Half-year Report -4

RNS Number : 3563K

Bank of Cyprus Holdings PLC

01 September 2021

 

BANK OF CYPRUS HOLDINGS GROUP  

Definitions and explanations of Alternative Performance Measures Disclosures

DEFINITIONS

Allowance for expected loan credit losses Basic earnings/(losses) after tax and before non-recurring items per share attributable to the owners of the Company (€ cent)		Allowance for expected loan credit losses comprises: (i) allowance for expected credit losses (ECL) on loans and advances to customers (including allowance for expected credit losses on loans and advances to customers classified as held for sale) , (ii) the residual fair value adjustment on initial recognition of loans and advances to customers (including residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale), (iii) allowance for expected credit losses for off-balance sheet exposures ( financial guarantees and commitments) disclosed on the balance sheet within other liabilities and (iv) the aggregate fair value adjustment on loans and advances to customers classified and measured at FVPL. Basic earnings/(losses) after tax and before non-recurring items per share attributable to the owners of the Company ( € cent) is the Profit/(loss) after tax and before non-recurring items (as defined below)  (attributable to the owners of the Company) divided by the weighted average number of shares in issue during the period, excluding treasury shares.
Cost to income ratio		Cost to income ratio is calculated as the total staff costs (excluding 'Restructuring costs - Voluntary Staff Exit Plan (VEP)' if applicable) (on an underlying basis as reconciled in the table further below), special levy on deposits and other levies/contributions (on an underlying basis as reconciled in the table further below), and other operating expenses (excluding 'Advisory and other restructuring costs-organic', any restructuring costs relating to NPE sales, and provisions for litigation, claims, regulatory and other matters) (on an underlying basis as reconciled in the table further below) divided by total income as per the underlying basis (as defined below).
Digitally engaged customers ratio		This is the ratio of digitally engaged individual customers to the total number of individual customers. Digitally engaged customers are the individuals who use the digital channels of BOC PCL (mobile banking app, browser and ATMs) to perform banking transactions, as well as digital enablers such as a bank-issued card to perform online card purchases, based on an internally developed scorecard.
Gross loans		Gross Loans comprises: (i) gross loans and advances to customers measured at amortised cost before the residual fair value adjustment on initial recognition (including loans and advances to customers classified as held for sale) and (ii) loans and advances to customers classified and measured at FVPL adjusted for the aggregate fair value adjustment. Gross loans are reported before the residual fair value adjustment on initial recognition relating mainly to loans acquired from Laiki Bank (calculated as the difference between the outstanding contractual amount and the fair value of loans acquired).
Interest earning assets		Interest earning assets include: cash and balances with central banks (including cash and balances with central banks classified as held for sale), plus loans and advances to banks, plus net loans and advances to customers (including loans and advances to customers classified as held for sale) plus deferred consideration receivable ('DPP') included within prepayments, accrued income and other assets (as per Note 18 of the Consolidated Condensed Interim Financial Statements), plus investments (excluding equities and mutual funds).
Leverage ratio		The leverage ratio is the ratio of tangible total equity (including Other equity instruments) to total assets as presented on the balance sheet. Tangible total equity comprises of equity attributable to the owners of the Company minus intangible assets.
Loan credit losses		Loan credit losses comprise: (i) credit losses to cover credit risk on loans and advances to customers, (ii) net (losses)/gains on derecognition of financial assets measured at amortised cost and (iii) net (losses)/gains on loans and advances to customers at FVPL, for the period.
Loan credit losses charge (cost of risk)		Loan credit losses charge (cost of risk) (year to date) is calculated as the loan credit losses (as defined) (annualised based on year to date days) divided by the average gross loans (as defined). The average of gross loans is calculated as the average of the opening balance and the closing balance for the period.
Net fee and commission income over total income		Fee and commission income less fee and commission expense divided by total income (as defined).
Net Interest Margin		Net interest margin is calculated as the net interest income (per the underlying basis) (annualised based on year to date days) divided by the quarterly average interest earning assets (as defined). Quarterly average interest earning assets exclude interest earning assets of any discontinued operations at each quarter end, if applicable.
Net loans and advances to customers		Net loans and advances to customers comprise gross loans (as defined) net of allowance for expected loan credit losses (as defined, but excluding allowance for expected credit losses on off-balance sheet exposures disclosed on the balance sheet within other liabilities).
Net loans to deposits ratio		Net loans to deposits ratio is calculated as the gross loans (as defined) net of allowance for expected loan credit losses (as defined), divided by customer deposits.
New lending		New lending includes the disbursed amounts of the new and existing non-revolving facilities (excluding forborne or re-negotiated accounts) as well as the average year to date change (if positive) of the current accounts and overdraft facilities between the balance at the beginning of the period and the end of the period. Recoveries are excluded from this calculation since their overdraft movement relates mostly to accrued interest and not to new lending.
Non-performing exposures (NPEs)		The definition of NPEs is included in 'Additional Risk and Capital Management Disclosures' section of the Interim Financial Report 2021. Exposures include all on and off balance sheet exposures, except those held for trading, and are categorized as such for their entire amount without taking into account the existence of collateral. The NPEs are reported before the deduction of allowance for expected credit losses (as defined).
Non-recurring items		Non-recurring items as presented in the 'Consolidated Condensed Interim Income Statement on the underlying basis' relate to: (i) Advisory and other restructuring costs - organic and (ii) Provisions/net loss relating to NPE sales, including restructuring expenses.
NPE coverage ratio		The NPE coverage ratio is calculated as the allowance for expected loan credit losses (as defined) over NPEs (as defined).
NPE ratio		The NPE ratio is calculated as the NPEs (as defined) divided by gross loans (as defined).
Operating profit		Operating profit (on an underlying basis) comprises profit before loan credit losses (as defined), impairments of other financial and non-financial assets, provisions for litigation, claims, regulatory and other matters, tax, (profit)/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 (based on year to date days) operating profit (on an underlying basis) (as defined) divided by the quarterly average of total assets for the relevant period. Average total assets exclude total assets of discontinued operations at each quarter end, if applicable.
Profit/(loss) after tax - organic (attributable to the owners of the Company)	Profit/(loss) after tax - organic (attributable to the owners of the Company) is the profit/(loss) after tax and before non-recurring items (as defined above) (attributable to the owners of the Company), except for the 'Advisory and other restructuring costs - organic'.
Total income	Total income per the underlying basis comprises the total of net interest income, net fee and commission income , net foreign exchange gains, net (losses)/gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates ( excluding net (losses)/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, net gains on disposal of stock of property and other income (per the underlying basis) . A reconciliation of these amounts between the statutory basis and the underlying basis is disclosed in the Interim Management Report under section 'Group financial results per the underlying basis'.

RECONCILIATIONS

For the purpose of the 'Definitions and explanations of Alternative Performance Measures Disclosures', reference to 'Note' relates to the respective note in the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2021.

1.  (a) Reconciliation of Gross loans and advances to customers

	30 June 2021	31 December 2020
	€000	€000
Gross loans and advances to customers as per the underlying basis (as defined above)	10,893,094	12,261,40 4
Reconciling items:
Residual fair value adjustment on initial recognition (Note 29.4)	(145,200)	(146,60 2 )
Loans and advances to customers classified as held for sale (Note 29.3)	-	(1,341,255)
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)	-	(46,675)
Loans and advances to customers measured at fair value through profit or loss (Note 16)	(292,119)	(289,861)
Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss	(39,559)	(36,408)
Gross loans and advances to customers at amortised cost as per the Consolidated Condensed Interim Financial Statements (Note 16)	10,416,216	10,400,603

1.  (b) Reconciliation of Loans and advances to customers classified as held for sale

	31 December 2020
	€000
Loans and advances to customers classified as held for sale as per the underlying basis	1,387,930
Reconciling items:
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)	(46,675)
Loans and advances to customers classified as held for sale as per the Consolidated Condensed Interim Financial Statements (Note 19)	1,341,255

1.  (c) Reconciliation of Gross book value of loans and advances to customers of Project Helix 2

	30 June 2021
	€000
Gross book value of loans and advances to customers of Project Helix 2 as per the underlying basis	1,331,084
Reconciling items:
Residual fair value adjustment on initial recognition on loans and advances to customers of Project Helix 2	(44,239)
Gross book value of loans and advances to customers of Project Helix 2 as per the Consolidated Condensed Interim Financial Statements (Note 29.4)	1,286,845

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

	30 June 2021	31 December 2020
	€000	€000
Allowance for expected credit losses on loans and advances to customers (ECL) as per the underlying basis (as defined above)	947,453	1,901,97 8
Reconciling items:
Residual fair value adjustment on initial recognition (Note 29.4)	(145,200)	(146,60 2 )
Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss	(39,559)	(36,408)
Allowance for expected credit losses on loans and advances to customers classified as held for sale (Note 19)	-	(848,218)
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)	-	(46,675)
Provisions for financial guarantees and commitments (Note 23)	(20,901)	(19,658)
Allowance for ECL for impairment of loans and advances to customers as per the Consolidated Condensed Interim Financial Statements (Note 16)	741,793	804,417

2.  (b) Reconciliation of Allowance for expected credit losses on loans and advances to customers classified as held for sale (ECL)

	31 December 2020
	€000
Allowance for expected credit losses on loans and advances to customers (ECL) classified as held for sale as per the underlying basis	894,893
Reconciling items:
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale (Note 29.4)	(46,675)
Allowance for ECL for impairment of loans and advances to customers classified as held for sale as per the Consolidated Condensed Interim Financial Statements (Note 19)	848,218

3.  Reconciliation of NPEs

	30 June 2021	31 December 2020
	€000	€000
NPEs as per the underlying basis (as defined above)	1,588,532	3,085,646
Reconciling items:
Loans and advances to customers ( NPEs ) classified as held for sale (Note 1 below)	-	(1,312,16 5 )
Residual fair value adjustment on initial recognition on loans and advances to customers ( NPEs ) classified as held for sale (Note 2 below)	-	(47,01 1 )
Loans and advances to customers measured at fair value through profit or loss (NPEs)	(121,058)	(118,479)
POCI (NPEs) (Note 3 below)	(212,162)	(227,065)
Residual fair value adjustment on initial recognition on loans and advances to customers (NPEs) classified as Stage 3 (Note 29.4)	(9,159)	(9,37 6 )
Stage 3 gross loans and advances to customers at amortised cost as per the Consolidated Condensed Interim Financial Statements (Note 29.4)	1,246,153	1,371,550
NPE ratio
NPEs (as per table above) ( €000)	1,588,532	3,085,646
Gross loans and advances to customers (as per table above) (€000)	10,893,094	12,261,40 4
Ratio of NPE/Gross loans (%)	14.6%	25.2%

3.  Reconciliation of NPEs ( continued)

Note 1 : As at 30 June 2021, there were no loans and advances to customers classified as held for sale. As at 31 December 2020, gross loans at amortised cost after residual fair value adjustment on initial recognition classified as held for sale include an amount of €1,130,937 thousand Stage 3 loans and an amount of €181,228 thousand POCI - Stage 3 loans (out of a total of €181,984 thousand POCI loans), as disclosed in Note 29.4 of the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2021.

Note 2 : As at 30 June 2021, there were no loans and advances to customers classified as held for sale. As at 31 December 2020, the residual fair value adjustment on initial recognition of loans and advances to customers classified as held for sale includes an amount of €7,650 thousand for Stage 3 loans and an amount of €39,361 thousand for POCI - Stage 3 loans (out of a total of €39 ,381 thousand POCI loans), as disclosed in Note 29.4 of the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2021.

Note 3 : Gross loans and advances to customers at amortised cost before residual fair value adjustment on initial recognition include an amount of €212,162 thousand POCI - Stage 3 loans (out of a total of €304,118 thousand POCI loans) (31 December 2020: €227,065 thousand POCI - Stage 3 loans (out of a total of €335,852 thousand POCI loans)) as disclosed in Note 29.4 of the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2021.

4.  Reconciliation of Gross Loans - Pro forma

	31 December 2020
	€000
Gross Loans (as per table 1 (a) above)	12,261,40 4
Reconciling items:
Gross loans and advances to customers classified as held for sale ( Project Helix 2, Portfolios A and B ) (Note 19 - Disposal Group 1 and 2)	(1,309,206)
Residual fair value adjustment on initial recognition on loans and advances to customers classified as held for sale ( Project Helix 2, Portfolios A and B )	(44,947)
Gross loans and advances to customers - pro forma	10,907,251

5.  Reconciliation of NPEs - Pro forma

	31 December 2020
	€000
NPEs (as per table 3 above)	3,085,646
Reconciling items:
Gross loans and advances to customers ( NPEs ) classified as held for sale ( Project Helix 2, Portfolios A and B ) (Note 1 below)	(1,280,391)
Residual fair value adjustment on initial recognition on loans and advances to customers ( NPEs ) classified as held for sale ( Project Helix 2, Portfolios A and B )	(45,269)
NPEs - pro forma	1,759,986

NPE ratio - Pro forma	31 December 2020
NPEs -  Pro forma (as per table above) ( €000)	1,759,986
Gross loans and advances to customers  - Pro forma (as per table above) (€000)	10,907,251
Ratio of NPE/Gross loans - Pro forma (%)	16.1%

5.  Reconciliation of NPEs - Pro forma (continued)

Note 1 : Gross loans at amortised cost after residual fair value adjustment on initial recognition classified as held for sale as at 31 December 2020, include an amount of €1,106,816 thousand Stage 3 loans and an amount of €173,575 thousand POCI - Stage 3 loans for project Helix 2, Portfolios A and B (out of a total €1,130,937 thousand Stage 3 loans classified as held for sale as disclosed in Note 29.4 of the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2021 and €181,228 thousand POCI - stage 3 loans classified as held for sale as disclosed in Note 1 of Table 3 in these ' Definitions and explanations of Alternative Performance Measures Disclosures ') .

6.  Reconciliation of Loan credit losses

	Six months ended 30 June
	2021	2020
	€000	€000
Loan credit losses as per the underlying basis	35,237	87,425
Reconciling items:
Loan credit losses relating to NPE sales, disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales, including restructuring expenses' under the underlying basis	15,210	90,662
	50,447	178,087
Loan credit losses (as defined) are reconciled to the statutory basis as follows:
Credit losses to cover credit risk on loans and advances to customers (Note 10)	48,349	183,711
Net gains on derecognition of financial assets measured at amortised cost (Interim Consolidated Income Statement)	(1,053)	(2,617)
Net losses/(gains) on loans and advances to customers at FVPL (Note 8)	3,151	(3,007)
	50,447	178,087

RATIO INFORMATION

For the purpose of the 'Definitions and explanations of Alternative Performance Measures Disclosures', reference to 'Note' relates to the respective note in the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2021.

1.  Net Interest Margin

Reconciliation of the various components of net interest margin   between the underlying basis and the statutory basis is provided below:

1.1. 

1.1. 

1.1.  Reconciliation of Net interest income	Six months ended 30 June
	2021	2020
	€000	€000
Net interest income as per the underlying basis/statutory basis	152,213	167,800
Net interest income used in the calculation of NIM (annualised)	306,949	337,444

1.2.  Interest earning assets	30 June 2021	31 March 2021	31 December 2020
	€000	€000	€000
Cash and balances with central banks	8,227,491	6,926,347	5, 653,315
Loans and advances to banks	436,091	420,593	402,784
Loans and advances to customers	9,966,542	9,959,849	9,886,047
Loans and advances to customers held for sale (Note 19)	-	471,628	493,037
Cash held for sale (Note 19)	-	79,373	68,425
Prepayments, accrued income and other assets - Deferred consideration receivable ('DPP') (Note 18)	378,141	-	-
Investments
Debt securities (Note 13)	1,998,076	1,923,324	1,708,844
Less: Investments which are not interest bearing	(7,531)	(18,883)	(18,618)
Total interest earning assets	20,998,810	19,762,231	18,1 93 , 834
1.3.  Quarterly average interest earning assets (€000)
-  as at 30 June 2021	19,651,625
-  as at 30 June 2020	17,740,852

1.1. 

1.1. 

1.4.  Net interest margin	Six months ended 30 June
	2021	2020
Net interest income (annualised) (as per table 1.1. above) (€000)	306,949	337,444
Quarterly average interest earning assets (as per table 1.3. above) (€000)	19,651,625	17,740,852
NIM (%)	1.56%	1.90%

2.  Cost to income ratio

2.1.  Reconciliation of the various components of total expenses used in the cost to income ratio calculation from the underlying basis to the statutory basis is provided below:

	Six months ended 30 June
	2021	2020
	€000	€000
2.1.1.  Reconciliation of Staff costs
Total Staff costs as per the underlying basis/statutory basis	100,866	96,208

	Six months ended 30 June
	2021	2020
	€000	€000
2.1.2.  Reconciliation of Other operating expenses
Other operating expenses as per the underlying basis	69,487	68,633
Reclassifications for:
Operating expenses relating to NPE sales, presented within 'Provisions/net loss relating to NPE sales, including restructuring expenses' under the underlying basis	6,300	12,000
Provisions for pending litigations, claims, regulatory and other matters, separately presented under the underlying basis	4,360	4,044
Advisory and other restructuring costs - organic, separately presented under the underlying basis	5,264	6,183
Restructuring costs relating to the NPE sales, presented within 'Provisions/net loss relating to NPE sales, including restructuring expenses' under the underlying basis	10,177	3,704
Other operating expenses as per the statutory basis	95,588	94,564

	Six months ended 30 June
	2021	2020
	€000	€000
2.1.3.  Special levy on deposits and other levies/contributions
Special levy on deposits and other levies/contributions per the underlying basis/statutory basis	15,255	15,323

2.  Cost to income ratio ( continued)

2.2. Reconciliation of the various components of total income (as defined) used in the cost to income ratio calculation from the underlying basis to the statutory basis is provided below:

	Six months ended 30 June
	20 2 1	20 20
	€000	€000
2.2.1.  Reconciliation of Net fee and commission income
Total Net fee and commission income as per the underlying basis/statutory basis	83,857	71,245

	Six months ended 30 June
	20 2 1	20 20
	€000	€000
2.2.2.  Reconciliation of Net foreign exchange gains and Net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates
Total Net foreign exchange gains and net gains on financial instruments transactions and disposal/dissolution of subsidiaries and associates as per the underlying basis	8,058	12,384
Reclassifications for:
Net (losses)/gains on loans and advances to customers measured at fair value through profit or loss (FVPL), disclosed within 'Loan credit losses' per the underlying basis (Note 8)	(3,151)	3,007
Net loss on early redemption of subordinated loan stock, disclosed within 'Advisory and other restructuring costs-organic' under the underlying basis (Note 8)	(12,433)	-
Total Net foreign exchange gains and Ν et (losses)/gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates as per the statutory basis (see below)	(7,526)	15,391
Net foreign exchange gains as per the statutory basis	6,550	10,543
Net (losses)/gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates as per the statutory basis	(14,076)	4,848
Total Net foreign exchange gains and Net (losses)/gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates as per the statutory basis	(7,526)	15,391

2.  Cost to income ratio ( continued)

	Six months ended 30 June
	2021	2020
	€000	€000
2. 3. Total Income as per the underlying basis
Net interest income as per the underlying basis   (as per table above)	152,213	167,800
Net fee and commission income as per the underlying basis (as per table above)	83,857	71,245
Net foreign exchange gains and Net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates as per the underlying basis (as per table above)	8,058	12,384
Insurance income net of claims and commissions (as per the statutory basis)	31,068	28,915
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties (as per the statutory basis)	5,991	347
Other income (as per the statutory basis)	6,597	8,043
Total Income as per the underlying basis	287,784	288,734

	Six months ended 30 June
	2021	2020
	€000	€000
2. 4. Total Expenses as per the underlying basis
Staff costs as per the underlying basis (as per table above)	100,866	96,208
Special levy on deposits and other levies/contributions as per the underlying basis (as per table above)	15,255	15,323
Other operating expenses as per the underlying basis (as per table above)	69,487	68,633
Total Expenses as per the underlying basis	185,608	180,164
2.5. Cost to income ratio
Total expenses (as per table above) ( €000)	185,608	180,164
Total income (as per table above) (€000)	287,784	288,734
Total expenses/Total income (%)	64%	62%

3.  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 June 2021	31 March 2021	31 December 2020
	€000	€000	€000
Total assets used in the computation of the operating profit return on average assets/per the Interim Consolidated Balance Sheet	24,211,313	23,043,592	21,514,131

	30 June 2021	30 June 2020
Annualised operating profit ( €000)	206,046	218,334
Quarterly average total assets ( € 000)	22,923,012	20,974,807
Operating profit return on average assets (annualised) (%)	0.9%	1.0%

The reconciliation of the various components of operating profit between the underlying and the statutory basis has been provided in the tables above.

 

END

 

 

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