modified. Furthermore, the ECB enlarged the scope of the ACC framework, increasing the universe of eligible loans. As far as existing collateral, the ECB announced changes in collateral rules, temporarily accepting collaterals with a rating below investment grade, up to a certain rating level.

Additionally, the package contained measures to provide liquidity support to the euro area financial system, such as a series of LTROs which will run from March to June 2020 so participants could shift their outstanding LTRO amounts to TLTRO III, as well as significant favourable amendments in the terms and characteristics of TLTRO III. Furthermore, a new series of additional longer-term refinancing operations, called Pandemic Emergency longer-term refinancing operations (PELTROs), were introduced with an interest rate of 25 basis points below the average rate applied in the Eurosystem's main refinancing operations (currently 0%) over the life of the respective PELTRO that are maturing in the third quarter of 2021.

F.12 Capital management

The primary objective of the Group's capital management is to ensure compliance with the relevant regulatory capital requirements and to maintain strong credit ratings and healthy capital adequacy ratios in order to support its business and maximise shareholders' value.

The capital adequacy framework, as in force, was incorporated through the CRR and Capital Requirements Directive IV (CRD IV) and came into effect on 1 January 2014 with certain specified provisions implemented gradually. The CRR and CRD IV transposed the new capital, liquidity and leverage standards of Basel III into the European Union's legal framework. CRR establishes the prudential requirements for capital, liquidity and leverage for credit institutions and investment firms. It is directly applicable in all EU member states. CRD IV governs access to deposit-taking activities and internal governance arrangements including remuneration, board composition and transparency. Unlike the CRR, member states were required to transpose the CRD IV into national laws and it allowed national regulators to impose additional capital buffer requirements.

On 27 June 2019, the revised rules on capital and liquidity (CRR II and CRDV) came into force. As an amending regulation, the existing provisions of CRR apply unless they are amended by CRR II. Member states are required to transpose the CRDV into national law. Certain provisions took immediate effect (primarily relating to MREL) but most changes will start to apply from mid-2021. Certain aspects of CRR II are dependent on final technical standards to be issued by the European Banking Authority (EBA) and adopted by the European Commission. The key changes introduced consist of among others changes to qualifying criteria for CET1, AT1 and Tier 2 instruments, introduction of requirements for MREL and a binding Leverage Ratio requirement and a Net Stable Funding Ratio (NSFR).

In addition, the Regulation (EU) 2016/445 of the ECB on the exercise of options and discretions available in Union law (ECB/2016/4) provides certain transitional arrangements which supersede the national discretions unless they are stricter than the EU Regulation 2016/445.

The CET1 ratio of the Group at 31 March 2020 stands at 14.3% and the total capital ratio at 17.7% on a transitional basis.

The minimum Pillar I total capital requirement is 8.0% and may be met, in addition to the 4.5% CET1 requirement, with up to 1.5% by Additional Tier 1 capital and with up to 2.0% by Tier 2 capital.

The Group is also subject to additional capital requirements for risks which are not covered by the Pillar I capital requirements (Pillar II add-ons).

Following the annual Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2019 and based on the final 2019 ECB decision received on 4 December 2019, the Group's minimum phased-in CET1 capital ratio and Total Capital ratio remain unchanged, when ignoring the phasing-in of the Other Systemically Important Institution Buffer (O-SII buffer). The Group's phased-in CET1 capital ratio was set to 11.0%, comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement (P2R), the Capital Conservation Buffer of 2.5% (fully phased-in as of 1 January 2019) and the O-SII buffer of 1.0%. The Group's Total Capital requirement is 14.5%, comprising an 8.0% Pillar I requirement (of which up to 1.50% could be in the form of Additional Tier 1 capital and up to 2.00% in the form of Tier 2 capital) , a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the O-SII buffer of 1.0%. The ECB has also provided non-public guidance for an additional Pillar II CET1 buffer. The final 2019 SREP decision is effective from 1 January 2020.

In April 2020, and following ECB and EBA announcements on 12 March 2020 in response to the COVID-19 outbreak, BOC PCL received an amending decision from the ECB amending the composition of the Pillar II additional own funds requirement, allowing to use Additional Tier 1 (AT1) capital and Tier 2 (T2) capital to meet Pillar II Requirements and not only by CET1 , compared to the 2019 final SREP decision received in December 2019 which required P2R to be met in full with CET1. This decision is effective from 12 March 2020. As a result, the minimum phased-in CET1 requirement decreased to 9.7%, comprising a 4.5% Pillar I requirement, a 1.7% Pillar II requirement, the Capital Conservation Buffer (CCB) of 2.5% (fully phased in as of 1 January 2019) and the O-SII buffer of 1.0%. There is no change on the Total Capital requirement.

The EBA final guidelines on SREP and supervisory stress testing and the Single Supervisory Mechanism's (SSM) 2018 SREP methodology provide that own funds held for the purposes of Pillar II Guidance cannot be used to meet any other capital requirements (Pillar I, Pillar II requirements or the combined buffer requirement), and therefore cannot be used twice.

The Group's minimum phased-in CET1 capital ratio for 2019 was 10.5%, comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement, the CCB of 2.5% and the O-SII buffer of 0.5%. The ECB had also provided non-public guidance for an additional Pillar II CET1 buffer.

The Group's minimum phased-in Total capital ratio requirement for 2019 was 14.0%, comprising a 8.0% Pillar I requirement (of which up to 1.50% could be in the form of Additional Tier 1 capital and up to 2.00% in the form of Tier 2 capital), a 3.0% Pillar II requirement, the CCB of 2.5% and O-SII buffer of 0.5%.

The above minimum ratios apply for both, BOC PCL and the Group.

The capital position of the Group and BOC PCL at 31 March 2020 exceeds both their Pillar I and their Pillar II add-on capital requirements. However, the Pillar II add-on capital requirements are a point-in-time assessment and therefore are subject to change over time.

The CBC, in accordance with the Macroprudential Oversight of Institutions Law of 2015, sets, on a quarterly basis, the Countercyclical Capital Buffer (CCyB) level in accordance with the methodology described in this law. The CBC has set the level of the CCyB for Cyprus at 0% for the six months up to 30 June 2020 and the year 2019.

In accordance with the provisions of this law, 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. BOC PCL has been designated as an O-SII and the CBC set the O-SII buffer for BOC PCL and the Group at 2.0%.

This buffer will be phased-in gradually, having started from 1 January 2019 at 0.5% and set to be increasing by 0.5% every year thereafter, until being fully implemented (2.0%) on 1 January 2022. In April 2020, in response to the COVID-19 outbreak, the CBC decided to delay the phasing-in (0.5%) of the O-SII buffer on 1 January 2021 and 1 January 2022 by 12 months. Consequently, the O-SII buffer will be fully phased-in on 1 January 2023, instead of 1 January 2022 as originally set.

The insurance subsidiaries of the Group comply with the requirements of the Superintendent of Insurance including the minimum solvency ratio. The regulated UCITS management company of the Group, BOC Asset Management Ltd complies with the regulatory capital requirements of the Cyprus Securities and Exchange Commission (CySEC) laws and regulations. The regulated investment firm (CIF) of the Group, The Cyprus Investment and Securities Corporation Ltd (CISCO) meets the minimum total capital ratio hurdle of CySEC but lacks behind the minimum initial capital requirement and the additional capital conservation buffer as at 31 March 2020 and as at 31 December 2019. As a result a business and capital plan was submitted to CySEC in December 2019. CISCO also submitted to CySEC its Internal Capital Adequacy Assessment Process (ICAAP) Report in September 2019. It is expected that CySEC will provide CISCO a reasonable timeframe, based on the capital/business plan submitted, to comply, as per its Supervisory Review and Evaluation Process (SREP).

F.12.1 Capital position

The capital position of the Group and BOC PCL as at the reporting date (after applying the transitional arrangements) is presented below:

Regulatory capital	Group		BOC PCL
	31 March 2020	31 December 2019	31 March 2020	31 December 2019⁵
	€000	€000	€000	€000
Transitional Common Equity Tier 1 (CET1 )	1,806,872	1,909,049	1,760,011	1,869,105
Transitional Additional Tier 1 capital (AT1)	220,000	220,000	220,000	220,000
Tier 2 capital (T2)	200,572	189,955	250,000	250,000
Transitional total regulatory capital	2,227,444	2,319,004	2,230,011	2,339,105
Risk weighted assets - credit risk	11,256,096	11,547,303	11,227,150	11,518,932
Risk weighted assets - operational risk	1,342,700	1,342,700	1,255,875	1,255,875
Total risk weighted assets	12,598,796	12,890,003	12,483,025	12,774,807

	%	%	%	%
Transitional Common Equity Tier 1 ratio	14.3	14.8	14.1	14.6
Transitional total capital ratio	17.7	18.0	17.9	18.3

Fully loaded	Group		BOC PCL
	31 March 2020	31 December 2019 ⁸	31 March 2020 ⁸	31 December 2019 ⁸
	%	%	%	%
Common Equity Tier 1 ratio	12.9	13.1	12.6	12.9
Total capital ratio	16.4	16.5	16.4	16.6

During the three months ended 31 March 2020 the CET1 was negatively affected mainly by the phasing-in of IFRS 9 transitional adjustments, the decrease in revaluation reserves and ECL charges. Risk weighted assets movement and pre-provision income had a positive effect on CET1 ratio.

As a result of the above, the CET1 ratio decreased by c. 50 bps during the three months ended 31 March 2020.

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 over a five-year period. The amount added back over the transitional period decreases based on a weighting factor of 95% in 2018, 85% in 2019, 70% in 2020, 50% in 2021 and 25% in 2022. The impact of IFRS 9 is fully absorbed after the five-year transitional period.

Following the COVID-19 outbreak, on 12 March 2020, the ECB and the EBA announced the following relaxation measures for the minimum capital requirements for banks:

· Banks are temporarily allowed to operate below the level of capital defined by the Pillar II Guidance, the Capital Conservation Buffer and the Countercyclical Buffer. The Countercyclical Buffer is 0% for Cypriot Banks.

· Banks are allowed to use Additional Tier 1 (AT1) capital and Tier 2 (T2) capital to meet Pillar II Requirements and not only by CET1; this brings forward a measure that was scheduled to come into effect in January 2021 with CRD V. An amending SREP decision was received in April 2020 to this respect.

The ECB's capital easing measures for COVID-19 increased the Group's CET1 buffer by 131 bps, effective from 12 March 2020, following the frontloading of the new rules on the Pillar II Requirement composition, initially scheduled to come into effect in January 2021. The Total SREP capital requirement remains unchanged.

In addition, in April 2020 the CBC decided to delay the phasing-in of the 1 January 2021 O-SII buffer (0.5% for BOC PCL) by 12 months. Consequently, the O-SII buffer will be fully phased-in on 1 January 2023, instead of 1 January 2022 as originally set.

F.12.2 Overview of RWA

		RWAs		Minimum capital requirements
		31 March 2020	31 December 2019	31 March 2020
		€000	€000	€000
1	Credit risk(excluding counterparty credit risk (CCR))	11,116,102	11,411,497	889,288
2	Of which the Standardised Approach	11,116,102	11,411,497	889,288
6	CCR	16,810	12,618	1,345
7	Of which markto market	12,385	9,568	991
12	Of which Credit Valuation Adjustment (CVA)	4,425	3,050	354
14	Securitisation exposures in the banking book (after the cap)	45,634	45,638	3,651
18	Of which Standardised Approach	45,634	45,638	3,651
23	Operational risk	1,342,700	1,342,700	107,416
25	Of which Standardised Approach	1,342,700	1,342,700	107,416
27	Amounts belowthe thresholds for deduction (subject to 250% risk weight)	77,550	77,550	6,204
29	Total	12,598,796	12,890,003	1,007,904

The overall decrease in total RWA and capital requirements was driven by 'Credit risk (excluding counterparty credit risk (CCR))' observed in line 1 of the table above. The decrease in the Credit risk RWA was driven by customers advances from (a) a decrease in balance sheet values especially in the higher risk exposure classes, exposures in default and items associated with particularly high risk, (b) the phasing in of the IFRS9 transitional arrangements which increases provisions recognised for RWA purposes, (c) increased residential real estate collaterals and (d) curing. All other risk categories remain fairly stable.

There were no large exposures for institutions that exceeded the relevant limits.

F.12.3 Standardised approach - Credit risk exposure and Credit Risk Mitigation (CRM) effects

The table below illustrates the analysis of RWA and RWA density of all exposure classes that comprise the RWA reported in lines 1 and 27 of table F.12.2.

	31 March 2020		31 December 2019
	RWAs and RWA density		RWAs and RWA density
Exposure classes	RWAs	RWA density	RWAs	RWA density
	€000	%	€000	%
Centralgovernmentsor centralbanks	347,007	6.2	382,591	6.2
Regionalgovernmentorlocalauthorities	1,128	1.9	542	0.8
Publicsectorentities	8	-	9	-
Institutions	171,437	23.3	179,648	29.6
Corporates	3,236,876	99.5	3,353,301	99.5
Retail	929,718	71.0	960,387	71.2
Securedbymortgagesonimmovableproperty	1,236,782	37.6	1,180,406	37.5
Exposuresindefault	1,909,970	106.9	2,053,619	107.3
Higher-riskcategories	1,306,956	150.0	1,404,849	150.0
Coveredbonds	19,823	10.0	16,333	10.0
Collectiveinvestmentundertakings (CIUs)	813	77.7	205	100.0
Equity	101,069	185.3	80,275	237.9
Otheritems	1,932,065	99.2	1,876,882	94.1
Total	11,193,652	57.7	11,489,047	57.1

The main driver behind the overall increase in the RWA density derived from a shift of balances from lower risk weight, such as 'Balances with Central Banks', included in exposure class 'Central governments or central banks' to higher risk weight balances such as 'Customer advances', mainly included in exposure class 'Secured with mortgages on immovable property'. Furthermore the overall density was driven upward from the increase in the density of exposure class 'Other items' from increased risk weight of certain properties held for sale. The risk density in the remaining exposure classes remains fairly stable, with the exception of exposure classes 'Collective investment undertakings (CIUs)' which improved due to improved external ratings, and exposure class 'Institutions', which improved from improved ratings and residual maturities.

F.13 Leverage ratio

According to CRR Article 429, the leverage ratio, expressed as a percentage, is calculated as the capital measure divided by the total exposure measure of the Group.

The leverage ratio of the Group is presented below:

	31 March 2020	31 December 2019
Transitional basis	€000	€000
Capital measure (Tier 1)	2,026,872	2,129,049
Total exposure measure	20,316,602	21,075,511
Leverage ratio (%)	10.0	10.1

IFRS 9 fully loaded
Capital measure (Tier 1)	1,810,732	1,866,593
Total exposure measure	20,193,093	20,859,371
Leverage ratio (%)	9.0	9.0

The decrease in the 'Total exposure measure' follows the movements in the Group's balance sheet assets.

The 'Capital measure (Tier1)' is negatively affected mainly by the phasing-in of IFRS 9 transitional adjustments, decrease in revaluation reserves and ECL charges.

The leverage ratio, including the loss (prudential consolidation) of €28,503 thousand for the period ended 31 March 2020, is calculated at 10.0% on a transitional basis and 9.0% on IFRS 9 fully loaded basis.

F.14 Internal Capital Adequacy Assessment Process (ICAAP), Internal Liquidity Assessment Process (ILAAP), Pillar II and SREP

The Group prepares the ICAAP and ILAAP reports annually. Both reports for 2019 were approved by the Board of Directors and submitted to the ECB on 30 April 2020.Due to the timing of the two reports, the business plans and ICAAP and ILAAP stress scenarios have not been updated to reflect the impact of the COVID-19 in line with relevant supervisory communication on this issue; however the COVID-19 preliminary estimated impact on capital and liquidity (based on scenarios) have been referenced commented in the ICAAP and ILAAP reports under a separate section.

Based on the end of December 2019 ICAAP, BOC PCL has sufficient capital throughout the three-year horizon to enable it to comply with all regulatory ratios, both in the base and adverse scenario, under the normative approach. Under the Economic perspective, a small capital shortfall arises in the adverse scenario, in 2022, which however can be neutralised by available mitigants.

The Group also undertakes a quarterly review of its ICAAP results (as at the end of June and as at the end of September) considering the latest actual and forecasted information. During the quarterly review, the Group's risk profile and risk management policies and processes are reviewed and any changes since the annual ICAAP exercise are taken into consideration.

The Group also undertakes a quarterly review for the ILAAP through quarterly stress tests submitted to the ALCO and the Risk Committee of the Board of Directors. During the quarterly review, the liquidity risk drivers are assessed and, if needed, the stress test assumptions are amended accordingly. Any material changes since the year-end are assessed in terms of liquidity. The quarterly review identifies whether the Group has an adequate liquidity buffer to cover the stress outflows. The Group's ILAAP analysis demonstrates that the volume and capacity of liquidity resources available to the Group are adequate.

The ECB, as part of its supervisory role, has been conducting the SREP and onsite inspections on the Group. SREP is a holistic assessment of, amongst other things, the Group's business model, internal governance and institution-wide control arrangements, risks to capital and adequacy of capital to cover these risks and risks to liquidity and adequacy of liquidity resources to cover these risks. The objective of the SREP is for the ECB to form an up-to-date supervisory view of the Group's risks and viability and to form the basis for supervisory measures and dialogue with the Group. Additional capital and other requirements could be imposed on the Group as a result of these supervisory processes, including a revision of the level of Pillar II add-ons as the Pillar II add-ons capital requirements are a point-in-time assessment and therefore subject to change over time.

The Group was to participate in the ECB SREP stress test of 2020 which was launched in January 2020 and was to be concluded by end of July 2020. However due to the outbreak of COVID-19 and its global spread, EBA decided to postpone until 2021 the EU-wide Stress Test Exercise of 2020 to allow banks to focus on and ensure continuity of their core operations. For 2020, the EBA will carry out an additional EU-wide transparency exercise in order to provide updated information on banks' exposures and asset quality to market participants. The ECB announced that it supports the decision of EBA to postpone the stress tests exercise and will extend the postponement to all banks subject to the 2020 stress test.

G. Definitions & Explanations

Reconciliations

1. Reconciliation of Gross loans and advances to customers

	31 March 2020	31 December 2019
	€000	€000
Gross loans and advances to customers (as defined below)	12,708,627	12,821,838
Reconciling items:
Residual fair value adjustment on initial recognition (Section F.4)	(200,428)	(201,999)
Loans and advances to customers classified as held for sale (Section F.4)	(167,689)	(173,881)
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Section F.4)	(10,741)	(11,083)
Loans and advances to customers measured at fair value through profit and loss (Section F.3)	(287,109)	(369,293)
Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss	(40,776)	(57,436)
Gross loans and advances to customers at amortised cost as per section F.3	12,001,884	12,008,146

2. Reconciliation of Allowance for expected credit losses on loans and advances to customers (ECL)

	31 March 2020	31 December 2019
	€000	€000
Allowance for expected credit losses on loans and advances to customers (as defined below)	2,109,271	2,096,180
Reconciling items:
Residual fair value adjustment on initial recognition (Section F.4)	(200,428)	(201,999)
Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss	(40,776)	(57,436)
Allowance for expected credit losses on loans and advances to customers classified as held for sale (Section F.6)	(143,989)	(147,952)
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Section F.4)	(10,741)	(11,083)
Provisions for financial guarantees and commitments	(20,880)	(22,112)
Allowance for ECL for impairment of loans and advances to customers as per section F.3	1,692,457	1,655,598

3. Reconciliation of NPEs

	31 March 2020	31 December 2019
	€000	€000
NPEs (as defined below and as per Section F.8)	3,737,917	3,879,508
Reconciling items:
Loans and advances to customers (NPEs) classified as held for sale (Note 1 below)	(166,714)	(172,880)
Residual fair value adjustment on initial recognition on loans and advances to customers (NPEs) classified as held for sale (Note 2 below)	(10,753)	(11,096)
Loans and advances to customers measured at fair value through profit and loss (NPEs)	(125,803)	(144,866)
POCI (NPEs) (Note 3 below)	(497,169)	(511,933)
Stage 3 gross loans and advances to customers at amortised cost as per section F.5	2,937,478	3,038,733
NPE ratio
NPE ratio
NPEs (as per table above) (€000)	3,737,917	3,879,508
Gross loans and advances to customers (as per table above) (€000)	12,708,627	12,821,838
Ratio of NPE/Gross loans (%)	29,4%	30.3%

Note 1: Gross loans at amortised cost after residual fair value adjustment on initial recognition classified as held for sale include an amount of €144,330 thousand Stage 3 loans (31 December 2019: €150,206 thousand Stage 3 loans) and an amount of €22,384 thousand POCI - Stage 3 loans (out of a total of €22,393 thousand POCI loans) (31 December 2019: €22,674 thousand POCI - Stage 3 loans (out of a total of €22,679 thousand POCI loans) as disclosed in Section F.5.

Note 2: Residual fair value adjustment on initial recognition of loans and advances to customers classified as held for sale includes an amount of €3,250 thousand for Stage 3 loans (31 December 2019: €3,402 thousand for Stage 3 loans) and an amount of €7,503 thousand for POCI - Stage 3 loans (31 December 2019: €7,694 thousand for POCI - Stage 3 loans) as disclosed in Section F.5.

Note 3: Gross loans and advances to customers at amortised cost before residual fair value adjustment on initial recognition include an amount of €497,169 thousand POCI - Stage 3 loans (out of a total of €611,973 thousand POCI loans) (31 December 2019: €511,933 thousand POCI - Stage 3 loans (out of a total of €627,212 thousand POCI loans)) as disclosed in Section F.5.

Ratios Information

1. Net Interest Margin

Reconciliation of the various components of net interest margin from the underlying basis to the statutory basis is provided below:

	Three months ended 31 March
	2020	2019 (restated)
1.1. Reconciliation of Net interest income	€000	€000
Net interest income as per the underlying basis	84,926	84,703
Reclassifications for:
Net interest income relating to the Helix portfolio, disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales' under the underlying basis	-	17,343
Net interest income as per the Unaudited Interim Consolidated Income Statement	84,926	102,046

Net interest income (annualised)	341,571	343,518

1.2. Interest earning assets	31 March 2020	31 December 2019
1.2. Interest earning assets	€000	€000
Cash and balances with central banks	4,398,781	5,060,042
Loans and advances to banks	455,284	320,881
Loans and advances to customers	10,596,536	10,721,841
Loans and advances to customers held for sale	23,700	25,929
Investments
Debt securities	1,781,992	1,738,007
Less: Investments which are not interest bearing	(21,496)	(23,593)
Total interest earning assets	17,234,797	17,843,107

1.3. Quarterly average interest earning assets (€000)
- as at 31 March 2020	17,538,952
- as at 31 March 2019	18,242,972

2. Operating profit return on average assets

The various components used in the determination of the operating profit return on average assets are provided below:

31 March 2020

31 December

2019

€000

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

20,430,792

21,122,822

	31 March 2020	31 March 2019 (restated)
	€000	€000
Annualised operating profit	211,098	212,320
Quarterly average total assets	20,776,807	21,910,354

Comparative information has been restated as noted within section A. 'Group Financial Results - Underlying basis - Commentary on Underlying basis' for the purposes of the underlying basis.

G. Definitions & Explanations (continued)

Accelerated phase-in period	Following the Regulation (EU) 2016/445 of the ECB of 14 March 2016 on the exercise of options and discretions, the DTA was phasing-in by 60% for 2017, 80% for 2018 and 100% for 2019 (fully phased-in).

Allowance for expected loan credit losses (previously 'Accumulated provisions')	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 held for sale), (ii) the residual fair value adjustment on initial recognition of loans and advances to customers, (iii) allowance for expected credit losses for 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.

Advisory and other restructuring costs	Comprise mainly: fees of external advisors in relation to: (i) disposal of operations and non-core assets, and (ii) customer loan restructuring activities.

AT1	AT1 (Additional Tier 1) is defined in accordance with Articles 51 and 52 of the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

CET1 capital ratio (transitional basis)	CET1 capital ratio (transitional basis) is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

CET1 fully loaded (FL)	The CET1 fully loaded (FL) ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

Contribution to DGF	Relates to the contribution made to the Deposit Guarantee Fund.

Contribution to SRF	Relates to the contribution made to the Single Resolution Fund.

Cost to Income ratio	Cost-to-income ratio comprises total expenses (as defined) divided by total income (as defined).

Data from the Statistical Service	The latest data from the Statistical Service of the Republic of Cyprus, Cyprus Statistical Service, was published on 20 May 2020.
Digital transactions ratio	This is the ratio of the number of digital transactions performed by individuals and legal entity customers to the total number of transactions. Transactions include deposits, withdrawals, internal and external transfers. Digital channels include mobile, browser and ATMs.

Digitally engaged customers ratio	This is the ratio of digitally engaged individual customers to the total number of individual customers. Digital channels include mobile, browser and ATMs.It also captures access to a card as well as online card purchases.
ECB	European Central Bank

Gross loans	Gross loans are reported before the residual 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 €252 mn at 31 March 2020 (compared to €271 mn at 31 December 2019). Additionally, gross loans (i) include loans and advances to customers classified and measured at fair value through profit and loss adjusted for the aggregate fair value adjustment of €328 mn at 31 March 2020 (compared to €427 mn at 31 December 2019), and (ii) are reported after the reclassification between gross loans and allowance for expected credit losses on loans and advances to customers classified as held for sale (amounting to Nil as at both 31 March 2020 and 31 December 2019).

Group	The Group consists οf 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.

Legacy gross loans	Gross loans relating to (i) Restructuring and Recoveries Division (RRD), (ii) Real Estate Management Unit (REMU), and (iii) non-core overseas exposures

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 (PL) (previously 'Provision charge')	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.

Loan credit losses charge (previously 'Provisioning charge') (cost of risk)	Loan credit losses charge (cost of risk) (year to date) is calculated as the annualised 'loan credit losses' (as defined) divided by average gross loans (the average balance is calculated as the average of the opening balance and the closing balance).

Market Shares	Both deposit and loan market shares are based on data from the CBC. The Bank is the single largest credit provider in Cyprus with a market share of 41.0% at 31 March 2020, compared to 41.1% at 31 December 2019, 40.8% at 30 September 2019, 41.3% at 30 June 2019, 46.7% at 31 March 2019, 45.4% at 31 December 2018 and as at 30 September 2018, 38.6% at 30 June 2018 and 37.4% at 31 March 2018. The market share on loans was affected as at 30 June 2019 following the derecognition of the Helix portfolio upon the completion of Project Helix announced on 28 June 2019. The market share on loans was affected during the quarter ended 31 March 2019 following a decrease in total loans in the banking sector of €1 bn, mainly attributed to reclassification, revaluation, exchange rate and other adjustments (CBC). 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 €6 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€2.1 bn, due to loan reclassifications, revaluations, exchange rate or other adjustments (CBC).

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 (annualised) divided by the quarterly average interest earning assets. Average interest earning assets exclude interest earning assets of any discontinued operations at each quarter end, if applicable. Interest earning assets include: cash and balances with central banks, plus loans and advances to banks, plus net loans and advances to customers (including loans and advances to customers classified as non-current assets held for sale), plus investments (excluding equities and mutual funds).

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

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

Net Stable Funding Ratio (NSFR)	The NSFR is calculated as the amount of "available 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 EBA NSFR will be enforced as a regulatory ratio under CRR II in 2021.

New lending	New lending includes the average YTD change (if positive) for overdraft facilities.

Non-interest income	Non-interest income comprises Net fee and commission income, Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiariesand associates (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 properties, and Other income.

Non-performing exposures (NPEs)	According to the EBA standards and ECB's Guidance to Banks on Non-Performing Loans (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, distress restructuring and obligor bankruptcy, (iii) material exposures as set by the CBC , which are more than 90 days past due, (iv) performing forborne exposures under probation for which additional forbearance measures are extended, and (v) performing forborne exposures under probation that present more than 30 days past due within the probation period. 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.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 Interim Condensed Consolidated Income Statement - Underlying basis' relate to: (i) advisory and other restructuring costs - organic, (ii) restructuring costs - Voluntary Staff Exit Plan (VEP), (iii) Provisions/net loss relating to NPE sales, including restructuring expenses, (iv) Share of profit from associates (CNP), and (v) Reversal of impairment of DTA and impairment of other tax receivables.

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

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

NPE sales	NPE sales refer to NPE sale transactions completed during FY2019, as well as NPE sale transactions under consideration at 31 December 2019 and 31 March 2020, irrespective of whether or not they met the held for sale classification criteria as at 31 December 2019 or as at 31 March 2020.

Operating profit	Comprises profit before Total loan credit losses, impairments and provisions (as defined), tax, (profit)/loss attributable to non-controlling interests and non-recurring items (as defined).

Operating profit return on average assets	Operating profit return on average assets is calculated as the annualised operating profit (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.

Phased-in Capital Conservation Buffer (CCB)	In accordance with the legislation in Cyprus which has been set for all credit institutions, the applicable rate of the CCB is 1.25% for 2017, 1.875% for 2018 and 2.5% for 2019 (fully phased-in).

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

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

Quarterly average interest earning assets	Average of interest earning assets as at the beginning and end of the relevant quarter.Interest earning assets include: cash and balances with central banks, plus loans and advances to banks, plus net loans and advances to customers (including loans and advances to customers classified as non-current assets held for sale), plus investments (excluding equities and mutual funds).

Qoq	Quarter on quarter change

Special levy	Relates to the special levy on deposits of credit institutions in Cyprus.
Total Capital ratio	Total capital ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date.

Total expenses	Total expenses comprise staff costs, other operating expenses and the special levy and contributions to the Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF). It does not include 'advisory and other restructuring costs-organic', or any restructuring costs relating to the Voluntary Staff Exit Plan, or any restructuring costs relating to NPE sales. 'Advisory and other restructuring costs-organic' amounted to €3mn for 1Q2020 (compared to €8 mn for 4Q2019). Restructuring costs relating to NPE sales amounted to €3 mn for 1Q2020 (compared to €10 mn for 4Q2019). Restructuring costs relating to the Voluntary Staff Exit Plan amounted to Nil for 1Q2020, compared to €81 mn for 4Q2019.

Total income	Total income comprises net interest income and non-interest income (as defined).

Total loan credit losses, impairments and provisions	Total loan credit losses, impairments and provisions comprises loan credit losses (as defined), plus (provisions)/reversal of provisions for litigation, claims, regulatory and other matters plus (impairments)/reversal of impairments of other financial and non-financial assets.

Underlying basis	This refers to the statutory basis after being adjusted for certain items as explained in the Basis of Presentation.

Write offs	Loans together with the associated loan credit losses 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" or "BOC PCL", and together with the Bank's subsidiaries, the "Group", for the quarter ended 31 March 2020.

At 31 December 2016, the Bank was listed on the Cyprus Stock Exchange (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 an overview of the Group financial results for the quarter ended 31 March 2020. The financial information in this announcement 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 2019, upon which the auditors have given an unqualified report, were published on 29 April 2020 and are expected to be delivered to the Registrar of Companies of Ireland within 28 days of 30 September 2020. The Board of Directors approved the Group financial results for the quarter ended 31 March 2020 on 25 May 2020.

Statutory basis: Statutory information is set out on pages 30-35. 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 page 36) to allow a comparison of the Group's underlying performance, as set out on pages 5-7.

The financial information included in this announcement is neither reviewed nor audited by the Group's external auditors.

This announcement and the presentation for the Group Financial Results for the quarter ended 31 March 2020 have been posted on the Group's website www.bankofcyprus.com (Investor Relations/Financial Results).

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

The Group Financial Results for the quarter ended 31 March 2020 are presented in Euro (€) 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 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 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 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 99 branches in Cyprus, of which 15 operate as cash offices. Bank of Cyprus also has representative offices in Russia, Ukraine and China. The Bank of Cyprus Group employs 3,566 staff worldwide. At 31 March 2020, the Group's Total Assets amounted to €20.4 bn and Total Equity was €2.2 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.

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