BOCH Group Financial Results 9M2019

RNS Number : 6591U

Bank of Cyprus Holdings PLC

26 November 2019

Announcement

Group Financial Results for the nine months ended 30 September 2019

Nicosia, 26 November 2019

Key Highlights for the nine months ended 30 September 2019

Good Capital Position

· Total Capital ratio of 17.9% pro forma for disposal of investment in CNP and Voluntary Staff Exit Plan (VEP) (18.2% as reported)

· CET1 ratio of 14.9% pro forma for disposal of investment in CNP and VEP (15.2% as reported)

Balance Sheet Repair Continues at Pace

· NPEs of €4.1 bn (€2.0 bn net); 73% reduction since 2014

· Gross NPE ratio reduced to 31%, coverage increased to 51%

· Organic NPE reduction continued ahead of guidance (€227 mn in 3Q2019; €684 mn in 9M2019)

· REMU sales of €355 mn in 9M2019

· Good momentum in efforts to accelerate de-risking with further portfolio sales

Active Liquidity Management

· Deposits flat qoq at €16.5 bn

· Loan to deposit ratio at 66%

· Liquidity surplus reduced to €3.0 bn on TLTRO repayment

· Liquidity management strategy underway for specific customer groups

Positive Performance in 3Q2019

· New lending of €491 mn for 3Q2019 and €1.6 bn for 9M2019

· Total Income of €162 mn, Operating profit of €63 mn

· Recurring income from on-going insurance business (€12 mn in 3Q2019; €42 mn in 9M2019)

· Cost of risk at 0.90%

· Underlying profit of €18 mn for 3Q2019 and €35 mn for 9M2019

· Profit after tax of €19 mn for 3Q2019 and €116 mn for 9M2019

Cost Management Actions in 4Q2019 Supported by Digital Transformation

· Successful completion of VEP in 4Q2019 at one-off cost of €79 mn, supported by the on-going Digital Transformation Programme

· Full time employees reduced by 11%

· Gross annual savings in staff costs of 13% (€28 mn)

· Branch footprint rationalisation continues; further 8% reduction in number of branches by the year end

· 75% of transactions (involving deposits, cash withdrawals and transfers) through digital channels; 54% increase in active mobile banking users since June 2017

Group Chief Executive Statement

"Our results this quarter reflect continuing progress against our core objective of balance sheet repair and normalisation of our Bank.

Following the completion of the sale of c.€2.7 bn non-performing loans in Project Helix in June, which added 140 bps of capital in the second quarter, the continued organic NPE reduction remains ahead of our organic target of c.€800 mn for 2019. The organic NPE reduction in the third quarter of the year amounted to €227 mn, bringing the total organic reduction in the nine months of 2019 to €684 mn. This represents the eighteenth consecutive quarter of organic NPE reductions.

Since the peak in 2014, we have now reduced the stock of NPEs by 73% to €4.1 bn. This stock of NPEs is now covered by 51% loan credit losses. Overall, since 2014 we have managed a reduction in NPEs of €10.9 bn, of which €8.2 bn has been through organic actions.

The Bank's capital position remains good and well in excess of our regulatory requirements. As at 30 September 2019, pro forma for the sale of our investment in CNP and the voluntary staff exit plan, our capital ratios (IFRS 9 transitional) were CET1 of 14.9% and Total Capital ratio of 17.9%.

During the quarter our deposits remained broadly flat at €16.5 bn and we reduced our cost of deposits by a further 5 bps. Overall, we reduced our cost of deposits by 57 bps since January 2018. In the third quarter of 2019, our new lending in Cyprus grew 20% from the prior year to €491 mn, helping support the continued growth in the Cypriot economy. Overall in the first nine months of 2019, we lent €1.6 bn to customers. Our loan to deposit ratio at the quarter-end stood at 66%.

During the third quarter of the year, the Group generated total income of €162 mn and a positive operating result of €63 mn. The underlying result was a profit after tax of €18 mn, whilst the reported profit after tax for the third quarter was €19 mn. After the net loss from the sale of our investment in CNP of €21 mn and the net impact from the reversal of impairments of €101 mn, the reported profit after tax for the first nine months of the year amounted to €116 mn.

Our on-going insurance business provides recurring income for the Group and, following the disposal of our investment in CNP, it remains well positioned for growth over the medium term.

The changed interest rate environment in Europe continues to present a challenge to our profitability levels. In response, we remain focused on actively managing our funding costs and reducing our cost base. We have made progress in these areas this quarter.

In September, we decided to early repay ECB funding in the form of TLTRO of €830 mn, given the comfortable liquidity position. The repayment is expected to result in savings as these funds were deposited at negative interest rates. The Bank continues to operate with a significant liquidity surplus, which at the end of the third quarter amounted to €3.0 bn.

In October, we completed a voluntary staff exit plan through which c.470 applicants were approved to leave at a total one-off cost of c.€79 mn to be recorded in the fourth quarter, reducing the number of our employees by c.11%, whilst gross annual savings are estimated at c.€28 mn or c.13% of staff costs. In addition, we continue our branch footprint rationalisation as we expect to reduce the number of our branches by a further 8% by the year end, further improving our operating model. We remain focused on further improvement in efficiency.

These actions have been supported by our on-going Digital Transformation Programme. The adoption of digital products and services continues to grow and gain momentum. Today, 75% of transactions involving deposits, cash withdrawals and transfers, are performed through digital channels, whilst the number of active users of mobile banking has increased by 54% since June 2017.

The Bank is returning to strength, through a disciplined approach to balance sheet repair, the disposal of non-core businesses and cost rationalisation through digital transformation. Good progress has been made throughout the year, however there remains more to do and we are focused on delivering balance sheet de-risking at pace and further efficiency gains across our cost base. Our strategy of making the Bank stronger, safer and future-focused is unchanged. This will enable us to continue to support the strengthening Cypriot economy, which expanded by 3.1% during the first nine months of the year.

I am looking forward to sharing my perspectives and vision for the future of our Bank with the release of the full year financial results."

Panicos Nicolaou

A. Group Financial Results - Underlying Basis
Unaudited Interim Condensed Consolidated Income Statement
€ mn	9M2019¹	9M2018¹represented²		3Q2019¹		2Q2019¹	qoq +%		yoy +%
Net interest income	260	250		90		85	5%		4%
Net fee and commission income	111	122		36		38	-5%		-9%
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates	34	52		8		16	-49%		-34%
Insurance income net of claims and commissions	42	38		12		18	-34%		11%
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties	26	15		10		12	-25%		65%
Other income	22	17		6		8	-22%		25%
Total income	495	494		162		177	-9%		0%
Staff costs	(167)	(154)		(55)		(56)	-2%		8%
Other operating expenses	(122)	(114)		(38)		(43)	-12%		7%
Special levy and contribution to Single Resolution Fund	(18)	(18)		(6)		(6)	2%		2%
Total expenses	(307)	(286)		(99)		(105)	-6%		7%
Operating profit	188	208		63		72	-13%		-10%
Loan credit losses	(117)	(104)		(30)		(40)	-26%		12%
(Impairments)/reversal of impairments of other financial and non-financial assets	(9)	(12)		1		(9)	-109%		-21%
(Provisions)/reversal of provisions for litigation, regulatory and other matters	(3)	(9)		(6)		3	-		-62%
Total loan credit losses, impairments and provisions	(129)	(125)		(35)		(46)	-27%		4%
Profit before tax and non-recurring items	59	83		28		26	15%		-29%
Tax	(1)	(4)		(1)		2	-		-82%
(Profit)/loss attributable to non-controlling interests	(2)	3		0		(2)	-		-
Profit after tax and before non-recurring items	56	82		27		26	6%		-32%
Advisory and other restructuring costs - excluding discontinued operations and NPE sale (Helix)	(21)	(26)		(9)		(5)	99%		-18%
Profit after tax - Organic	35	56		18		21	-15%		-38%
Profit from discontinued operations (UK)	-	4		-		-	-		-
Profit/(loss) relating to NPE sale (Helix)	1	(105)		1		4	-		-
Loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates	(21)	8		0		(23)	-		-
Reversal of impairment of DTA and impairment of other tax receivables	101	-		-		-	-		-
Profit/(loss) after tax - attributable to the owners of the Company	116	(37)		19		2	-		-

Key Performance Ratios²	9M2019¹	9M2018^1,2		3Q2019¹		2Q2019¹	qoq +		yoy +
Net Interest Margin (annualised)	1.92%	1.84%		1.99%		1.89%	+10 bps		+8bps
Cost to income ratio	62%	58%		61%		59%	+2 p.p.		+4 p.p.
Cost to income ratio excluding special levy and contribution to Single Resolution Fund	58%	54%		57%		56%	+1 p.p.		+4 p.p.
Operating profit return on average assets (annualised)	1.2%	1.3%		1.2%		1.3%	-10 bps		-10 bps
Basic earnings per share attributable to the owners of the Company (€ cent) - Organic	7.78	12.59		4.06		4.78	-0.72		-4.81
Basic earnings/(losses) per share attributable to the owners of the Company (€ cent)	25.92	(8.28)		4.08		0.61	3.47		34.20
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis. 2. Including the impact from IFRIC Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)). This resulted in a reclassification between net interest income and loan credit losses, with no impact on the overall profitability. p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Unaudited Interim Condensed Consolidated Balance Sheet
€ mn			30.09.2019		31.12.2018 (restated)		+%
Cash and balances with central banks			4,413		4,610		-4%
Loans and advances to banks			428		473		-9%
Debt securities, treasury bills and equity investments			1,975		1,515		30%
Net loans and advances to customers			10,971		10,922		0%
Stock of property			1,399		1,427		-2%
Investment properties			138		127		8%
Other assets			1,601		1,531		5%
Non-current assets and disposal groups held for sale			189		1,470		-87%
Total assets			21,114		22,075		-4%
Deposits by banks			451		432		4%
Funding from central banks			-		830		-
Repurchase agreements			250		249		1%
Customer deposits			16,473		16,844		-2%
Subordinated loan stock			268		271		-1%
Other liabilities			1,190		1,082		10%
Total liabilities			18,632		19,708		-5%

Shareholders' equity			2,234		2,121		5%
Other equity instruments			220		220		-
Total equity excluding non-controlling interests			2,454		2,341		5%
Non-controlling interests			28		26		9%
Total equity			2,482		2,367		5%
Total liabilities and equity			21,114		22,075		-4%

Key Balance Sheet figures and ratios				30.09.2019		31.12.2018		+
Gross loans (€ mn)				13,035		13,148		-1%
Allowance for expected loan credit losses (€ mn)				2,086		2,254		-7%
Customer deposits (€ mn)				16,473		16,844		-2%
Loans to deposits ratio (net)				66%		65%		+1 p.p.
NPE ratio				31%		36%		-5 p.p.
NPE coverage ratio				51%		47%		+4 p.p.
Leverage ratio				10.9%		10.0%		0.9 p.p.
Capital ratios and risk weighted assets		30.09.2019 Pro forma for CNP and VEP		30.09.2019		31.12.2018		+
Common Equity Tier 1 (CET1) ratio (transitional for IFRS 9)¹		14.9%		15.2%		11.9%²		+330 bps
Total capital ratio		17.9%		18.2%		14.9%		+330 bps
Risk weighted assets (€ mn)		13,520		13,758		15,373		-11%
1. The CET1 FL ratio as at 30 September 2019 (including the full impact of IFRS 9) amounts to 13.6% and 13.3% pro forma for CNP and VEP (compared to 13.3% and 13.5% pro forma for CNP as at 30 June 2019, 11.9% and 13.3% pro forma for Helix as at 31 March 2019, and 10.1% and 13.5% pro forma for DTC and Helix as at 31 December 2018). 2. The CET1 ratio transitional also for DTA as at 31 December 2018 stood at 12.1%. p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 p.p.

Commentary and Comparative Information

The Group adopted the accounting standard IFRS 16 'Leases' on 1 January 2019. The impact on adoption was an increase in assets of €37 mn and an increase in liabilities of €37 mn with no impact on retained earnings or equity of the Group. The effect of the adoption of IFRS 16 remains subject to change until the Group finalises its financial statements for the year ended 31 December 2019, the year of initial application.

Reclassifications to comparative information were also made for unrecognised interest on previously credit impaired loans which have cured during the period amounting to €24 mn. This was reclassified from 'Net interest income' to 'Credit losses to cover credit risk on loans and advances to customers' in line with an IFRIC discussion, which has taken place in November 2018 (Presentation of unrecognised interest following the curing of a credit impaired financial asset (IFRS 9)). The corresponding amount for the nine months ended 30 September 2019 stood at €12 mn.

A.1. Balance Sheet Analysis

A.1.1 Capital Base

Total equity excluding non-controlling interests totalled €2,454 mn at 30 September 2019, compared to €2,442 mn at 30 June 2019 and €2,341 mn at 31 December 2018. Shareholders' equity totalled €2,234 mn at 30 September 2019, compared to €2,222 mn at 30 June 2019 and €2,121 mn at 31 December 2018.

The Common Equity Tier 1 capital (CET1) ratio on an IFRS 9 transitional basis stood at 15.2% at 30 September 2019 (and 14.9% pro forma for the sale of investment in CNP Cyprus Insurance Holdings Ltd (CNP) (referred to as "pro forma for CNP") and for the voluntary staff exit plan (VEP), collectively referred to as "pro forma for CNP and VEP"), compared to 14.9% at 30 June 2019 (and 15.2% pro forma for CNP) and to 11.9% at 31 December 2018 (adjusted to take into account the deferred tax assets (DTAs) which were fully phased in as of 1 January 2019). During 3Q2019 the CET1 ratio was positively affected mainly by the decrease in risk weighted assets (RWAs). The CET1 ratio as at 30 September 2019 includes unreviewed profits for the nine months ended 30 September 2019.

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 ratios 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. The CET1 ratio on a fully-loaded basis amounts to 13.6% at 30 September 2019 and 13.3% pro forma for CNP and VEP, compared to 13.3% at 30 June 2019 (and 13.5% pro forma for CNP) and to 10.1% at 31 December 2018 (and 13.5% pro forma for DTC and Helix). On a transitional basis and on a fully phased-in basis, after the five year period of transition is complete, the impact of IFRS 9 is expected to be manageable and within the Group's capital plans.

As at 30 September 2019, the Total Capital ratio stood at 18.2% (and 17.9% pro forma for CNP and VEP), compared to 17.8% at 30 June 2019 (and 18.1% pro forma for CNP) and to 14.9% at 31 December 2018.

The Group's capital ratios are above the minimum CET1 regulatory capital requirement of 10.5% (comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 0.5%) and the overall Total Capital requirement of 14.0%, 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 0.5%. 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 Supervisory Review and Evaluation Process (SREP), which is a point in time assessment, and are therefore subject to change over time.

In accordance with the provisions of the Macroprudential Oversight of Institutions Law of 2015, the Central Bank of Cyprus (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.

Following the annual SREP performed by the ECB in 2019 and based on the pre-notification received in September 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. The Group's phased-in CET1 capital ratio is expected to be 11.0%, comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement, 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%. The Group's Total Capital requirement is expected to be 14.5%, comprising an 8.0% Pillar I requirement, a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 1.0%. The new SREP requirements are expected to be effective from January 2020 and remain subject to ECB final confirmation.

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 1, Pillar II requirement or the combined buffer requirements), and therefore cannot be used twice. Following the Annual Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2019 and based on the pre-notification received in September 2019, the new provisions are expected to be effective from January 2020 and remain subject to ECB final confirmation.

The Group capital ratios remain above the SREP requirements.

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 2018 and 2017. Following the 2018 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.

Additional Tier 1

In December 2018, the Company proceeded with the issuance of €220 mn of Additional Tier 1 Capital Securities (AT1). AT1 constitutes an unsecured and subordinated obligation of the Company. The coupon is at 12.50% and is payable semi-annually. The first coupon payment to AT1 holders was made in June 2019 and was recognised in retained earnings.

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 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 have resulted in improved regulatory capital treatment, under Capital Requirements Regulation (EU) No. 575/2013 ("CRR"), of the DTA amounting to c.€285 mn or a CET1 uplift of c.190 bps.

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 with an estimated cost of €79 mn which will be recognised in the consolidated income statement in the fourth quarter, resulting in a negative impact of c.60 bps on both the Group's CET1 and Total Capital ratios.

Pro forma capital ratios

With the completion of the sale of the Group's investment in its associate CNP and the voluntary staff exit plan (VEP), both of which took place in 4Q2019, the CET1 ratio (IFRS 9 transitional basis) of 15.2% as at 30 September 2019 changes to 14.9% pro forma for CNP and VEP. The Total Capital ratio of 18.2% as at 30 September 2019 changes to 17.9% pro forma for CNP and VEP.

Share premium reduction of the Bank

The Bank will proceed (subject to approvals mainly by the Court of Cyprus and the ECB) with a capital reduction process which will result in the reclassification of c.€551 mn of the Bank's share premium account balance as distributable reserves which shall be available for distribution to the shareholders of the Bank, resulting in total net distributable reserves of c.€1 bn on a pro forma basis (30 September 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 CRR, which provides that coupons on AT1 capital instruments may only be funded from distributable items.

A.1.2 Funding and Liquidity

Funding

Funding from Central Banks

At 30 September 2019, the Bank had no funding from central banks. At 30 June 2019, the Bank's funding from central banks amounted to €830 mn, which related to ECB funding (at the same level as at 31 March 2019 and 31 December 2018), comprising solely of funding through the Targeted Longer-Term Refinancing Operations (TLTRO II).

In September 2019, the Bank decided to early repay the ECB funding, given its comfortable liquidity position. The repayment is expected to result in savings for the Bank as these funds were deposited at negative interest rates.

Deposits

Customer deposits totalled €16,473 mn at 30 September 2019, compared to €16,377 mn at 30 June 2019 and €16,844 mn at 31 December 2018.

The Bank's deposit market share in Cyprus reached 34.6% as at 30 September 2019, compared to 34.7% as at 30 June 2019. Customer deposits accounted for 78% of total assets at 30 September 2019.

The Loan to Deposit ratio (L/D) stood at 66% as at 30 September 2019, compared to 67% as at 30 June 2019 and to a peak of 151% as at 31 March 2014. The L/D ratio was reduced by 7 p.p. upon completion of Project Helix in 2Q2019, compared to 74% as at 31 March 2019 when ignoring the classification of the Helix portfolio as a disposal group held for sale (and to 72% at 31 December 2018 on the same basis).

Subordinated Loan Stock

At 30 September 2019 the Bank's subordinated loan stock (including accrued interest) amounted to €268 mn (compared to €261 mn at 30 June 2019 and €271 mn as at 31 December 2018) and relates to unsecured subordinated Tier 2 Capital Notes of nominal value €250 mn, issued by the Bank in January 2017.

Liquidity

At 30 September 2019 the Group Liquidity Coverage Ratio (LCR) stood at 218% (compared to 253% at 30 June 2019 and 231% at 31 December 2018) and was in compliance with the minimum regulatory requirement of 100%.

The liquidity surplus at 30 September 2019 decreased to €3.0 bn, from €3.8 bn at 30 June 2019, following the repayment of ECB funding amounting to €830 mn. At 30 June 2019, the liquidity surplus had increased to €3.8 bn, from €2.7 bn at 31 March 2019, reflecting a €1.2 bn increase in liquidity on Helix completion.

The Net Stable Funding Ratio (NSFR) has not yet been introduced. It will become a regulatory indicator when CRR2 is enforced, currently expected in 2021, with the limit set at 100%. At 30 September 2019, the Group's NSFR, on the basis of Basel ΙΙΙ standards, stood at 122% (compared to 128% at 30 June 2019 and 119% at 31 December 2018).

A.1.3 Loans

Group gross loans totalled €13,035 mn at 30 September 2019, compared to €13,072 mn at 30 June 2019, €15,882 mn at 31 March 2019 and €15,900 mn at 31 December 2018. Gross loans in Cyprus totalled €12,942 mn at 30 September 2019. The reduction in gross loans by 18% since the beginning of the year is attributed mainly to the completion of Project Helix (sale of €2.8 bn of gross loans of which €2.7 bn related to non-performing loans) and to a lesser extent to the completion of Project Velocity (sale of €30 mn gross loans as at the date of disposal, relating wholly to non-performing loans) in 2Q2019. New loans granted in 3Q2019 reached €491 mn, bringing the new loans granted in 9M2019 to €1,602 mn, exceeding new lending in Cyprus in 9M2018.

At 30 September 2019, the Group net loans and advances to customers totalled €10,971 mn (compared to €10,949 mn at 30 June 2019, €10,955 mn at 31 March 2019 pro forma for Helix (and Velocity) and €10,922 mn at 31 December 2018 on the same basis).

The Bank is the single largest credit provider in Cyprus with a market share of 40.8% at 30 September 2019, compared to 41.3% at 30 June 2019 and 46.7% at 31 March 2019, with the reduction in 2Q2019 reflecting the derecognition of the Helix portfolio on completion.

A.1.4 Loan portfolio quality

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

Non-performing exposures (NPEs) as defined by the European Banking Authority (EBA) were reduced by €227 mn or 5% during 3Q2019, bringing the total organic reduction in NPEs in 9M2019 to €684 mn, ahead of the target for organic NPE reduction of c.€800 mn for 2019. NPEs at 30 September 2019 amounted to €4,085 mn, compared to €4,312 mn at 30 June 2019 and €7,419 mn at 31 December 2018.

The NPEs account for 31% of gross loans as at 30 September 2019, compared to 33% as at 30 June 2019, 46% as at 31 March 2019, ignoring the classification of the Helix (and Velocity) portfolio as disposal groups held for sale, and 47% at 31 December 2018 (on the same basis).

The NPE coverage ratio improved to 51% at 30 September 2019, compared to 50% at 30 June 2019, 48% at 31 March 2019 pro forma for Helix and 47% at 31 December 2018 on the same basis. Ignoring the classification of the Helix (and Velocity) portfolios as disposal groups held for sale, the NPE coverage ratio as at 31 March 2019 stood at 53% and at 31 December 2018 stood at 52%.

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

	30.09.2019		30.06.2019
	€ mn	% gross loans	€ mn	% gross loans
NPEs as per EBA definition	4,085	31.3%	4,312	33.0%

Of which, in pipeline to exit:	530	4.1%	657	5.0%
-NPEs with forbearance measures, no arrears¹
1. The analysis is performed on a customer basis.

Overall, the Group has recorded organic NPE reductions for eighteen consecutive quarters and expects the organic reduction of NPEs to continue in the next quarter, in line with the target of c.€800 mn for 2019.

The Group remains focused on continuing to improve its asset quality position and to seek solutions, both organic and inorganic, to make the Bank a stronger and safer institution, capable of supporting the local economy.

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) (the "Portfolio") secured by real estate collateral to certain funds affiliated with Apollo Global Management LLC, the agreement for which was announced on 28 August 2018.

Upon completion of Project Helix, the Group's gross NPEs were c.70% lower than its peak in 2014. Project Helix reduced the NPE ratio by c.11 p.p. to 33% as at 30 June 2019.

Cash consideration of c.€1.2 bn was received on completion, reflecting adjustments resulting from, inter alia, loan repayments received on the 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.

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.€0.83 bn of retail core NPEs, refers 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. Eligibility criteria relate primarily to the OMV of the residence, total income and net wealth of the household. These will act as a clear definition of socially protected borrowers, acting as an enabler against strategic defaulters. In accordance with the Scheme, the eligible loans are to be restructured to the lower of the contractual balance and the OMV. The Government will subsidise one third of the instalment of the restructured loan, subject to the borrowers servicing their restructured loans.

In July 2019 the Memorandum of Understanding was signed by the institutions and the Government for participation in the Scheme, which was officially launched in September 2019. According to the updated timeline provided by the Government in November 2019, application submissions will continue until the end of the year, with evaluation by the institutions running concurrently until mid-January 2020. The participating institutions will offer restructuring solutions to the applicants until the end of January 2020 and simultaneously the applications will be reviewed and approved by the Government, with the process expected to finish by mid-May 2020. The 1^st payment of the state subsidy instalment is expected to occur between December 2019 and June 2020 (please refer to slide 7 of the Results Presentation for the nine months ended 30 September 2019).

The Scheme is expected to resolve part of the ESTIA-eligible portfolio (487 applications (c.€120 mn) have been received by the Bank until 22 November 2019), to identify non-viable customers for which alternative restructuring solutions are being considered and to facilitate the resolution of the remaining customers mainly by focusing on realising collateral through consensual and non-consensual foreclosures.

Project Velocity

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 30 September 2018 (known as "Project Velocity" or the "Sale") 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 account and to capital.

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. To that extent the Group has, during the second half of 2019, embarked on a preparation phase 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 proceeding to engage in high level discussions via the signing of confidentiality agreements with various third parties, including financial investors and investment banks, that may be interested in pursuing a possible collaboration with the Group. A range of potential outcomes of this preparation phase is possible, including outright sales (including the Bank retaining a portion of the related financing). Any potential transactions are expected to involve in total a portfolio of NPEs in excess of €2 bn by gross book value. The Group is not committed to any outcome arising from this preparation phase, which is currently expected to be finalised in the first half of 2020.

A.1.5 Real Estate Management Unit (REMU)

The Real Estate Management Unit (REMU) on-boarded €159 mn of assets in 9M2019 (down by 49% 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 €159 mn in 9M2019 (compared to €154 mn in 9M2018), resulting in a profit on disposal of €26 mn for 9M2019. During the nine months ended 30 September 2019, the Group executed sale-purchase agreements (SPAs) with contract value of €195 mn (433 properties), excluding the sale of the Cyreit. In addition, the Group signed SPAs for disposals of assets with contract value of €65 mn.

Completion of sale of Cyreit

In November 2018, the Bank signed an agreement for the disposal of its entire holding in the investment shares of the Cyreit Variable Capital Investment Company PLC (Cyreit). During 2Q2019, the Group completed the sale of the Cyreit (21 properties), recognising a loss on disposal of c.€1 mn. The total proceeds from the disposal of Cyreit were €160 mn.

Completion of Project Helix

With the completion of Project Helix in 2Q2019, properties with 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.

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

In 2Q2019, the Group decided to classify the leased properties acquired in exchange of debt and leased out under operating leases as 'Investment Properties' instead of 'Stock of property'. This change was applied retrospectively, resulting in the restatement of comparatives.

As a result of the above change in classification, properties with carrying value of €103 mn as at 31 December 2018 were reclassified from the stock of properties (measured at the lower of cost and net realisable value under IAS 2) to investment properties (measured at fair value under IAS 40). These properties continue to be managed by REMU. The carrying value of such properties as at 30 June 2019 was €118 mn.

This change in classification had no material impact on the Group's comparative retained earnings and a cumulative impact of €1 mn gain was recognised under 'Net gains from revaluation and disposal of investment properties and on disposal of stock of properties' in 2Q2019.

Assets held by REMU

As at 30 September 2019, assets held by REMU had a carrying value of €1,513 mn (comprising properties of €1,399 mn classified as 'Stock of property' and €114 mn as 'Investment Properties'), compared to €1,548 mn as at 30 June 2019 (comprising properties of €1,430 mn classified as 'Stock of property' and €118 mn as 'Investment Properties') and to €1,530 mn as at 31 December 2018 (comprising properties of €1,427 mn classified as 'Stock of property' and €103 mn as 'Investment Properties').

In addition to assets held by REMU, properties classified as 'Investment properties' with carrying value of €24 mn as at 30 September 2019, 30 June 2019 and as at 31 December 2018, relate to legacy properties held by the Bank before the set-up of REMU in January 2016.

Assets held by REMU (Group) € mn	9M2019	9M2018	3Q2019	2Q2019	qoq +%	yoy +%
Opening balance	1,530	1,641	1,548	1,542	0%	-7%
On-boarded assets (including construction cost)	159	311	33	81	-59%	-49%
Sales	(159)	(154)	(67)	(62)	8%	4%
Transfer to investment properties (Cyreit)	-	(166)	-	-	-	-
Impairment loss	(12)	(17)	(2)	(8)	-82%	-30%
Transfer to non-current assets and disposal groups held for sale	(5)	(60)	1	(5)	-	-91%
Foreign exchange and other movements	-	3	-	-	-	-
Closing balance	1,513	1,558	1,513	1,548	-2%	-3%

Analysis by type and country	Cyprus	Greece	Romania	Total
30 September 2019 (€ mn)
Residential properties	182	27	0	209
Offices and other commercial properties	218	30	9	257
Manufacturing and industrial properties	79	37	0	116
Hotels	28	0	-	28
Land (fields and plots)	893	7	3	903
Total	1,400	101	12	1,513

	Cyprus	Greece	Romania	Total
31 December 2018 (€ mn)
Residential properties	164	25	0	189
Offices and other commercial properties	228	44	7	279
Manufacturing and industrial properties	80	38	0	118
Hotels	35	0	-	35
Land (fields and plots)	896	8	4	908
Properties under construction	1	-	-	1
Total	1,404	115	11	1,530

A.1.6 Non-core overseas exposures

The remaining non-core overseas net exposures (including both on-balance sheet and off-balance sheet exposures) at 30 September 2019 are as follows:

€ mn	30 September 2019	31 December 2018
Greece	138	164
Romania	32	35
Serbia	0	7
Russia	18	23
UK	0	11
Total	188	240

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.

During 3Q2019 the disposal of the overseas exposure in Serbia, comprising loans and properties, with a carrying value of €8 mn was completed.

In addition to the above, as at 30 September 2019, there were overseas exposures of €279 mn in Greece, relating to both loans and properties (compared to €311 mn at 30 June 2019 and €144 mn at 31 December 2018), 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	9M2019¹	9M2018¹represented²	3Q2019¹	2Q2019¹	qoq +%	yoy +%
Net interest income	260	250	90	85	5%	4%
Net fee and commission income	111	122	36	38	-5%	-9%
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates	34	52	8	16	-49%	-34%
Insurance income net of claims and commissions	42	38	12	18	-34%	11%
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties	26	15	10	12	-25%	65%
Other income	22	17	6	8	-22%	25%
Non-interest income	235	244	72	92	-22%	-4%
Total income	495	494	162	177	-9%	0%
Net Interest Margin (annualised)	1.92%	1.84%	1.99%	1.89%	+10 bps	+8 bps
Average interest earning assets¹ (€ mn)	18,103	18,109	17,962	18,149	-1%	0%
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis. 2. Including the impact from IFRIC Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)). This resulted in a reclassification between net interest income and loan credit losses, with no impact on the overall profitability. p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Net interest income (NII) and net interest margin (NIM) for 9M2019 amounted to €260 mn (up 4% yoy) and 1.92% respectively (up by 8 bps yoy). NII for 3Q2019 amounted to €90 mn (compared to €85 mn for 2Q2019) and increased by 5% qoq, mainly due to increased interest cash collections not previously recognised. In addition, the NII was negatively affected by the continued pressure on lending rates and positively affected by the reduction of cost of deposits. The NIM for 3Q2019 stood at 1.99% increased by 10 bps qoq, resulting mainly from the increase in net interest income.

Average interest earning assets for 9M2019 amounted to €18,103 mn, flat yoy. Quarterly average interest earning assets for 3Q2019 amounted to €17,962 mn compared to €18,149 mn for 2Q2019, down by 1%, primarily driven by the repayment of ECB funding.

Non-interest income for 9M2019 amounted to €235 mn, comprising net fee and commission income of €111 mn, net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates of €34 mn, net insurance income of €42 mn, net gains from revaluation and disposal of investment properties and on disposal of stock of properties of €26 mn and other income of €22 mn. Net fee and commission income for 9M2019 amounted to €111 mn, decreased by 9% yoy (€122 mn for 9M2018), mainly due to the decreased volume of business from the International Business Units (IBUs) in 2019.

Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates of €34 mn for 9M2019, comprising mainly net foreign exchange gains of €21 mn and net gains on revaluation of financial instruments of €13 mn, decreased by 34% yoy mainly due to one-off gain on disposal of bonds during 1Q2018 amounting to €19 mn. Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates totalled €8 mn for 3Q2019, compared to €16 mn for 2Q2019, down by 49% qoq. The decrease qoq is driven mainly by one-off revaluation gains on financial instruments in 2Q2019.

Net insurance income amounted to €42 mn for 9M2019, compared to €38 mn for 9M2018, up by 11% yoy, reflecting increased income and positive investment returns in 2Q2019. Net insurance income amounted to €12 mn for 3Q2019, compared to €18 mn for 2Q2019, down by 34% qoq mainly due to a one-off amount of c.€2.5 mn arising from the reduction of the discount rate, following an improvement in the yield of assets, other revaluation gains and lower insurance claims during 2Q2019.

Net gains from revaluation and disposal of investment properties and on disposal of stock of properties for 9M2019 amounted to €26 mn, comprising a net profit from the disposal of stock properties of €24 mn (REMU gains) and a net gain from revaluation of €2 mn (compared to net gains of €15 mn for 9M2018). Net gains from revaluation and disposal of investment properties and on disposal of stock of properties for 3Q2019 amounted to €10 mn compared to €12 mn in the previous quarter. REMU profit remains volatile.

Total income for 9M2019 amounted to €495 mn, at similar levels to the previous year. Total income for 3Q2019 amounted to €162 mn, compared to €177 mn in 2Q2019, down by 9% qoq.

A.2.2 Total expenses

€ mn	9M2019¹	9M2018¹ represented²	3Q2019¹	2Q2019¹		qoq +%	yoy +%
Staff costs	(167)	(154)	(55)		(56)	-2%	8%
Other operating expenses	(122)	(114)	(38)		(43)	-12%	7%
Total operating expenses	(289)	(268)	(93)		(99)	-7%	8%
Special levy and contribution to Single Resolution Fund (SRF)	(18)	(18)	(6)		(6)	2%	2%
Total expenses	(307)	(286)	(99)		(105)	-6%	7%
Cost to income ratio	62%	58%	61%		59%	+2 p.p.	+4 p.p.
Cost to income ratio excluding special levy and contribution to SRF	58%	54%	57%		56%	+1 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 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis. 2. Including the impact from IFRIC Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)). This resulted in a reclassification between net interest income and loan credit losses, with no impact on the overall profitability. p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Total expenses for 9M2019 were €307 mn (compared to €286 mn for 9M2018), 54% of which related to staff costs
(€167 mn), 40% to other operating expenses (€122 mn) and 6% (€18 mn) to special levy and contribution to Single Resolution Fund (SRF).

Total operating expenses for 9M2019 were €289 mn, increased by 8% yoy, compared to €268 mn for 9M2018. Total operating expenses for 3Q2019 were €93 mn, decreased by 7% qoq, compared to €99 mn in 2Q2019.

Staff costs of €167 mn for 9M2019 increased by 8% yoy (compared to €154 mn in 9M2018) mainly driven by the increase in employer's social insurance contributions from the beginning of the year and the additional contributions to the new general healthcare system which commenced in March 2019. Staff costs for 3Q2019 amounted to €55 mn, at similar levels as the previous quarter.

The Group employed 4,134 persons as at 30 September 2019 (compared to 4,155 persons as at 30 June 2019 and 4,146 persons as at 31 December 2018), including 108 persons relating to the Helix transaction, whilst full migration and transfer to the buyer is expected to conclude soon after the year end. The staff costs related to these persons are included under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis.

In October 2019, the Group completed a voluntary staff exit plan ("VEP" or "the Plan"), through which c.470 applicants (including six persons relating to the Helix transaction) were approved to leave at a total cost of c.€79 mn, expected to be recorded in the consolidated income statement in the fourth quarter. Following the completion of the Plan, the overall number of employees is reduced by c.11%, whilst the gross annual savings are estimated at c.€28 mn or c.13% of staff costs (excluding the 108 persons relating to the Helix transaction). These gross annual savings do not include any impact from the renewal of the collective agreement for 2019, which remains under discussion.

Other operating expenses for 9M2019 were €122 mn, increased by 7% yoy, mainly due to higher property related costs and higher depreciation / amortization, resulting from increased capital expenditure, following the Digital Transformation Programme. Other operating expenses for 3Q2019 were €38 mn, compared to €43 mn for 2Q2019 (down by 12% qoq), mainly due to seasonality and lower marketing expenses.

The cost to income ratio excluding special levy and contribution to Single Resolution Fund for 3Q2019 was 57%, compared to 56% for 2Q2019, principally reflecting the increase in non-interest income in 2Q2019. Cost management, including containment of staff costs, remains a key focus going forward.

A.2.3 Profit before tax and non-recurring items

€ mn	9M2019¹	9M2018¹ represented²	3Q2019¹	2Q2019¹	qoq +%	yoy +%
Operating profit	188	208	63	72	-13%	-10%
Loan credit losses	(117)	(104)	(30)	(40)	-26%	12%
(Impairments)/reversal of impairments of other financial and non-financial assets	(9)	(12)	1	(9)	-109%	-21%
(Provisions)/reversal of provisions for litigation, regulatory and other matters	(3)	(9)	(6)	3	-	-62%
Total loan credit losses, impairments and provisions	(129)	(125)	(35)	(46)	-27%	4%
Profit before tax and non-recurring items	59	83	28	26	15%	-29%
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis. 2. Including the impact from IFRIC Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)). This resulted in a reclassification between net interest income and loan credit losses, with no impact on the overall profitability.

Operating profit for 9M2019 was €188 mn, compared to €208 mn for 9M2018, down by 10% yoy, mainly due to the increase in total operating expenses.

The loan credit losses for 9M2019 totalled €117 mn (compared to €104 mn for 9M2018 up by 12% yoy), reflecting further balance sheet de-risking. The loan credit losses for 3Q2019 amounted to €30 mn, compared to €40 mn for 2Q2019, down by 26% qoq, due to the IFRS 9 model recalibration in 2Q2019.

The annualised loan credit losses charge (cost of risk) for 9M2019, following the completion of NPE sales which led to the reduction of gross loans by €2.8 bn, accounted for 1.19% of gross loans, compared to an annualised loan credit losses charge of 1.00% for 9M2018, on the same basis, reflecting further de-risking and IFRS 9 model volatility. The annualised loan credit losses charge (cost of risk) for 3Q2019, accounted for 0.90% of gross loans, compared to an annualised loan credit losses charge of 1.23% for 2Q2019, on the same basis, due to the IFRS 9 model recalibration in 2Q2019.

At 30 September 2019, the allowance for expected loan credit losses, including fair value adjustment on initial recognition and credit losses on off-balance sheet exposures totalled €2,086 mn (compared to €2,145 mn at 30 June 2019, €2,227 mn at 31 March 2019 pro forma for Helix and €2,254 mn at 31 December 2018 on the same basis) and accounted for 16.0% of gross loans (at similar levels with 30 June 2019, and also with 31 March 2019 and 31 December 2018 on the same basis).

Impairments of other financial and non-financial assets for 9M2019 amounted to €9 mn, compared to €12 mn for 9M2018. Reversal of impairments of other financial and non-financial assets for 3Q2019 amounted to €1 mn (compared to impairments of €9 mn for 2Q2019) mainly relating to a reversal of ECL (expected credit losses) charge on financial instruments driven by reduction of certain exposures.

Provisions for litigation, regulatory and other matters for 9M2019 totalled €3 mn, compared to €9 mn for 9M2018. Provisions for litigation, regulatory and other matters for 3Q2019 totalled €6 mn, compared to a reversal of €3 mn for 2Q2019, which related to the reversal of provisions of previously provided cases with a favourable outcome.

A.2.4 Profit/(loss) after tax

€ mn	9M2019¹	9M2018¹ represented²	3Q2019¹	2Q2019¹	qoq +%	yoy +%
Profit before tax and non-recurring items	59	83	28	26	15%	-29%
Tax	(1)	(4)	(1)	2	-	-82%
(Profit)/loss attributable to non-controlling interests	(2)	3	0	(2)	-	-
Profit after tax and before non-recurring items	56	82	27	26	6%	-32%
Advisory and other restructuring costs - excluding discontinued operations and NPE sale (Helix)	(21)	(26)	(9)	(5)	99%	-18%
Profit after tax - Organic	35	56	18	21	-15%	-38%
Profit from discontinued operations (UK)	-	4	-	-	-	-
Profit/(loss) relating to NPE sale (Helix)	1	(105)	1	4	-	-
Loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates	(21)	8	0	(23)	-	-
Reversal of impairment of DTA and impairment of other tax receivables	101	-	-	-	-	-
Profit/(loss) after tax - attributable to the owners of the Company	116	(37)	19	2	-	-
1. The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under 'Profit/(loss) relating to NPE sale (Helix)' in the underlying basis. 2. Including the impact from IFRIC Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9)). This resulted in a reclassification between net interest income and loan credit losses, with no impact on the overall profitability.

The tax charge for 9M2019 is €1 mn, compared to a tax charge of €4 mn a year earlier, primarily due to lower taxable profit in the current period. The tax charge for 3Q2019 amounted to €1 mn compared to a tax credit of €2 mn in 2Q2019.

Profit after tax and before non-recurring items for 9M2019 was €56 mn, compared to a profit of €82 mn for 9M2018, down by 32% yoy. Profit after tax and before non-recurring items for 3Q2019 was €27 mn, at similar levels to the previous quarter.

Advisory and other restructuring costs - excluding discontinued operations and NPE sale (Helix) for 9M2019 amounted to €21 mn, compared to €26 mn for 9M2018, down by 18% yoy.

Profit after tax arising from the organic operations of the Group for 9M2019 amounted to €35 mn, compared to €56 mn for 9M2018, down by 38% yoy. Profit after tax arising from the organic operations of the Group for 3Q2019 amounted to €18 mn, compared to a €21 mn for the 2Q2019.

The net result of the sale of the Helix portfolio, comprising the interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix for 3Q2019 was a profit of €1 mn, compared to a profit of €4 mn for the previous quarter, bringing the net result from the Project for 9M2019 to €1 mn, compared to a net loss of €105 mn for 9M2018.

Loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates totalled €21 mn for 9M2019, comprising a loss on remeasurement of investment in associate classified as held for sale of €26 mn and a share of profit from associates of €5 mn (compared to a share of profit from associates of €8 mn in 9M2018). In early October 2019, the Group completed the sale of its entire shareholding of 49.9% in its associate CNP Cyprus Insurance Holdings Limited (CNP) that had been acquired as part of the acquisition of certain operations of Laiki Bank in 2013, for a cash consideration of €97.5 mn.

Reversal of impairment of DTA and impairment of other tax receivables totalled €101 mn for 9M2019, comprising the 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 at the quarter end was c.€5 mn.

Profit after tax attributable to the owners of the Company for 9M2019 was €116 mn, compared to a loss of €37 mn for 9M2018. Profit after tax attributable to the owners of the Company for 3Q2019 was €19 mn, compared to a profit of €2 mn in 2Q2019.

B. Operating Environment

Following robust growth in 2016-2018 averaging about 5% annually, economic expansion in Cyprus continued into 2019 at a slowing pace with real Gross Domestic Product (GDP) increasing by 3.1% on average in the first three quarters of the year seasonally adjusted (3.3% in the first quarter, 3.1% in the second and by 3.0% in the third quarter - Cyprus Statistical Service). The deceleration was driven by slowing activity in the traditional sectors including tourism and construction. From the demand side the slowdown was driven by a deteriorating external imbalance. Excluding registrations of ships, net exports have been contributing negatively to real GDP growth in 2018 and the first half of 2019. Exports of goods declined in the first half of the year. Government consumption surged in the first half and fixed investment other than transport equipment which fluctuates with ship registrations, increased significantly driven by construction related activities.

Frequency indicators point to sustained economic activity. In the labour market total employment increased by 5% in the first half of the year (Labour Force Survey), driven by full-time hirings, and the unemployment rate dropped to 6.8% in the third quarter when seasonally adjusted (Eurostat). Consumer inflation decelerated in the ten months to October rising by 0.3% compared with 1.4% in 2018, mainly due to lower transport costs, but also due to the limited pricing power in most categories of goods and services with the exception of housing. Tourist arrivals increased marginally by 0.6% in the year to October despite declines from traditional source countries like Russia, Germany and Greece. There was a significant increase in arrivals from non-European sources. Tourist receipts had dropped by 1.7% in the year to August, which marks a recovery from a steeper drop earlier in the year. In the construction sector, building permits remained strong in the year to July increasing 42% in terms of volume which mainly reflects developments in the hotel sector. The production index in construction was up 15% in the first half of the year driven by building activity that recorded a corresponding increase of 23%. On the demand side, the volume of retail sales decelerated in the year to August, rising by 3.2%, compared to a 6.6% in the same period the year before.

Fiscal performance has been strengthening driven by rising public revenues and constrained expenditures. The general government budget surplus rose to 3.0% of GDP in 2018 excluding the fiscal burden associated with the orderly resolution of the Cyprus Cooperative Bank. The budget surplus continued to increase in the first three quarters of 2019. Public debt remains high and rose further in 2018 to €21.3 bn or 100.6% of GDP, as a result of the fiscal burden noted above. However, a combination of a sustained budget surplus, rising expected inflation and low debt service costs, will be supporting an accelerated decline in the public debt to GDP ratio in the medium term.

In the banking sector, funding conditions remained favourable and the stock of NPEs continued to decline. Specifically, the stock of NPEs declined from €20.9 bn at the end of December 2017 to €10.4 bn at the end of December 2018 after Bank of Cyprus' loans sale and the resolution of the Cyprus Cooperative Bank. The stock of NPEs was €9.8 bn at the end of June 2019 and the ratio to gross loans was 30%, marginally lower than 30.5% at the end of December 2018, despite a further drop in loans outstanding.

Going forward, downside risks derive from the external environment and the structure of the domestic economy which is characterised by a large foreign balance relative to the GDP. The slowing of global trade, uncertainties over Brexit and fragilities in the EU are having an impact. Brexit presents downside risks to the Cyprus economy given close trade and investment links. Economic growth is expected to remain positive, but to soften. Growth is expected to average 3.1% in 2019 and slow down further in 2020 and 2021 to 2.6% and 2.3% respectively, according to the European Commission (Autumn 2019 Forecasts). Employment is expected to continue to rise, but at a slower pace than in recent years, and the unemployment rate is expected to continue to drop to slightly below 6% in 2021 (Autumn 2019 Forecasts). Investment is expected to be strengthening, but high imports are expected to limit the contribution to growth from the external sector. Exports growth is expected to decelerate relative to 2014 - 2018 against a less favourable international environment. Price inflation will be about 0.2% in 2019 and will remain low in the medium term, expected to rise in later years as capacity utilisation will be tightening.

The economy will continue to be challenged by legacy problems to some degree, but the real challenge will be the transformation of the economy towards higher value added activities that will support higher productivity growth and improved competitiveness. The primary challenges therefore will be, to further de-risk the economy by reducing public debt and the remaining stock of non-performing loans; to safeguard fiscal space so as to be able to respond to unforeseen circumstances; and to pursue additional structural reforms especially in the judiciary and public administration domains that will improve the investment environment and in the process induce productivity boosting investments.

The sovereign risk ratings of the Cyprus Government improved considerably in the recent period 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 citing improvements in bank asset quality and fiscal strength. S&P Global Ratings maintains an investment grade rating (BBB-) with a stable outlook since September 2018.

C. Business Overview

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

Tackling the Bank's loan portfolio quality is of utmost importance for the Group. The Group has been successful in engineering restructuring solutions across the spectrum of its loan portfolio, and expects the organic reduction of residual NPEs to continue ahead of the target of c.€800 mn for 2019, as portfolio size and business line mix has changed radically upon completion of the Project Helix. In parallel, the Group continues to actively explore strategies to further accelerate de-risking, including further portfolio sales. To that extent, the Group is in an advanced stage of a preparation phase of reviewing NPE reduction structures. A range of potential outcomes of this preparation phase is possible, including outright sales (including the Bank retaining a portion of the related financing). Any potential transactions are expected to involve in total a portfolio of NPEs in excess of €2 bn by gross book value. The Group is not committed to any outcome arising from this preparation phase, which is currently expected to be finalised in the first half of 2020.

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.

The strategic focus of the Group is to reshape its business model to grow in the core Cypriot market through prudent new lending. As at 30 September 2019, the Bank's capital position remains good. The Group expects to continue to be able to support the recovery of the Cyprus economy through the provision of new lending. Growth in new lending in Cyprus is focused on selected industries that are more in line with the Bank's target risk profile, such as tourism, trade, real estate, professional services, information/communication technologies, energy, education and green projects. The Group is currently exploring ways to grow its new lending, including careful, modest new lending in shipping, syndicated loans, as well as other initiatives. New lending in the nine months to 30 September 2019 reached €1.6 bn.

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

Management is also placing emphasis on diversifying income streams by optimising fee income from international transaction services, wealth management and insurance. The Group's insurance companies, EuroLife Ltd and General Insurance of Cyprus Ltd operating in the sectors of life and general insurance respectively, are leading players in the insurance business in Cyprus, with such businesses providing a recurring income, further diversifying the Group's income streams. The insurance income net of claims and commissions for 9M2019 amounted to €42 mn, up by 11% yoy, contributing to 18% of non-interest income.

In order to further optimise its funding structure, the Bank continues to focus on the shape and cost of deposit franchise, taking advantage of the increased customer confidence towards the Bank, as well as improving macroeconomic conditions. The cost of deposits has been reduced by 57 bps to 19 bps over the last 21 months. Consideration of a liquidity management strategy for specific customer groups is underway.

In common with other European banks, the changed interest rate environment presents a challenge to the Group's profitability. A key focus for management this year and going forward is the active management of funding costs and on-going running expenses, including the containment of staff costs. The Digital Transformation Programme that started in 2017 is beginning to deliver an improved customer experience (see section below) and the branch network is half the size it was in 2013. Furthermore, the branch footprint rationalisation continues and it is expected that the number of branches will be further reduced by 8% by the year end, further improving the Bank's operating model. 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 the last few months, various new features were introduced on the new mobile app, such as managing standing orders and direct debits, the ability to transfer amounts over €150 through QuickPay via the use of Digipass, login through biometric authentication and viewing own accounts with UK banks. Soon customers will also be able to keep track of their accounts with Cypriot banks in the Bank's mobile app. Also, financial management tools have been introduced that allow clients to use the 1Bank service to better manage their finances. In addition, Mastercard holders will soon be able to make secure and fast payments through Apple Pay (iOS) and later through BoC Wallet (Android).

The launch of the new Cards and Payments systems that will allow the Group to offer customised solutions and improve the customer banking experience is being finalised. For example, in 2020 the Group will be able to offer new features through mobile banking, 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 (e.g. spend up to €500 in supermarkets).

The adoption of digital products and services continues to grow and gain momentum, compared to two years ago, when the Digital Transformation Programme began. Today, 75% of transactions involving deposits, cash withdrawals and internal/external transfers, are performed through digital channels (with the corresponding rate two years before reaching 65%). Regarding the use of mobile banking, the number of active users increased by 54% from June 2017.

In 2020 there will also be 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.

D. Strategy and Outlook

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

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

· Materially reduce the level of delinquent loans

· Further optimise the funding structure

· Maintain an appropriate capital position by internally generating capital

· Focus on the core Cyprus market

· Achieve a lean operating model

· Deliver value to shareholders and other stakeholders

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

E. Statutory Financial Results

Unaudited Interim Consolidated Income Statement

	Nine months ended 30 September
	2019	2018 (represented)
	€000	€000
Continuing operations
Turnover	718,358	724,931
Interest income	363,353	423,397
Income similar to interest income	40,178	38,446
Interest expense	(73,082)	(111,730)
Expense similar to interest expense	(36,440)	(34,054)
Net interest income	294,009	316,059
Fee and commission income	131,825	131,291
Fee and commission expense	(17,660)	(11,062)
Net foreign exchange gains	21,151	28,768
Net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates	14,540	41,618
Insurance income net of claims and commissions	41,731	37,631
Net gains/(losses) from revaluation and disposal of investment properties	1,473	(14,295)
Net gains on disposal of stock of property	24,180	29,813
Other income	21,639	17,311
	532,888	577,134
Staff costs	(169,982)	(157,918)
Special levy on deposits on credit institutions in Cyprus and contribution to Single Resolution Fund	(18,715)	(18,283)
Other operating expenses	(167,809)	(168,050)
	176,382	232,883
Net gains on derecognition of financial assets measured at amortised cost	6,298	26,016
Credit losses to cover credit risk on loans and advances to customers	(140,750)	(294,388)
Credit (losses)/gains of other financial instruments	(5,032)	1,857
Impairment of non-financial instruments	(12,993)	(17,204)
Profit/(loss) before share of profit from associates and remeasurement	23,905	(50,836)
Remeasurement of investment in associate classified as held for sale	(25,943)	-
Share of profit from associates	5,400	7,966
Profit/(loss) before tax from continuing operations	3,362	(42,870)
Income tax	114,514	(3,887)
Profit/(loss) after tax from continuing operations	117,876	(46,757)
Discontinued operations
Profit after tax from discontinued operations	-	7,243
Profit/(loss) for the period	117,876	(39,514)

Attributable to:
Owners of the Company - continuing operations profit/(loss)	115,614	(44,179)
Owners of the Company - discontinued operations profit	-	7,243
Total profit/(loss) attributable to the owners of the Company	115,614	(36,936)
Non-controlling interests - continuing operations profit/(loss)	2,262	(2,578)
Profit/(loss) for the period	117,876	(39,514)

Basic and diluted profit/(loss) per share attributable to the owners of the Company (€ cent) - continuing operations	25.9	(9.9)
Basic and diluted profit/(loss) per share attributable to the owners of the Company (€ cent)	25.9	(8.3)

Unaudited Interim Consolidated Statement of Comprehensive Income

	Nine months ended 30 September
	2019	2018
	€000	€000
Profit/(loss) for the period	117,876	(39,514)
Other comprehensive income (OCI)
OCI that may be classified in the consolidated income statement in subsequent periods
Fair value reserve (debt instruments)
Net gains/(losses) on investments in debt instruments measured at fair value through OCI (FVOCI)	10,644	(1,497)
Transfer to the consolidated income statement on disposal	-	(21,256)
	10,644	(22,753)
Foreign currency translation reserve
(Loss)/profit on translation of net investment in foreign branches and subsidiaries	(8,528)	6,665
Profit/(loss) on hedging of net investments in foreign branches and subsidiaries	9,668	(6,285)
Transfer to the consolidated income statement on disposal/dissolution of foreign operations	(422)	(17,431)
	718	(17,051)
Total OCI that may be classified in the consolidated income statement in subsequent periods	11,362	(39,804)
OCI not to be reclassified in the consolidated income statement in subsequent periods
Fair value reserve (equity instruments)
Share of net gains/(losses) from fair value changes of associates	4,200	(2,251)
Net gains on investments in equity instruments designated at FVOCI	188	2,928
	4,388	677
Property revaluation
Deferred Tax	29	16

Actuarial (losses)/gains on the defined benefit plans
Remeasurement (losses)/gains on defined benefit plans	(5,022)	4,098
Total OCI not to be classified in the consolidated income statement in subsequent periods	(605)	4,791
Other comprehensive income/(loss) for the period net of taxation	10,757	(35,013)
Total comprehensive income/(loss) for the period	128,633	(74,527)

Attributable to:
Owners of the Company	126,344	(71,947)
Non-controlling interests	2,289	(2,580)
Total comprehensive income/(loss) for the period	128,633	(74,527)

Unaudited Interim Consolidated Balance Sheet

	30 September 2019	31 December 2018 (restated)
Assets	€000	€000
Cash and balances with central banks	4,412,542	4,610,491
Loans and advances to banks	427,966	472,532
Derivative financial assets	23,248	24,754
Investments	1,683,124	777,104
Investments pledged as collateral	291,724	737,587
Loans and advances to customers	10,970,923	10,921,786
Life insurance business assets attributable to policyholders	446,765	402,565
Prepayments, accrued income and other assets	287,906	256,002
Stock of property	1,399,288	1,426,857
Deferred tax assets	379,126	301,778
Investment properties	137,885	128,006
Property and equipment	290,487	260,723
Intangible assets	171,831	170,411
Investments in associates and joint venture	2,281	114,637
Non-current assets and disposal groups held for sale	189,244	1,470,038
Total assets	21,114,340	22,075,271
Liabilities
Deposits by banks	451,276	431,942
Funding from central banks	-	830,000
Repurchase agreements	250,353	248,945
Derivative financial liabilities	63,054	38,983
Customer deposits	16,472,689	16,843,558
Insurance liabilities	634,368	591,057
Accruals, deferred income, other liabilities and other provisions	339,452	285,483
Pending litigation, claims, regulatory and other matters	102,154	116,951
Subordinated loan stock	267,502	270,930
Deferred tax liabilities	44,554	44,282
Non‑current liabilities and disposal group held for sale	6,435	5,812
Total liabilities	18,631,837	19,707,943
Equity
Share capital	44,620	44,620
Share premium	1,294,358	1,294,358
Revaluation and other reserves	207,913	190,411
Retained earnings	687,325	591,941
Equity attributable to the owners of the Company	2,234,216	2,121,330
Other equity instruments	220,000	220,000
Total equity excluding non‑controlling interests	2,454,216	2,341,330
Non‑controlling interests	28,287	25,998
Total equity	2,482,503	2,367,328
Total liabilities and equity	21,114,340	22,075,271

The Group adopted the accounting standard IFRS 16 Leases on 1 January 2019. The impact on adoption was an increase in assets of €37,474 thousand and an increase in liabilities of €37,474 thousand with no impact on retained earnings or equity of the Group. The effect of the adoption of IFRS 16 remains subject to change until the Group finalises its financial statements for the year ended 31 December 2019, the year of initial application.

Comparative information was restated following the change in the classification of properties which are leased out under operating leases as investment properties. In relation to these properties, an amount of €103,531 thousand was reclassified from 'Stock of property' to 'Investment properties' relating to balances as at 31 December 2018. The disclosures on the change in accounting policy are presented in the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2019 within the Interim Financial Report.

Reclassifications to comparative information were also made for unrecognised interest on previously credit impaired loans which have cured during the period amounting to €24,346 thousand. This was reclassified from 'Net interest income' to 'Credit losses to cover credit risk on loans and advances to customers' in line with an IFRIC discussion, which did not take place until November 2018 (Presentation of unrecognised interest following the curing of a credit impaired financial asset (IFRS 9)). The corresponding amount for the nine months ended 30 September 2019 stood at €12,337 thousand.

Unaudited Interim Consolidated Statement of Changes in Equity

	Attributable to the owners 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	-	-	-	115,614	-	-	-	-	115,614	-	2,262	117,876
Other comprehensive (loss)/income after tax for the period	-	-	-	(5,022)	22	15,012	-	718	10,730	-	27	10,757
Total comprehensive income after tax for the period	-	-	-	110,592	22	15,012	-	718	126,344	-	2,289	128,633
Increase in value of in-force life insurance business	-	-	-	(2,000)	-	-	2,000	-	-	-	-	-
Tax on increase in value of in-force life insurance business	-	-	-	250	-	-	(250)	-	-	-	-	-
Payment of coupon to AT1 holders	-	-	-	(13,447)	-	-	-	-	(13,447)	-	-	(13,447)
Change in the holding of Undertakings for Collective Investments in Transferable Securities (UCITS) Fund	-	-	-	(11)	-	-	-	-	(11)	-	-	(11)
30 September 2019	44,620	1,294,358	(21,463)	687,325	79,455	30,301	102,751	16,869	2,234,216	220,000	28,287	2,482,503

	Attributable to the owners of the Company										Non- controlling interests	Total equity
	Share capital	Share premium	Treasury shares	Accumulated losses	Property revaluation reserve	Financial instruments fair value reserve	Other reserves	Life insurance in-force business reserve	Foreign currency translation reserve	Total	Non- controlling interests	Total equity
	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000
1 January 2018	44,620	2,794,358	(21,463)	(527,128)	92,878	54,485	6,059	105,651	36,098	2,585,558	31,150	2,616,708
Impact of adopting IFRS 9 at 1 January 2018	-	-	-	(299,150)	-	(8,470)	-	-	-	(307,620)	-	(307,620)
Restated balance at 1 January 2018	44,620	2,794,358	(21,463)	(826,278)	92,878	46,015	6,059	105,651	36,098	2,277,938	31,150	2,309,088
Loss for the period	-	-	-	(36,936)	-	-	-	-	-	(36,936)	(2,578)	(39,514)
Other comprehensive income/(loss) after tax for the period	-	-	-	4,098	16	(22,074)	-	-	(17,051)	(35,011)	(2)	(35,013)
Total comprehensive (loss)/ income after tax for the period	-	-	-	(32,838)	16	(22,074)	-	-	(17,051)	(71,947)	(2,580)	(74,527)
Decrease in value of in-force life insurance business	-	-	-	5,794	-	-	-	(5,794)	-	-	-	-
Tax on decrease in value of in-force life insurance business	-	-	-	(724)	-	-	-	724	-	-	-	-
Transfer of realised profits on disposal of properties	-	-	-	4,143	(4,143)	-	-	-	-	-	-	-
Transfer of property revaluation reserve and other reserve of subsidiary to accumulated losses	-	-	-	14,014	(7,955)	-	(6,059)	-	-	-	-	-
Loss of control of subsidiary	-	-	-	1,996	(1,996)	-	-	-	-	-	-	-
Decrease in share capital of subsidiary	-	-	-	(722)	-	-	-	-	-	(722)	(489)	(1,211)
Transfer of loss on disposal of FVOCI equity investments to accumulated losses	-	-	-	(67)	-	67	-	-	-	-	-	-
Increase in non-controlling interests due to change in the shareholding of subsidiary	-	-	-	865	-	-	-	-	-	865	18,956	19,821
30 September 2018	44,620	2,794,358	(21,463)	(833,817)	78,800	24,008	-	100,581	19,047	2,206,134	47,037	2,253,171

F. Notes

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

€ million	Underlying basis	Helix portfolio	Investment in associate classified as held for sale	Tax related items	Other	Statutory basis
Net interest income	260	34	-	-	-	294
Net fee and commission income	111	9	-	(6)	-	114
Net foreign exchange gains and net gains on financial instrument transactions	34	-	-	-	1	35
Insurance income net of claims and commissions	42	-	-	-	-	42
Net gains from revaluation and disposal of investment properties and on disposal of stock of property	26	-	-	-	-	26
Other income	22	-	-	-	-	22
Total income	495	43	-	(6)	1	533
Total expenses	(307)	(25)	-	-	(24)	(356)
Operating profit	188	18	-	(6)	(23)	177
Loan credit losses	(117)	(17)	-	-	(1)	(135)
Impairments of other financial and non-financial instruments	(9)	-	-	(8)	-	(17)
Provisions for litigation, claims, regulatory and other matters	(3)	-	-	-	3	-
Remeasurement of investment in associate classified as held for sale	-	-	(26)	-	-	(26)
Share of profit from associates	-	-	5	-	-	5
Profit/(loss) before tax, and non-recurring items	59	1	(21)	(14)	(21)	4
Tax	(1)	-	-	115	-	114
Profit attributable to non-controlling interests	(2)	-	-	-	-	(2)
Profit after tax and before non-recurring items	56	1	(21)	101	(21)	116
Advisory and other restructuring costs-excluding NPE sale (Helix)	(21)	-	-	-	21	-
Profit after tax organic*	35	1	(21)	101	-	116
Profit/(loss) relating to NPE sale (Helix)	1	(1)	-	-	-	-
Loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates	(21)	-	21	-	-	-
Reversal of impairment of deferred tax assets (DTA) and impairment of other tax receivables	101	-	-	(101)	-	-
Profit after tax (attributable to the owners of the Company)	116	-	-	-	-	116

*This is the profit after tax, before the loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates, and the reversal of impairment of DTA and impairment of other tax receivables.

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

Helix portfolio

· Net interest income of €34 million and fee and commission income of €9 million relating to the NPE sale (Helix) is disclosed under non‑recurring items within 'Profit/(loss) relating to NPE sale (Helix)' under the underlying basis.

· Total expenses include staff costs of €4 million, operating expenses of €12 million and restructuring costs of €9 million relating to NPE sale (Helix), and are presented within 'Profit/(loss) relating to NPE sale (Helix)' under the underlying basis.

· Loan credit losses of €17 million are disclosed under non‑recurring items within 'Profit/(loss) relating to NPE sale (Helix)' under the underlying basis.

Investment in associate classified as held for sale

· Loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associate of €21 million comprises the share of profit of associate of €5 million, which is reported in the 'Share of profit from associates' under the statutory basis, and the loss on remeasurement of €26 million, which is classified as 'Remeasurement of investment in associate classified as held for sale' under the statutory basis.

Tax related items

· Reversal of impairment of the deferred tax asset amounting to €115 million included within 'Tax' under the statutory basis is classified as a non‑recurring item and disclosed within 'Reversal of impairment of DTA and impairment of other tax receivables' under the underlying basis. Fee and commission expense relating to the revised income tax legislation of €6 million, which has been disclosed within 'Reversal of impairment of DTA and impairment of other tax receivables' under the underlying basis, is disclosed within the 'Net fee and commission income' under the statutory basis.

· Impairment of other financial assets of €8 million, which are included in 'Credit (losses)/gains of other financial instruments' under the statutory basis, relate to the impairment of Greek tax receivables and are classified as a non‑recurring item and disclosed within 'Reversal of impairment of DTA and impairment of other tax receivables' under the underlying basis.

Other reclassifications

· Advisory and other restructuring costs of approximately €21 million included in 'Other operating expenses' under the statutory basis are separately presented under the underlying basis.

· Provisions for litigation, claims, regulatory and other matters amounting to €3 million included in 'Other operating expenses' under the statutory basis, are separately presented under the underlying basis.

· Net gains on loans and advances to customers at FVPL of €1 million are included in 'Net gains on financial instrument transaction and disposal/dissolution of subsidiaries and associates' under the statutory basis and within 'Loan credit losses' under the underlying basis.

F.2 Customer deposits

The analysis of customer deposits is presented below:

	30 September 2019	31 December 2018
By type of deposit	€000	€000
Demand	7,066,341	6,708,852
Savings	1,465,224	1,352,452
Time or notice	7,941,124	8,782,254
	16,472,689	16,843,558
By currency
Euro	14,750,373	14,961,025
US Dollar	1,341,875	1,482,867
British Pound	283,276	292,640
Russian Rouble	18,123	25,529
Swiss Franc	6,714	7,994
Other currencies	72,328	73,503
	16,472,689	16,843,558
By customer sector
Corporate	1,875,343	1,750,517
SMEs	764,260	800,671
Retail	9,869,567	10,032,047
Restructuring
- corporate	73,481	69,180
- SMEs	23,211	29,299
- retail other	16,157	16,773
Recoveries
- corporate	3,946	6,492
International banking services	3,487,465	3,707,713
Wealth management	359,259	430,866
	16,472,689	16,843,558

All deposits are in Cyprus.

F.3 Loans and advances to customers

	30 September 2019	31 December 2018
	€000	€000
Gross loans and advances to customers at amortised cost	12,386,404	12,430,367
Allowance for ECL for impairment of loans and advances to customers	(1,785,991)	(1,904,153)
Loans and advances to customers measured at amortised cost	10,600,413	10,526,214
Loans and advances to customers measured at FVPL	370,510	395,572
	10,970,923	10,921,786

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 table below:

30 September 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	1,389,823	14,238	1,404,061	(18,056)	1,386,005
Manufacturing	459,432	5,945	465,377	(5,154)	460,223
Hotels and catering	930,996	1,108	932,104	(18,055)	914,049
Construction	883,643	4,475	888,118	(11,693)	876,425
Real estate	1,135,575	23,940	1,159,515	(15,503)	1,144,012
Private individuals	6,092,359	960	6,093,319	(117,300)	5,976,019
Professional and other services	856,716	41,754	898,470	(27,719)	870,751
Other sectors	763,508	789	764,297	(5,377)	758,920
	12,512,052	93,209	12,605,261	(218,857)	12,386,404
By business line
Corporate	3,688,442	82,637	3,771,079	(34,425)	3,736,654
SMEs	1,136,289	9,739	1,146,028	(16,510)	1,129,518
Retail
- housing	2,850,694	-	2,850,694	(42,177)	2,808,517
- consumer, credit cards and other	920,012	833	920,845	2,838	923,683
Restructuring
- corporate	386,469	-	386,469	(6,476)	379,993
- SMEs	355,906	-	355,906	(5,627)	350,279
- retail housing	399,527	-	399,527	(2,672)	396,855
- retail other	232,387	-	232,387	(4,331)	228,056
Recoveries
- corporate	117,061	-	117,061	(3,349)	113,712
- SMEs	554,595	-	554,595	(22,248)	532,347
- retail housing	817,033	-	817,033	(37,323)	779,710
- retail other	722,635	-	722,635	(42,619)	680,016
International banking services	162,545	-	162,545	(1,315)	161,230
Wealth management	168,457	-	168,457	(2,623)	165,834
	12,512,052	93,209	12,605,261	(218,857)	12,386,404

31 December 2018	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	1,447,623	39,682	1,487,305	(24,096)	1,463,209
Manufacturing	437,030	7,572	444,602	(6,439)	438,163
Hotels and catering	877,501	3,806	881,307	(20,354)	860,953
Construction	991,122	2,552	993,674	(14,661)	979,013
Real estate	980,152	21,644	1,001,796	(16,231)	985,565
Private individuals	6,234,765	11,536	6,246,301	(135,603)	6,110,698
Professional and other services	866,093	45,758	911,851	(36,551)	875,300
Other sectors	720,876	4,704	725,580	(8,114)	717,466
	12,555,162	137,254	12,692,416	(262,049)	12,430,367
By business line
Corporate	3,363,298	125,138	3,488,436	(49,982)	3,438,454
SMEs	1,188,456	11,188	1,199,644	(16,537)	1,183,107
Retail
- housing	2,871,294	-	2,871,294	(45,016)	2,826,278
- consumer, credit cards and other	940,388	904	941,292	2,965	944,257
Restructuring
- corporate	531,462	24	531,486	(7,907)	523,579
- SMEs	560,806	-	560,806	(11,637)	549,169
- retail housing	498,601	-	498,601	(4,481)	494,120
- retail other	328,952	-	328,952	(8,588)	320,364
Recoveries
- corporate	164,821	-	164,821	(7,439)	157,382
- SMEs	630,968	-	630,968	(26,178)	604,790
- retail housing	697,212	-	697,212	(40,577)	656,635
- retail other	480,733	-	480,733	(39,923)	440,810
International banking services	192,646	-	192,646	(2,158)	190,488
Wealth management	105,525	-	105,525	(4,591)	100,934
	12,555,162	137,254	12,692,416	(262,049)	12,430,367

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 €197,765 thousand (31 December 2018: €55,789 thousand) and lending exposures in Cyprus with collaterals in Greece with a carrying value of €80,770 thousand (31 December 2018: €76,303 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 as at 31 December 2018 are presented in the table below:

31 December 2018	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	373,351	-	373,351	(12,213)	361,138
Manufacturing	202,193	-	202,193	(7,216)	194,977
Hotels and catering	258,529	-	258,529	(11,960)	246,569
Construction	995,430	-	995,430	(74,233)	921,197
Real estate	409,632	55,225	464,857	(11,765)	453,092
Private individuals	218,531	-	218,531	(9,098)	209,433
Professional and other services	140,748	-	140,748	(5,941)	134,807
Other sectors	191,463	6,011	197,474	(6,727)	190,747
	2,789,877	61,236	2,851,113	(139,153)	2,711,960
By business line
Corporate	15,249	-	15,249	(584)	14,665
SMEs	2,841	-	2,841	-	2,841
Retail
- consumer, credit cards and other	128	-	128	(1)	127
Restructuring
- corporate	859,214	-	859,214	(24,379)	834,835
- SMEs	216,866	-	216,866	(4,858)	212,008
- retail housing	272	-	272	-	272
- retail other	5,773	-	5,773	(210)	5,563
Recoveries
- corporate	1,274,835	61,236	1,336,071	(86,644)	1,249,427
- SMEs	374,336	-	374,336	(17,991)	356,345
- retail housing	635	-	635	(115)	520
- retail other	39,720	-	39,720	(4,371)	35,349
International banking services	8	-	8	-	8
	2,789,877	61,236	2,851,113	(139,153)	2,711,960

There were no loans and advances to customers at amortised cost classified as held for sale as at 30 September 2019.

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:

30 September 2019	Stage 1	Stage 2	Stage 3	POCI	Total
30 September 2019	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	6,112,798	2,435,184	3,372,040	685,239	12,605,261
Residual fair value adjustment on initial recognition	(64,404)	(31,084)	(21,800)	(101,569)	(218,857)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	6,048,394	2,404,100	3,350,240	583,670	12,386,404

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
30 September 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	2,534,813	922,313	234,172	79,781	3,771,079
SMEs	689,079	388,277	57,676	10,996	1,146,028
Retail
- housing	1,996,838	644,450	197,857	11,549	2,850,694
- consumer, credit cards and other	616,682	202,431	81,941	19,791	920,845
Restructuring
- corporate	20,921	112,532	219,022	33,994	386,469
- SMEs	31,006	64,047	235,389	25,464	355,906
- retail housing	4,722	5,911	377,032	11,862	399,527
- retail other	2,893	1,010	216,030	12,454	232,387
Recoveries
- corporate	-	-	94,939	22,122	117,061
- SMEs	-	-	448,927	105,668	554,595
- retail housing	-	-	644,565	172,468	817,033
- retail other	82	-	545,167	177,386	722,635
International banking services	63,536	81,041	17,255	713	162,545
Wealth management	152,226	13,172	2,068	991	168,457
	6,112,798	2,435,184	3,372,040	685,239	12,605,261

Residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
30 September 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	(21,678)	(12,237)	340	(850)	(34,425)
SMEs	(9,324)	(6,123)	(460)	(603)	(16,510)
Retail
- housing	(34,360)	(7,648)	91	(260)	(42,177)
- consumer, credit cards and other	2,458	333	176	(129)	2,838
Restructuring
- corporate	(7)	(2,068)	(3,802)	(599)	(6,476)
- SMEs	(4)	(959)	(1,494)	(3,170)	(5,627)
- retail housing	(39)	(35)	(1,527)	(1,071)	(2,672)
- retail other	10	4	(1,801)	(2,544)	(4,331)
Recoveries
- corporate	-	-	(478)	(2,871)	(3,349)
- SMEs	-	-	(1,700)	(20,548)	(22,248)
- retail housing	-	-	(3,667)	(33,656)	(37,323)
- retail other	-	-	(7,357)	(35,262)	(42,619)
International banking services	(310)	(984)	(15)	(6)	(1,315)
Wealth management	(1,150)	(1,367)	(106)	-	(2,623)
	(64,404)	(31,084)	(21,800)	(101,569)	(218,857)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
30 September 2019	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	2,513,135	910,076	234,512	78,931	3,736,654
SMEs	679,755	382,154	57,216	10,393	1,129,518
Retail
- housing	1,962,478	636,802	197,948	11,289	2,808,517
- consumer, credit cards and other	619,140	202,764	82,117	19,662	923,683
Restructuring
- corporate	20,914	110,464	215,220	33,395	379,993
- SMEs	31,002	63,088	233,895	22,294	350,279
- retail housing	4,683	5,876	375,505	10,791	396,855
- retail other	2,903	1,014	214,229	9,910	228,056
Recoveries
- corporate	-	-	94,461	19,251	113,712
- SMEs	-	-	447,227	85,120	532,347
- retail housing	-	-	640,898	138,812	779,710
- retail other	82	-	537,810	142,124	680,016
International banking services	63,226	80,057	17,240	707	161,230
Wealth management	151,076	11,805	1,962	991	165,834
	6,048,394	2,404,100	3,350,240	583,670	12,386,404

31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	6,035,781	1,921,255	3,915,591	819,789	12,692,416
Residual fair value adjustment on initial recognition	(77,738)	(20,673)	(40,432)	(123,206)	(262,049)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	5,958,043	1,900,582	3,875,159	696,583	12,430,367

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	2,215,264	793,249	387,093	92,830	3,488,436
SMEs	739,166	346,148	103,384	10,946	1,199,644
Retail
- housing	2,259,976	300,101	300,584	10,633	2,871,294
- consumer, credit cards and other	591,242	199,099	130,816	20,135	941,292
Restructuring
- corporate	48,943	92,537	303,955	86,051	531,486
- SMEs	55,295	52,573	406,369	46,569	560,806
- retail housing	6,883	3,745	473,444	14,529	498,601
- retail other	5,140	1,226	304,076	18,510	328,952
Recoveries
- corporate	-	-	120,234	44,587	164,821
- SMEs	-	-	515,542	115,426	630,968
- retail housing	-	-	512,175	185,037	697,212
- retail other	89	-	313,529	167,115	480,733
International banking services	69,620	78,109	41,352	3,565	192,646
Wealth management	44,163	54,468	3,038	3,856	105,525
	6,035,781	1,921,255	3,915,591	819,789	12,692,416

Residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	(25,159)	(11,564)	(12,282)	(977)	(49,982)
SMEs	(10,652)	(4,150)	(1,113)	(622)	(16,537)
Retail
- housing	(43,528)	(97)	(1,246)	(145)	(45,016)
- consumer, credit cards and other	3,248	352	(375)	(260)	2,965
Restructuring
- corporate	(199)	(1,988)	(2,687)	(3,033)	(7,907)
- SMEs	28	(580)	(3,931)	(7,154)	(11,637)
- retail housing	(119)	(3)	(2,796)	(1,563)	(4,481)
- retail other	34	(40)	(3,971)	(4,611)	(8,588)
Recoveries
- corporate	-	-	(1,654)	(5,785)	(7,439)
- SMEs	-	-	(2,073)	(24,105)	(26,178)
- retail housing	-	-	(3,200)	(37,377)	(40,577)
- retail other	-	-	(4,695)	(35,228)	(39,923)
International banking services	(303)	(1,164)	(195)	(496)	(2,158)
Wealth management	(1,088)	(1,439)	(214)	(1,850)	(4,591)
	(77,738)	(20,673)	(40,432)	(123,206)	(262,049)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	2,190,105	781,685	374,811	91,853	3,438,454
SMEs	728,514	341,998	102,271	10,324	1,183,107
Retail
- housing	2,216,448	300,004	299,338	10,488	2,826,278
- consumer, credit cards and other	594,490	199,451	130,441	19,875	944,257
Restructuring
- corporate	48,744	90,549	301,268	83,018	523,579
- SMEs	55,323	51,993	402,438	39,415	549,169
- retail housing	6,764	3,742	470,648	12,966	494,120
- retail other	5,174	1,186	300,105	13,899	320,364
Recoveries
- corporate	-	-	118,580	38,802	157,382
- SMEs	-	-	513,469	91,321	604,790
- retail housing	-	-	508,975	147,660	656,635
- retail other	89	-	308,834	131,887	440,810
International banking services	69,317	76,945	41,157	3,069	190,488
Wealth management	43,075	53,029	2,824	2,006	100,934
	5,958,043	1,900,582	3,875,159	696,583	12,430,367

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 concentration.

30 September 2019	Stage 1	Stage 2	Stage 3	POCI	Total
30 September 2019	€000	€000	€000	€000	€000
Cyprus	6,111,535	2,435,184	3,280,094	685,239	12,512,052
Other countries	1,263	-	91,946	-	93,209
	6,112,798	2,435,184	3,372,040	685,239	12,605,261

31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	€000	€000	€000	€000	€000
Cyprus	6,023,870	1,921,234	3,790,269	819,789	12,555,162
Other countries	11,911	21	125,322	-	137,254
	6,035,781	1,921,255	3,915,591	819,789	12,692,416

Loans and advances to customers classified as held for sale

The following tables present the staging of the Group's loans and advances at amortised cost classified as held for sale as at 31 December 2018 by business line concentration.

31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	€000	€000	€000	€000	€000
Gross loans at amortised cost before residual fair value adjustment on initial recognition	7,148	94,600	2,222,931	526,434	2,851,113
Residual fair value adjustment on initial recognition	(195)	(3,261)	(24,571)	(111,126)	(139,153)
Gross loans at amortised cost after residual fair value adjustment on initial recognition	6,953	91,339	2,198,360	415,308	2,711,960

Gross loans at amortised cost before residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	165	-	14,343	741	15,249
SMEs	2,835	-	6	-	2,841
Retail
- consumer, credit cards and other	-	-	125	3	128
Restructuring
- corporate	2,110	85,783	722,631	48,690	859,214
- SMEs	2,038	8,817	187,831	18,180	216,866
- retail housing	-	-	231	41	272
- retail other	-	-	5,575	198	5,773
Recoveries
- corporate	-	-	967,761	368,310	1,336,071
- SMEs	-	-	300,509	73,827	374,336
- retail housing	-	-	484	151	635
- retail other	-	-	23,427	16,293	39,720
International banking services	-	-	8	-	8
	7,148	94,600	2,222,931	526,434	2,851,113

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 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	-	-	(584)	-	(584)
Retail
- consumer, credit cards and other	-	-	-	(1)	(1)
Restructuring
- corporate	-	(2,722)	(13,730)	(7,927)	(24,379)
- SMEs	(195)	(539)	(1,470)	(2,654)	(4,858)
- retail other	-	-	(132)	(78)	(210)
Recoveries
- corporate	-	-	(4,900)	(81,744)	(86,644)
- SMEs	-	-	(3,473)	(14,518)	(17,991)
- retail housing	-	-	-	(115)	(115)
- retail other	-	-	(282)	(4,089)	(4,371)
	(195)	(3,261)	(24,571)	(111,126)	(139,153)

Gross loans at amortised cost after residual fair value adjustment on initial recognition	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
By business line	€000	€000	€000	€000	€000
Corporate	165	-	13,759	741	14,665
SMEs	2,835	-	6	-	2,841
Retail
- consumer, credit cards and other	-	-	125	2	127
Restructuring
- corporate	2,110	83,061	708,901	40,763	834,835
- SMEs	1,843	8,278	186,361	15,526	212,008
- retail housing	-	-	231	41	272
- retail other	-	-	5,443	120	5,563
Recoveries
- corporate	-	-	962,861	286,566	1,249,427
- SMEs	-	-	297,036	59,309	356,345
- retail housing	-	-	484	36	520
- retail other	-	-	23,145	12,204	35,349
International banking services	-	-	8	-	8
	6,953	91,339	2,198,360	415,308	2,711,960

There were no loans and advances to customers at amortised cost classified as held for sale as at 30 September 2019.

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

The following table presents the Group's gross loans and advances before residual fair value adjustment on initial recognition at amortised cost classified as held for sale as at 31 December 2018 by staging and geographical concentration.

31 December 2018	Stage 1	Stage 2	Stage 3	POCI	Total
31 December 2018	€000	€000	€000	€000	€000
Cyprus	7,148	94,600	2,161,695	526,434	2,789,877
Other countries	-	-	61,236	-	61,236
	7,148	94,600	2,222,931	526,434	2,851,113

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

	Nine months ended 30 September
	2019	2018 (represented)
	€000	€000
Impairment loss net of reversals on loans and advances to customers	164,952	459,303
Recoveries of loans and advances to customers previously written off	(18,096)	(125,329)
Changes in expected cash flows	(798)	(32,882)
Financial guarantees and commitments	(5,308)	(6,704)
Credit losses to cover credit risk on loans and advances to customers	140,750	294,388

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:

30 September 2019	Cyprus	Other countries	Total
30 September 2019	€000	€000	€000
1 January	3,315,259	146,746	3,462,005
Foreign exchange and other adjustments	6,624	3,732	10,356
Write offs	(314,988)	(34,978)	(349,966)
Interest provided not recognised in the income statement	96,513	4,956	101,469
Disposal of Helix and Velocity portfolios	(1,548,060)	(54,765)	(1,602,825)
Charge for the period	165,069	(117)	164,952
30 September	1,720,417	65,574	1,785,991
Stage 1	20,561	3	20,564
Stage 2	40,500	-	40,500
Stage 3	1,449,622	65,571	1,515,193
POCI	209,734	-	209,734
Total	1,720,417	65,574	1,785,991

The allowance for ECL of loans and advances to customers classified as held for sale as at 31 December 2018 included in the table above, amounts to €1,557,852 thousand.

There were no loans and advances to customers held for sale as at 30 September 2019.

30 September 2018	Cyprus	Other countries	Total
30 September 2018	€000	€000	€000
1 January	3,205,177	247,673	3,452,850
Change in the basis of calculation of gross carrying values (IFRS 9 grossing up adjustment)	1,632,322	57,175	1,689,497
Impact of adopting IFRS 9 at 1 January 2018	313,928	5,174	319,102
Restated balance at 1 January 2018	5,151,427	310,022	5,461,449
Transfer from Romanian branch	19,258	(19,258)	-
Foreign exchange and other adjustments	5,779	(6,915)	(1,136)
Write offs	(2,371,936)	(82,904)	(2,454,840)
Interest provided not recognised in the income statement	121,817	(4,667)	117,150
Charge/(credit) for the period - continuing operations	473,881	(14,578)	459,303
Credit for the period - discontinued operations	-	(624)	(624)
Loss of control of UK operations	-	(3,594)	(3,594)
30 September	3,400,226	177,482	3,577,708
Stage 1	20,912	138	21,050
Stage 2	101,583	3,736	105,319
Stage 3	2,836,405	170,845	3,007,250
POCI	441,326	2,763	444,089
Total	3,400,226	177,482	3,577,708

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 at 30 September 2018 by staging and geographical area is presented in the table below:

30 September 2018	Stage 1	Stage 2	Stage 3	POCI	Total
30 September 2018	€000	€000	€000	€000	€000
Cyprus	853	53,487	1,228,062	188,662	1,471,064
Other countries	-	-	48,254	-	48,254
	853	53,487	1,276,316	188,662	1,519,318
Collectively assessed	853	53,487	1,276,316	188,662	1,519,318

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

As from 1 January 2018, to comply with the requirements of IFRS 9, relating to the measurement and presentation of the gross carrying amount and accumulated allowance for impairment as impacted from interest income on impaired loans and advances to customers, the gross carrying amounts of the loans have been increased by an amount of €1,689,497 thousand and an equivalent adjustment was effected on the accumulated allowance for impairment. There was no impact on the net carrying amount of the customer loans and advances to customers from this change in the presentation.

During the nine months ended 30 September 2019 the total non‑contractual write‑offs recorded by the Group amounted to €185,700 thousand (nine months ended 30 September 2018: €2,229,691 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 30 September 2019 the weighted average haircut (including liquidity haircut and selling expenses) used in the collectively assessed provision calculation for loans and advances to customers is c.32% under the baseline scenario (31 December 2018: c.32%, other than 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 2018: average seven years, other than 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 December 2018, 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 nine months ended 30 September 2019 and the year 2018. 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 amount of required allowance for credit losses of loans and advances to customers.

F.7 Rescheduled loans and advances to customers

	Cyprus	Other countries	Total
30 September 2019	€000	€000	€000
Stage 1	268,761	114	268,875
Stage 2	489,556	-	489,556
Stage 3	1,716,474	37,279	1,753,753
POCI	215,411	-	215,411
	2,690,202	37,393	2,727,595


31 December 2018
Stage 1	508,664	120	508,784
Stage 2	376,794	24	376,818
Stage 3	2,001,947	48,662	2,050,609
POCI	266,263	-	266,263
	3,153,668	48,806	3,202,474

F.8 Credit risk disclosures

According to the 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 debtor is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due amount or of the number of days past due.

(ii) Defaulted or impaired exposures as per the approach provided in the Capital Requirements Regulation (CRR) (Article 178).

(iii) Material exposures (as defined below) 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:

- Loans: Arrears amount greater than €500 or number of instalments in arrears is greater than one.

- Overdrafts: Excess amount is greater than €500 or greater than 10% of the approved limit.

- Exposures other than retail: Total customer arrears/excesses are greater than €1,000 or greater than 10% of the total customer funded balances.

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 not-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.

30 September 2019	Gross loans and advances to customers				Provision for impairment and fair value adjustment on initial recognition
	Group gross customer loans and advances¹	Of which NPEs	Of which exposures with forbearance measures		Total provision for impairment and fair value adjustment on initial recognition	Of which NPEs	Of which exposures with forbearance measures
	Group gross customer loans and advances¹	Of which NPEs	Total exposures with forbearance measures	Of which on 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	64,831	1	1,232	-	3,582	-	459	-
Other financial corporations	136,523	29,279	5,979	2,518	18,281	15,068	892	849
Non-financial corporations	6,424,495	1,527,145	1,385,406	803,315	851,458	762,317	366,048	349,675
Of which: Small and Medium sized Enterprises² (SMEs)	4,834,350	1,199,854	900,616	609,257	714,880	639,270	273,193	261,323
Of which: Commercial real estate²	4,333,316	948,912	889,440	537,308	498,141	429,374	223,618	213,675
Non-financial corporations by sector
Construction	853,776	298,473			152,163
Wholesale and retail trade	1,348,463	405,569			210,918
Accommodation and food service activities	1,053,409	63,378			54,568
Real estate activities	1,284,041	305,526			162,801
Professional, scientific and technical activities	435,585	97,026			59,493
Other sectors	1,449,221	357,173			211,515
Households	6,418,054	2,528,492	1,697,775	1,351,375	1,199,659	1,135,261	499,609	488,672
Of which: Residential mortgage loans²	4,871,501	1,912,090	1,363,925	1,081,850	782,707	726,589	349,607	341,464
Of which: Credit for consumption²	860,536	357,173	205,604	177,597	207,628	206,327	82,072	80,641
Total on-balance sheet	13,043,903	4,084,917	3,090,392	2,157,208	2,072,980	1,912,646	867,008	839,196

1. Excluding loans and advances to central banks and credit institutions.

2. The analysis shown in lines 'non-financial corporations' and 'households' is non-additive across categories as certain customers could be in both categories.

31 December 2018	Gross loans and advances to customers				Provision for impairment and fair value adjustment on initial recognition
	Group gross customer loans and advances³	Of which NPEs	Of which exposures with forbearance measures		Total provision for impairment and fair value adjustment on initial recognition	Of which NPEs	Of which exposures with forbearance measures
	Group gross customer loans and advances³	Of which NPEs	Total exposures with forbearance measures	Of which on 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	70,638	3	1,595	-	3,681	-	468	-
Other financial corporations	167,910	21,338	28,028	5,621	13,378	8,471	3,374	2,076
Non-financial corporations	6,331,381	1,941,479	1,682,997	1,042,164	947,857	864,983	367,235	347,924
Of which: Small and Medium sized Enterprises⁴	4,573,824	1,488,289	1,108,153	793,579	759,484	692,343	280,675	266,736
Of which: Commercial real estate⁴	4,473,159	1,284,145	1,124,078	742,839	569,351	501,842	231,694	216,486
Non-financial corporations by sector
Construction	972,059	382,697			184,282
Wholesale and retail trade	1,431,706	522,151			254,823
Accommodation and food service activities	1,005,691	96,702			58,563
Real estate activities	1,140,596	406,226			174,269
Manufacturing	428,828	134,950			74,884
Other sectors	1,352,501	398,753			201,036
Households	6,588,202	2,805,496	1,924,928	1,486,583	1,271,429	1,208,624	481,701	471,184
Of which: Residential mortgage loans⁴	5,022,617	2,112,152	1,552,445	1,180,705	828,205	774,656	336,651	327,956
Of which: Credit for consumption⁴	891,964	397,747	234,572	195,422	225,505	221,996	79,417	77,930
	13,158,131	4,768,316	3,637,548	2,534,368	2,236,345	2,082,078	852,778	821,184
Loans and advances to customers classified as held for sale	2,851,113	2,749,301	1,492,083	1,437,851	1,697,005	1,646,091	825,977	797,692
Total on-balance sheet	16,009,244	7,517,617	5,129,631	3,972,219	3,933,350	3,728,169	1,678,755	1,618,876

3. Excluding loans and advances to central banks and credit institutions.

4. The analysis shown in lines 'non-financial corporations' and 'households' is non-additive across categories as certain customers could be in both categories.

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. 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. Where an individual provision is material, the fact that a provision has been made is stated. 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 matters.

F.10 Liquidity regulation

The Group has to comply with requirements on the Liquidity Coverage Ratio (LCR) under CRD IV/CRR (as supplemented by the Commission Delegated Regulation (EU) No 2015/61 which prescribes the criteria for liquid assets and methods of calculation as from 1 October 2015 and the Commission Implementing Regulation (EU) No 2016/322 which prescribes supervisory reporting requirements and is applicable since 10 September 2016). It also monitors its position against the Net Stable Funding Ratio (NSFR) as proposed under Basel III. 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.

In October 2014, the Basel Committee on Banking Supervision proposed the methodology for calculating the NSFR. It is noted that the NSFR will become a regulatory indicator when Capital Requirements Regulation 2 (CRR2) is enforced with the limit set at 100%.

As at 30 September 2019 the Group was in compliance with all regulatory liquidity requirements. As at 30 September 2019 the LCR stood at 218% for the Group (compared to 231% at 31 December 2018) and was in compliance with the minimum regulatory requirement of 100% applicable as from 1 January 2018. The main reason for the reduction in the LCR ratio from 31 December 2018 to 30 September 2019 is the change in the tenor and mix of deposits. As at 30 September 2019 the Group's NSFR, on the basis of the Basel ΙΙΙ standards, was 122% (compared to 119% at 31 December 2018).

F.11 Liquidity reserves

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

Composition of the liquidity reserves	30 September 2019			31 December 2018
	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	4,253,608	4,253,608	-	4,447,511	4,447,511	-
Nostro and overnight placements with banks	60,645	-	-	281,383	-	-
Other placements with banks	144,644	-	-	-	-	-
Liquid investments	1,233,604	1,146,394	128,312	881,091	929,380	93,165
Available ECB Buffer	1,184,708	-	-	108,374	-	-
Total	6,877,209	5,400,002	128,312	5,718,359	5,376,891	93,165

Internal Liquidity Reserves show the total liquid assets as defined in BOC PCL's Liquidity Policy. Liquidity reserves as per LCR Delegated Regulation (EU) 2015/61 show 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 collateralised assets in the ECB pool are not LCR eligible but only ECB eligible.

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.

With the exception of certain specified provisions, the CRR and Capital Requirements Directive IV (CRD IV) came into effect on 1 January 2014. 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. CRR introduced significant changes in the prudential regulatory regime applicable to banks including amended minimum capital adequacy ratios, changes to the definition of capital and the calculation of risk weighted assets and the introduction of new measures relating to leverage, liquidity and funding. CRR permits a transitional period for certain of the enhanced capital requirements and certain other measures, which are largely fully effective in 2019.

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 30 September 2019 stands at 15.2% and the total capital ratio at 18.2% on a transitional basis. The ratios as at 30 September 2019 includes unreviewed profits for the nine months ended 30 September 2019.

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 pre-notification received in September 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. The Group's phased-in CET1 capital ratio is expected to be 11.0%, comprising a 4.5% Pillar I requirement, a 3.0% Pillar II requirement, 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%. The Group's Total Capital requirement is expected to be 14.5%, comprising an 8.0% Pillar I requirement, a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 1.0%. The new SREP requirements are expected to be effective from January 2020 and remain subject to ECB final confirmation.

Following the annual Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2018 and based on the final 2018 SREP decision received on 27 March 2019, the Group's minimum phased-in CET1 capital ratio and Total capital ratio for 2019 remained unchanged when ignoring the phasing-in of the Capital Conservation Buffer (CCB) and the Other Systemically Important Institution Buffer. The Group's phased-in CET1 capital ratio requirement is 10.5%, comprising of a 4.5% Pillar I requirement, a 3.0% Pillar II requirement, the CCB of 2.5% and the Other Systemically Important Institution Buffer of 0.5%. The Group's Total capital ratio requirement is 14.0%, comprising of a 8.0% Pillar I requirement, a 3.0% Pillar II requirement, the Capital Conservation Buffer of 2.5% and the Other Systemically Important Institution Buffer of 0.5%. The final 2018 SREP decision applies from 1 April 2019. The ECB has also provided non-public guidance for an additional Pillar II CET1 buffer.

The Group's minimum phased-in CET1 capital ratio for 2018 was 9.375%, comprising of a 4.50% Pillar I requirement, a 3.00% Pillar II requirement and the CCB of 1.875%. The ECB had also provided non-public guidance for an additional Pillar II CET1 buffer. The overall Total Capital Ratio Requirement for 2018 was 12.875% comprising of 8.00% 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 3.00% Pillar II requirement (in the form of CET1) and the CCB of 1.875% applicable for 2018.

The above minimum ratios apply for both, BOC PCL and the Group. BOC PCL is 100% subsidiary of the Company and its principal activities are the provision of banking, financial services and management and disposal of property predominately acquired in exchange of debt.

The capital position of the Group and BOC PCL at 30 September 2019 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.

Based on the provisions of the Macroprudential Oversight of Institutions Law of 2015 which came into force on 1 January 2016, the CBC is the designated Authority responsible for setting the macroprudential buffers that derive from the CRD IV.

In accordance with the provisions of the above law, the CBC sets, on a quarterly basis, the Countercyclical Capital Buffer (CCyB) level in accordance with the methodology described in this law. The CCyB is effective as from 1 January 2016 and is determined for all the countries in the European Economic Area (EEA) by their local competent authorities ahead of the beginning of each quarter. The CBC has set the level of the CCyB for Cyprus at 0% for the years 2018 and 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. The Group has been designated as an O-SII and the CBC set the O-SII buffer for the Group at 2.0%. 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.

The Capital Conservation Buffer (CCB) was gradually phased-in at 0.625% in 2016, 1.25% in 2017, 1.875% in 2018 and has been fully implemented on 1 January 2019 at 2.5%.

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. Although the precise calibration and ultimate designation of the Group's MREL has not yet been finalised, BOC PCL is monitoring developments in this area very closely.

The insurance subsidiaries of the Group comply with the requirements of the Superintendent of Insurance including the minimum solvency ratio. The regulated investment firms of the Group comply with the regulatory capital requirements of the CySEC laws and regulations.

F.12.1 Capital position

The capital position of the Group and the BOC PCL under CRD IV/CRR basis (after applying the transitional arrangements) is presented below:

Regulatory capital	Group		BOC PCL
	30 September 2019	31 December 2018⁵	30 September 2019	31 December 2018
	€000	€000	€000	€000
Transitional Common Equity Tier 1 (CET1)^6&7	2,097,985	1,864,000	2,120,751	1,861,098
Transitional Additional Tier 1 capital (AT1)	220,000	220,000	220,000	220,000
Tier 2 capital (T2)	187,780	212,000	250,000	250,000
Transitional total regulatory capital⁷	2,505,765	2,296,000	2,590,751	2,331,098
Risk weighted assets - credit risk⁸	12,219,112	13,832,589	12,247,267	13,820,385
Risk weighted assets - market risk	-	2,182	-	-
Risk weighted assets - operational risk	1,538,588	1,538,588	1,411,788	1,411,788
Total risk weighted assets	13,757,700	15,373,359	13,659,055	15,232,173

	%	%	%	%
Transitional Common Equity Tier 1 ratio	15.2	12.1	15.5	12.2
Transitional total capital ratio	18.2	14.9	19.0	15.3

Fully loaded	Group		BOC PCL
	30 September 2019⁹	31 December 2018¹⁰	30 September 2019⁹	31 December 2018¹⁰
	€000	€000	€000	€000
Common Equity Tier 1 ratio (%)	13.6	10.1	13.9	10.2
Total capital ratio (%)	16.8	13.2	17.4	13.4

During the period ended 30 September 2019, the CET1 was negatively affected by the phasing-in of transitional adjustments, mainly the IFRS 9, and it was positively affected by the profit¹¹ for the period of €123,832 thousand, in line with the prudential consolidation, primarily driven by legislative changes. Moreover, on 1 March 2019 the Cyprus Parliament adopted legislative amendments allowing for the conversion of deferred tax assets into deferred tax credits for regulatory purposes, under the CRR. For more details refer to Note 11 of the Consolidated Condensed Interim Financial Statements for the period ended 30 June 2019.

5. As per the Annual Report 2018 and Pillar 3 Disclosures 2018

6. CET1 includes regulatory deductions, comprising intangible assets amounting to €43,383 thousand as at 30 September 2019 (31 December 2018: €43,364 thousand). As at 31 December 2018 CET1 included regulatory deductions comprising deferred tax assets amounting to €163,082 thousand.

7. Following the Regulation (EU) 2016/445 of the ECB of 14 March 2016 on the exercise of options and discretions available in Union law (ECB/2016/4), the deferred tax asset was phasing-in for 5 years, with effect as from the reporting of 31 December 2016, and fully phased-in on 1 January 2019.

8. Includes Credit Valuation Adjustments (CVA).

9. IFRS 9 fully loaded.

10. IFRS 9 & Deferred Tax Asset fully loaded.

11. No permission has been requested by the ECB for the inclusion of interim profits in capital regulatory submissions. The regulatory capital and the respective ratios as at 30 September 2019 include unreviewed profits for the nine months ended 30 September 2019.

F.12.2 Overview of RWA

		RWAs		Minimum capital requirements
		30 September 2019	30 June 2019	30 September 2019
		€000	€000	€000
1	Credit risk (excluding counterparty credit risk (CCR))	11,837,609	11,974,850	947,009
2	Of which the Standardised Approach	11,837,609	11,974,850	947,009
6	CCR	16,583	19,194	1,327
7	Of which mark to market	11,795	12,881	944
11	Of which risk exposure amount for contributions to the default fund of a CCP	-	-	-
12	Of which Credit Valuation Adjustment (CVA)	4,788	6,313	383
13	Settlement risk	-	-	-
14	Securitisation exposures in the banking book (after the cap)	49,700	52,504	3,976
18	Of which Standardised Approach	49,700	52,504	3,976
19	Market risk	-	61,712	-
20	Of which the Standardised Approach	-	61,712	-
22	Large exposures	-	-	-
23	Operational risk	1,538,588	1,538,588	123,087
25	Of which Standardised Approach	1,538,588	1,538,588	123,087
27	Amounts below the thresholds for deduction (subject to 250% risk weight)	315,220	315,220	25,218
29	Total	13,757,700	13,962,068	1,100,617

The overall decrease in total RWA was mainly driven from 'Credit Risk ((excluding Counterparty Credit Risk (CCR))' observed in line 1 from the (a) the improved overall RW efficiency of customer advances mainly from curing and repayments/settlements in regulatory high risk and NPEs which attract higher RWs, and (b) the decreased balance sheet values of properties held for sale and other assets. Further analysis can be observed in table F.12.3 below. The decrease in CCR RWA observed in line 6 is the result of decreased derivative and securities financing transactions exposure values. The decrease in line 19 results from the reversal of the forex position created from the sale of Helix and Velocity portfolio of loans in June 2019. The decrease in RWA in line 14, Securitisation exposures in the banking book, is the result of the decreased balance sheet position held in the Helix transaction.

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.

	30 September 2019		31 December 2018
	RWAs and RWA density		RWAs and RWA density
Exposure classes	RWAs	RWA density	RWAs	RWA density
	€000	%	€000	%
Central governments or central banks	382,627	6.8%	333,243	6.1%
Regional government or local authorities	1,395	2.0%	701	1.2%
Public sector entities	8	0,0%	7	0.0%
Multilateral development banks	-	0.0%	-	0.0%
International organisations	-	0.0%	-	0.0%
Institutions	197,146	28.9%	177,904	29.8%
Corporates	3,294,637	99.4%	3,016,593	98.8%
Retail	971,652	71.1%	987,312	71.1%
Secured by mortgages on immovable property	1,160,936	37.5%	1,077,148	37.4%
Exposures in default	2,293,058	108.9%	3,695,591	110.8%
Higher-risk categories	1,452,932	150.0%	2,032,341	150.0%
Covered bonds	16,776	10.0%	14,153	10.0%
Collective investment undertakings (CIUs)	191	100.0%	172	100.0%
Equity	330,164	234.1%	254,220	229.9%
Other items	2,051,307	93.7%	2,220,345	92.4%
Total	12,152,829	60.5%	13,809,730	65.6%

The main driver behind the overall decrease in the RWA density is the sale of projects Helix and Velocity whereby the exposures in exposure classes 'Exposures in default', 'Higher-risk categories' and 'Other items' which carry high risk weights materially decreased. On 1 March 2019 the Cyprus Parliament adopted legislative amendments allowing for the conversion of deferred tax assets into deferred tax credits for regulatory capital purposes, under the CRR. The law amendment increased the RWA density in exposure classes 'Central governments or central banks' which include the deferred tax asset amounts converted to deferred tax credits carrying a Risk Weight of 100% and 'Equity' which include the FSE amounts carrying a Risk Weight of 250%. The law amendment and the increased exposure values from Balance Sheet line 'Other assets' that take a 100% Risk Weight included in exposure class 'Other items' resulted in the overall increased RWA density. The slight decrease in the RWA density at individual class level observed in 'Institutions' derives from improved ratings and decreases in residual maturities whilst the RWA increased from increased carrying amounts with 'Institutions'. New lending and curing, mainly to customers, which do not benefit from the SME supporting factor under article 501 of the CRR led to increased RWA and RWA density in exposure class 'Corporates'. The decrease observed in the RWA density in "Exposures in default' is the result of more eligible real estate collateral covering the NPE and increased credit adjustments ratio for their unsecured part.

The RWA density of all other exposure classes remained stable.

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:

	30 September 2019	31 December 2018
Transitional basis	€000	€000
Capital measure (Tier 1)	2,317,985	2,084,000
Total exposure measure	21,088,020	22,052,298
Leverage ratio (%)	10.99%	9.45%

IFRS 9 fully loaded
Capital measure (Tier 1)	2,055,530	1,745,473
Total exposure measure	20,871,880	21,893,785
Leverage ratio (%)	9.85%	7.97%

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

For the 'Capital measure' the increase in Tier1 is primarily driven by the tax legislation amendments relating to the conversion of deferred tax assets into deferred tax credits.

The leverage ratio, including the profit (prudential consolidation) of €123,832 thousand for the nine month period ended 30 September 2019, is calculated at 10.99% on a transitional basis and 9.85% 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 2018 were approved by the Board of Directors and submitted to the ECB on 25 April 2019.

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 ICAAP process demonstrates that the Group has sufficient capital under both the base case and stress scenarios under the Normative internal perspective. Under the Economic internal perspective there are shortfalls in the adverse scenario, which however can be largely neutralised by the available mitigants.

The Group also undertakes a quarterly review for the ILAAP through quarterly stress tests submitted to the ALCO and RC. During the quarterly review, the liquidity risk drivers are assessed and, if needed, the stress test assumptions are amended accordingly. 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. Following the annual Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2019 , the Group received a pre-notification in September 2019 that 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.

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 1, Pillar II requirement or the combined buffer requirements), and therefore cannot be used twice. Following the annual Supervisory Review and Evaluation Process (SREP) performed by the ECB in 2019 and based on the pre-notification received in September 2019, the new provisions are expected to be effective from January 2020 and remain subject to ECB final confirmation.

The Group has been informed that it has been selected to participate in the ECB SREP stress test of 2020 which is expected to be launched by end of January 2020 and be concluded by end of July 2020.

G. Definitions & Explanations

Reconciliations

1. Reconciliation of Gross loans and advances to customers

	30 September 2019	31 December 2018
	€000	€000
Gross loans and advances to customers (as defined below)	13,034,814	15,900,427
Reconciling items:
Fair value adjustment on initial recognition (Section F.4)*	(277,900)	(322,375)
Loans and advances to customers classified as non-current assets held for sale	-	(2,711,960)
Fair value adjustment on initial recognition on loans and advances to customers classified as non-current assets held for sale	-	(139,153)
Reclassification between gross loans and allowance for expected credit losses on loans and advances to customers classified as held for sale	-	99,000
Loans and advances to customers measured at fair value through profit and loss (Section F.3)	(370,510)	(395,572)
Gross loans and advances to customers at amortised cost as per section F.3	12,386,404	12,430,367

* Including fair value adjustment on initial recognition of loans and advances to customers measured at fair value through profit and loss amounting to €59,043 thousand (31 December 2018: €60,326 thousand).

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

	30 September 2019	31 December 2018
	€000	€000
Allowance for expected credit losses on loans and advances to customers (as defined below)	2,086,268	3,852,218
Reconciling items:
Fair value adjustment on initial recognition*	(277,900)	(322,375)
Loans and advances to customers classified as non-current assets held for sale	-	(1,557,852)
Fair value adjustment on initial recognition on loans and advances to customers classified as non-current assets held for sale	-	(139,153)
Reclassification between gross loans and allowance for expected credit losses on loans and advances to customers classified as held for sale	-	99,000
Provisions for financial guarantees and commitments	(22,377)	(27,685)
Allowance for ECL of loans and advances to customers as per section F.3	1,785,991	1,904,153

3. Reconciliation of NPEs

	30 September 2019	31 December 2018
	€000	€000
NPEs (as defined below and as per Section F.8)	4,084,917	7,418,613
Reconciling items:
Loans and advances to customers classified as non-current assets held for sale	-	(2,613,603)
Fair value adjustment on initial recognition on loans and advances to customers classified as non-current assets held for sale	-	(135,697)
Reclassification between gross loans and allowance for expected credit losses on loans and advances to customers classified as held for sale	-	99,000
Loans and advances to customers measured at fair value through profit and loss (NPE)	(144,288)	(160,907)
POCI (NPE)	(568,589)	(691,815)
Stage 3 loans and advances to customers as per section F.5	3,372,040	3,915,591
NPE ratio
NPE ratio
NPEs (as per table above) (€000)	4,084,918	7,418,613
Gross loans and advances to customers (as per table above) (€000)	13,034,814	15,900,427
Ratio of NPE/Gross loans (%)	31.3%	46.7%

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:

	Nine months ended 30 September
	2019	2018 (represented)
1.1. Reconciliation of Net interest income	€000	€000
Net interest income as per the underlying basis	260,047	249,744
Reclassifications for:
Net interest income relating to the NPE sale (Helix), disclosed under non-recurring items within 'Profit/(loss) relating to NPE sale (Helix)' under the underlying basis	33,962	66,315
Net interest income as per the Unaudited Interim Consolidated Income Statement	294,009	316,059

Net interest income (annualised)	347,682	333,907

1.2. Interest earning assets	30 September 2019	30 June 2019	31 March 2019	31 December 2018
1.2. Interest earning assets	€000	€000	€000	€000
Cash and balances with central banks	4,412,542	5,261,896	3,913,391	4,610,491
Loans and advances to banks	427,966	403,041	448,043	472,532
Loans and advances to customers	10,970,923	10,949,002	10,954,529	10,921,786
Loans and advances to customers held for sale	-	5,891	1,108,440	1,154,108
Investments
Debt securities	1,808,891	1,720,231	1,556,668	1,364,743
Less: Investment which is not interest bearing	(22,345)	(13,563)	(10,181)	(8,606)
Total interest earning assets	17,597,977	18,326,498	17,970,890	18,515,054

1.3. Quarterly average interest earning assets (€000)
- as at 30 September 2019	18,102,605
- as at 30 September 2018	18,109,088

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:

30 September

2019

30 June

2019

31 March

2019

31 December

2018

€000

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

21,114,340

21,887,186

21,745,438

22,075,271

	30 September 2019	30 September 2018 (represented)
	€000	€000
Annualised operating profit	251,676	278,323
Quarterly average total assets	21,705,559	21,575,953

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')	Comprise (i) allowance for expected credit losses (ECL) on loans and advances to customers, (ii) the 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) accumulated fair value adjustments on loans and advances to customers classified 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.

CET1 capital ratio (transitional basis)	CET1 capital ratio (transitional basis) is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013.

CET1 fully loaded (FL)	The CET1 fully loaded (FL) ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013.

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 18 November 2019.
ECB	European Central Bank

Gross loans	Gross loans are reported before the fair value adjustment on initial recognition relating to loans acquired from Laiki Bank (calculated as the difference between the outstanding contractual amount and the fair value of loans acquired) amounting to €278 mn at 30 September 2019 (compared to €290 mn at 30 June 2019 and €462 mn at 31 December 2018). Additionally, gross loans (i) include loans and advances to customers measured at fair value through profit and loss of €430 mn at 30 September 2019 (compared to €454 mn at 30 June 2019 and €456 mn as at 31 December 2018), and (ii) are reported after the reclassification between gross loans and expected credit losses on loans and advances to customers classified as a disposal group held for sale of Nil as at 30 September 2019 and 30 June 2019 (compared to €99 mn at 31 December 2018).

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.

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 Central Bank of Cyprus. The Bank is the single largest credit provider in Cyprus with a market share of 40.8% at 30 September 2019, compared to 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, 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 European Banking Authority (EBA) is working on finalising the NSFR and enforcing it as a regulatory ratio under CRR2, currently expected 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 subsidiaries and 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 reporting standards on forbearance and non-performing exposures (NPEs), published in 2014, ECB's Guidance to Banks on Non-Performing Loans published in March 2017 and EBA Guidelines on management of non-performing and forborne exposures published in October 2018 and applicable from June 2019, a loan is considered an NPE if: (i) the debtor is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due amount or of the number of days past due, or (ii) the exposures are impaired, or (iii) there are material exposures which are more than 90 days past due, or (iv) there are performing forborne exposures under probation for which additional forbearance measures are extended, or (v) there are performing forborne exposures under probation that present more than 30 days past due within the probation period. The NPEs are reported before the deduction of allowance for expected loan credit losses (as defined).

Non-recurring items	Non-recurring items as presented in the 'Interim Condensed Consolidated Income Statement - Underlying basis' relate to: (i) advisory and other restructuring costs, (ii) discontinued operations (UK sale), (iii) profit/(loss) relating to NPE sale (Helix), (iv) loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates, 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).

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).

Pro forma for CNP	Includes the impact from the completion of the sale of the investment in CNP

Pro forma for CNP and VEP	Includes the impact from the completion of the sale of the investment in CNP and the Voluntary Staff Exit Plan (VEP)

Pro forma for Helix	Includes the impact from the completion of Project Helix, as well as the impact from the agreement for the sale of a portfolio of retail unsecured NPEs, with gross book value €33 mn as at 31 March 2019, known as Project Velocity.

Profit/(loss) after tax and before non-recurring items	Excludes non-recurring items (as defined)

Profit/(loss) after tax - Organic	Profit/(loss) after tax and before 'non-recurring items' as defined, except for the "Advisory and other restructuring costs - excluding discontinued operations and NPE sale (Helix)".

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, 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.



Total expenses	Total expenses comprise staff costs, other operating expenses and the special levy and contribution to the Single Resolution Fund. It does not include 'advisory and other restructuring costs-excluding discontinued operations and NPE sale (Helix)' or any restructuring costs relating to NPE sale (Helix). 'Advisory and other restructuring costs-excluding discontinued operations and NPE sale (Helix)' for 3Q2019 were €9 mn, compared to €5 mn for 2Q2019. 'Advisory and other restructuring costs-excluding discontinued operations and NPE sale (Helix)' for 9M2019 were €21 mn, compared to €26 mn for 9M2018. Restructuring costs relating to NPE sale (Helix) for 3Q2019 were €1 mn, compared to €7 mn for 2Q2019. Restructuring costs relating to NPE sale (Helix) for 9M2019 were €9 mn, compared to €17 mn for 9M2018.

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, regulatory and other matters plus (impairments)/reversal of impairments of other financial and non-financial assets.

Underlying basis	Statutory basis adjusted for certain items as 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 nine months ended 30 September 2019.

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 nine months ended 30 September 2019. 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 2018, upon which the auditors have given an unqualified report, were published on 28 March 2019 and have been annexed to the annual return and delivered to the Registrar of Companies of Ireland. The Board of Directors approved the Group financial results for the nine months ended 30 September 2019 on 25 November 2019.

Statutory basis: Statutory information is set out on pages 22-52. However, a number of factors have had a significant effect on the comparability of the Group's financial position and results. Accordingly, the results are also presented on an underlying basis.

Underlying basis: The statutory results are adjusted for certain items (as described on pages 28-29) to allow a comparison of the Group's underlying performance, as set out on pages 4-5.

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 nine months ended 30 September 2019 have been posted on the Group's website www.bankofcyprus.com (Investor Relations/Financial Results).

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

The Group Financial Results for the nine months ended 30 September 2019 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 108 branches in Cyprus, of which 11 operate as cash offices. Bank of Cyprus also has representative offices in Russia, Ukraine and China. The Bank of Cyprus Group employs 4,134* staff worldwide. At 30 September 2019, the Group's Total Assets amounted to €21.1 bn and Total Equity was €2.5 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.

*The Bank of Cyprus Group employed 4,134 staff worldwide as at 30 September 2019. The number of staff has been reduced by c.470 employees following the completion of a voluntary staff exit plan in October 2019.

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

END

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