Half-year Report -Part 4

Bank of Cyprus Holdings PLC

09 August 2023

 

Independent review report to Bank of Cyprus Holdings Public Limited Company

Report on the consolidated condensed interim financial statements

Our conclusion

We have reviewed Bank of Cyprus Holdings Public Limited Company's consolidated condensed interim financial statements (the "interim financial statements") in the Interim Financial Report of Bank of Cyprus Holdings Public Limited Company for the six month period ended 30 June 2023 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007, as amended, Part 2 (Transparency Requirements) of the Central Bank (Investment Market Conduct) Rules 2019 and the applicable requirements of the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority.

The interim financial statements, comprise:

·      The Interim Consolidated Balance Sheet as at 30 June 2023;

·      the Interim Consolidated Income Statement and the Interim Consolidated Statement of Comprehensive Income for the period then ended;

·      the Interim Consolidated Statement of Cash Flows for the period then ended;

·      the Interim Consolidated Statement of Changes in Equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the Interim Financial Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007, as amended, Part 2 (Transparency Requirements) of the Central Bank (Investment Market Conduct) Rules 2019 and the applicable requirements of the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority.

As disclosed in note 3.2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' ("ISRE (Ireland) 2410") issued for use in Ireland. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (Ireland) 2410. However future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Interim Financial Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, as amended, Part 2 (Transparency Requirements) of the  Central Bank (Investment Market Conduct) Rules 2019 and the applicable requirements of the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority. In preparing the Interim Financial Report including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Financial Report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Transparency (Directive 2004/109/EC) Regulations 2007, as amended, Part 2 (Transparency Requirements) of the Central Bank (Investment Market Conduct) Rules 2019 and the applicable requirements of the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers

Chartered Accountants

8 August 2023

Dublin

Alternative Performance Measures Disclosures

30 June 2023

DEFINITIONS

Allowance for expected credit losses on loans		Allowance for expected credit losses on loans comprises: (i) allowance for expected credit losses (ECL) on loans and advances to customers (including allowance for expected credit losses on loans and advances to customers classified as non-current assets held for sale, where applicable), (ii) the residual fair value adjustment on initial recognition of loans and advances to customers (including residual fair value adjustment on initial recognition of loans and advances to customers held for sale, where applicable), (iii) allowance for expected credit losses on off-balance sheet exposures (financial guarantees and commitments) disclosed on the balance sheet within other liabilities and (iv) the aggregate fair value adjustment on loans and advances to customers classified and measured at FVPL.
Cost to income ratio		Cost to income ratio is calculated as total expenses per the underlying basis (as defined below) divided by total income as per the underlying basis (as defined below).
Digitally engaged customers ratio		This is the ratio of digitally engaged individual customers to the total number of individual customers. Digitally engaged customers are the individuals who use the digital channels of BOC PCL (mobile banking app, browser and ATMs) to perform banking transactions, as well as digital enablers such as a bank-issued card to perform online card purchases, based on an internally developed scorecard.
Gross loans		Gross Loans comprise: (i) gross loans and advances to customers measured at amortised cost before the residual fair value adjustment on initial recognition (including loans and advances to customers classified as non-current assets held for sale, where applicable) and (ii) loans and advances to customers classified and measured at FVPL adjusted for the aggregate fair value adjustment. The residual fair value adjustment on initial recognition relates mainly to loans acquired from Laiki Bank (calculated as the difference between the outstanding contractual amount and the fair value of loans acquired at acquisition).
Interest earning assets		Interest earning assets include: cash and balances with central banks, plus loans and advances to banks, plus net loans and advances to customers (including net loans and advances to customers classified as non-current assets held for sale, where applicable) (as defined below), plus deferred consideration receivable ('DPP'), plus investments (excluding equities, mutual funds and other non-interest bearing investments).
Legacy exposures		Legacy exposures are exposures relating to (i)         Restructuring and Recoveries Division (RRD), (ii)        Real Estate Management Unit (REMU), and (iii)       Non-core overseas exposures.
Leverage ratio		The leverage ratio is the ratio of tangible total equity to total assets as presented on the balance sheet. Tangible total equity comprises of equity attributable to the owners of the Company and Other equity instruments 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 gains on derecognition of financial assets measured at amortised cost relating to loans and advances to customers and (iii) net gains on loans and advances to customers at FVPL, for the period/year.

Loan credit losses charge (cost of risk)		Loan credit losses charge (cost of risk) (year to date) is calculated as the loan credit losses (as defined) (annualised based on year to date days) divided by the average gross loans (as defined). The average gross loans are calculated as the average of the opening balance and the closing balance of Gross loans (as defined), for the reporting period/year.
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 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 credit losses on loans (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 credit losses on loans (as defined), divided by customer deposits.
Net performing loan book		Net performing loan book is the total net loans and advances to customers (as defined) excluding net loans included in legacy exposures (as defined).
New lending		New lending includes the disbursed amounts of the new and existing non-revolving facilities (excluding forborne or re-negotiated accounts) as well as the average year to date change (if positive) of the current accounts and overdraft facilities between the balance at the beginning of the period and the end of the period. Recoveries are excluded from this calculation since their overdraft movement relates mostly to accrued interest and not to new lending.
Non-performing exposures (NPEs)		As per the EBA standards and European Central Bank's (ECB) Guidance to Banks on Non-Performing Loans (which was published in March 2017), NPEs are defined as those exposures that satisfy one of the following conditions:  (i)         The borrower is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due amount or of the number of days past due. (ii)        Defaulted or impaired exposures as per the approach provided in the Capital Requirement Regulation (CRR), which would also trigger a default under specific credit adjustment, diminished financial obligation and obligor bankruptcy. (iii)       Material exposures as set by the Central Bank of Cyprus (CBC), which are more than 90 days past due. (iv)       Performing forborne exposures under probation for which additional forbearance measures are extended. (v)        Performing forborne exposures previously classified as NPES that present more than 30 days past due within the probation period. From 1 January 2021 two regulatory guidelines came into force that affect NPE classification and Days-Past-Due calculation. More specifically, these are the RTS on the Materiality Threshold of Credit Obligations Past-Due (EBA/RTS/2016/06), and the Guideline on the Application of the Definition of Default under article 178 (EBA/GL/2016/07). The Days-Past-Due (DPD) counter begins counting DPD as soon as the arrears or excesses of an exposure reach the materiality threshold (rather than as of the first day of presenting any amount of arrears or excesses). Similarly, the counter will be set to zero when the arrears or excesses drop below the materiality threshold. Payments towards the exposure that do not reduce the arrears/excesses below the materiality threshold, will not impact the counter. For retail debtors, when a specific part of the exposures of a customer that fulfils the NPE criteria set out above is greater than 20% of the gross carrying amount of all on-balance sheet exposures of that customer, then the total customer exposure is classified as non‑performing; otherwise only the specific part of the exposure is classified as non‑performing. For non‑retail debtors, when an exposure fulfils the NPE criteria set out above, then the total customer exposure is classified as non‑performing. Material arrears/excesses are defined as follows: - Retail exposures: Total arrears/excess amount greater than €100 - Exposures other than retail: Total arrears/excess amount greater than €500 and the amount in arrears/excess is at least 1% of the customer's total exposure. The NPEs are reported before the deduction of allowance for expected credit losses on loans (as defined).
Non-recurring items		Non-recurring items as presented in the 'Consolidated Income Statement on the underlying basis' relate to 'Advisory and other transformation costs - organic' (2022: Non-recurring items relate to: (i) Advisory and Other transformation costs-ongoing (ii) Provisions/net loss relating to NPE sales, (iii) Restructuring and other costs relating to NPE sales, and (iv) Restructuring costs - Voluntary Staff Exit Plan (VEP), as applicable).
NPE coverage ratio		The NPE coverage ratio is calculated as the allowance for expected credit losses on loans on an underlying basis (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 (net of reversals), tax, profit 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 and before non-recurring items (attributable to the owners of the Company)		Profit/(loss) after tax and before non-recurring items (attributable to the owners of the Company) is the operating profit (as defined) adjusted for loan credit losses (as defined), impairments of other financial and non-financial assets, provisions for litigation, claims, regulatory and other matters (net of reversals), tax and (profit)/loss attributable to non-controlling interests.
Profit/(loss) after tax - organic (attributable to the owners of the Company)	Profit/(loss) after tax - organic (attributable to the owners of the Company) is the profit/(loss) after tax and before non-recurring items (as defined) (attributable to the owners of the Company), adjusted for the 'Advisory and other transformation costs - organic'.
Return on Tangible Equity (ROTE) after tax and before non-recurring items	Return on Tangible Equity (ROTE) after tax and before non-recurring items is calculated as Profit/(loss) after tax and before non-recurring items (attributable to the owners of the Company) (as defined) per the underlying basis (annualised - (based on year-to-date days)), divided by the quarterly average of Shareholders' equity minus intangible assets at each quarter end.
Return on Tangible Equity (ROTE)	Return on Tangible Equity (ROTE) is calculated as Profit/(loss) after tax (attributable to the owners of the Company) (annualised - (based on year-to-date days)), divided by the quarterly average of Shareholders' equity minus intangible assets at each quarter end.
Shareholders' equity	Shareholders' equity comprise total equity adjusted for non-controlling interest and other equity instruments.
Time deposit pass-through	Calculated as a percentage of the cost (interest expense) of Time and Notice deposits over the average 6-month Euribor rate of the period.
Total expenses	Total expenses on the underlying basis comprise the total staff costs, special levy on deposits and other levies/contributions and other operating expenses (excluding 'Advisory and other transformation costs-organic', (on an underlying basis) as reconciled in the table further below) (2022: total expenses on the underlying basis comprise total staff costs (excluding 'Restructuring costs - Voluntary Staff Exit Plan (VEP)') (on an underlying basis as reconciled in the table further below), special levy on deposits and other levies/contributions and other operating expenses (excluding 'Advisory and other transformation costs-organic', 'Restructuring and other costs relating to NPE sales', on an underlying basis as reconciled in the table further below)).
Total income	Total income on the underlying basis comprises the total of net interest income, net fee and commission income, net foreign exchange gains, net gains/(losses) on financial instruments (excluding net gains/(losses) on loans and advances to customers at FVPL), net insurance result, net gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of property and other income (on an underlying basis). A reconciliation of these amounts between the statutory and the underlying bases is disclosed in the Interim Management Report under section 'Group financial results on the underlying basis'.

RECONCILIATIONS

For the purpose of the '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 2023.

Reconciliations between the calculations of non-IFRS performance measures and the most directly comparable IFRS measures which allow for the comparability of the underlying basis to statutory information are disclosed below.

On 1 January 2023, the Group adopted IFRS 17 'Insurance Contracts'. As required by the standard, the Group applied the requirements retrospectively with comparative information previously published under IFRS 4 'Insurance Contracts' restated from 1 January 2022, the transition date and therefore reconciliations of alternative performance measures have also been restated, where applicable.

1.           Reconciliation of Gross loans and advances to customers

	30 June 2023	31 December 2022
	€000	€000
Gross loans and advances to customers as per the underlying basis (as defined above)	10,277,457	10,217,453
Reconciling items:
Residual fair value adjustment on initial recognition (Note 18)	(74,998)	(89,029)
Loans and advances to customers measured at fair value through profit or loss (Note 18)	(210,385)	(214,359)
Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss	3,261	3,270
Gross loans and advances to customers at amortised cost as per the Consolidated Condensed Interim Financial Statements (Note 18)	9,995,335	9,917,335

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

	30 June 2023	31 December 2022
	€000	€000
Allowance for expected credit losses on loans and advances to customers (ECL) as per the underlying basis (as defined above)	287,645	281,630
Reconciling items:
Residual fair value adjustment on initial recognition (Note 18)	(74,998)	(89,029)
Aggregate fair value adjustment on loans and advances to customers measured at fair value through profit or loss	3,261	3,270
Provisions for financial guarantees and commitments (Note 24)	(18,007)	(17,429)
Allowance for ECL for impairment of loans and advances to customers as per the Consolidated Condensed Interim Financial Statements (Note 18)	197,901	178,442

3.           Reconciliation of NPEs

	30 June 2023	31 December 2022
	€000	€000
NPEs as per the underlying basis (as defined above)	371,091	410,563
Reconciling items:
POCI (NPEs) (Note 1 below)	(35,866)	(37,742)
Residual fair value adjustment on initial recognition of loans and advances to customers (NPEs) classified as Stage 3 (Note 18)	(1,433)	(1,803)
Stage 3 gross loans and advances to customers at amortised cost as per the Consolidated Condensed Interim Financial Statements (Note 18)	333,792	371,018
NPE ratio
NPEs (as per table above) (€000)	371,091	410,563
Gross loans and advances to customers (as per table above) (€000)	10,277,457	10,217,453
Ratio of NPE/Gross loans (%)	3.6%	4.0%

Note 1: Gross loans and advances to customers at amortised cost before residual fair value adjustment on initial recognition include an amount of €35,866 thousand POCI - Stage 3 loans (out of a total of €107,622 thousand POCI loans) (31 December 2022: €37,742 thousand POCI - Stage 3 loans (out of a total of €115,544 thousand POCI loans)) as disclosed in Note 18 of the Consolidated Condensed Interim Financial Statements for the six months ended 30 June 2023.

4.           Reconciliation of Loan credit losses

	Six months ended 30 June
	2023	2022
	€000	€000
Loan credit losses as per the underlying basis	24,397	23,118
Reconciling items:
Loan credit losses relating to NPE sales, disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales' under the underlying basis	-	385
	24,397	23,503
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 12)	30,290	23,959
Net gains on derecognition of financial assets measured at amortised cost - loans and advances to customers (see further below)	(5,902)	(2,515)
Net losses on loans and advances to customers at FVPL (Note 10)	9	2,059
	24,397	23,503

Net gains on derecognition of financial assets measured at amortised cost on the Interim Consolidated Income Statement amount to €5,861 thousand (30 June 2022: €1,648 thousand) and comprise €5,902 thousand (30 June 2022: €2,515 thousand) net gains on derecognition of loans and advances to customers and €41 thousand (30 June 2022: €867 thousand) net losses on derecognition of debt securities measured at amortised cost.

KEY PERFORMANCE RATIOS INFORMATION

For the purpose of the '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 2023

1.           Net Interest Margin

The various components for the calculation of net interest margin are provided below:

1.1  Net interest income used in the calculation of NIM			Six months ended 30 June
			2023	2022 (restated)
			€000	€000
Net interest income as per the underlying basis/statutory basis			358,342	145,722
Net interest income used in the calculation of NIM (annualized)			722,623	293,859
1.2 Interest       earning assets		30 June 2023	31 March 2023	31 December 2022
		€000	€000	€000
Cash and balances with central banks		9,127,429	9,247,705	9,567,258
Loans and advances to banks		431,812	415,832	204,811
Loans and advances to customers		10,007,819	10,013,108	9,953,252
Prepayments, accrued income and other assets - Deferred consideration receivable ('DPP') (Note 20)		320,655	315,755	311,523
Investments
Debt securities (Note 15)		3,178,127	2,746,790	2,499,894
Total interest earning assets		23,065,842	22,739,190	22,536,738
1.3 Quarterly average interest earning assets (€000)
-    as at 30 June 2023				22,780,590
-    as at 30 June 2022				22,235,482

1.4   Net interest margin (NIM)	Six months ended 30 June
	2023	2022 (restated)
Net interest income (annualised) (as per table 1.1 above) (€000)	722,623	293,859
Quarterly average interest earning assets (as per table 1.3 above) (€000)	22,780,590	22,235,482
NIM (%)	3.17%	1.32%

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:

2.1.1  Reconciliation of Staff costs	Six months ended 30 June
	2023	2022 (restated)
	€000	€000
Total Staff costs as per the underlying basis	93,043	95,173
Reclassifications for:
Restructuring costs - separately presented under the underlying basis in 2022	n/a	3,130
Staff costs as per the statutory basis (Note 11)	93,043	98,303
2.1.2  Reconciliation of Other operating expenses	Six months ended 30 June
	2023	2022 (restated)
	€000	€000
Other operating expenses as per the underlying basis	68,199	69,149
Reclassifications for:
Operating expenses and restructuring costs relating to the NPE sales, presented within 'Restructuring and other costs relating to NPE sales' under the underlying basis	n/a	1,389
Advisory and other transformation costs - organic, separately presented under the underlying basis	2,257	5,286
Other operating expenses as per the statutory basis (Note 11)	70,456	75,824

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

2.2    Total Income as per the underlying basis	Six months ended 30 June
	2023	2022 (restated)
	€000	€000
Net interest income as per the underlying basis/statutory basis (as per table 1.1 above)	358,342	145,722
Net fee and commission income as per the underlying basis/statutory basis	89,604	93,639
Net foreign exchange gains, Net gains/(losses) on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the underlying basis (as per table 2.3 below)	21,487	2,907
Net insurance result (Note below)	24,561	23,724
Net losses from revaluation and disposal of investment properties and Net gains on disposal of stock of properties (as per the statutory basis)	4,694	6,870
Other income (as per the statutory basis)	12,200	8,927
Total Income as per the underlying basis	510,888	281,789

Net insurance result comprises the aggregate of captions 'Net insurance finance income/(expense) and Net reinsurance finance income/(expense)', 'Net insurance service result' and 'Net reinsurance service result' per the statutory basis.

2.   Cost to income ratio (continued)

2.3       Reconciliation of Net foreign exchange gains, Net gains/ (losses) on financial instruments and Net gains on derecognition of financial assets measured at amortised cost between the statutory basis and the underlying basis		Six months ended 30 June
		2023		2022 (restated)
		€000		€000
Net foreign exchange gains, Net gains/(losses) on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the underlying basis		21,487		2,907
Reclassifications for:
Net losses on loans and advances to customers measured at fair value through profit or loss (FVPL), disclosed within 'Loan credit losses' per the underlying basis (Note 10)		(9)		(2,059)
Net gains on derecognition of financial assets measured at amortised cost - loans and advances to customers (Table 4 Section 'Reconciliations' above)		5,902		2,515
Net foreign exchange gains, Νet gains/(losses) on financial instruments and Net gains on derecognition of financial assets measured at amortised cost as per the statutory basis (see below)		27,380		3,363
Net foreign exchange gains, Net gains/(losses) on financial instruments and Net gains on derecognition of financial assets measured at amortised cost (as per table above) are reconciled to the statutory basis as follows:
Net foreign exchange gains		15,839		11,898
Net gains/(losses) on financial instruments (Note 10)		5,680		(10,183)
Net gains on derecognition of financial assets measured at amortised cost		5,861		1,648
		27,380		3,363
2.4     Total Expenses as per the underlying basis	Six months ended 30 June
	2023		2022 (restated)
	€000		€000
Staff costs as per the underlying basis (as per 2.1.1 table above)	93,043		95,173
Special levy on deposits and other levies/contributions as per the underlying basis/statutory basis	18,236		16,507
Other operating expenses as per the underlying basis (as per table 2.1.2 above)	68,199		69,149
Total Expenses as per the underlying basis	179,478		180,829
Cost to income ratio
Total expenses (as per table 2.4 above) (€000)	179,478		180,829
Total income (as per table 2.2 above) (€000)	510,888		281,789
Total expenses/Total income (%)	35%		64%

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 2023	31 March 2023	31 December 2022 (restated)
	€000	€000	€000
Total assets used in the computation of the operating profit return on average assets/per the Interim Consolidated Balance Sheet	25,706,637	25,386,804	25,288,541
Quarterly average total assets (€000)
-     as at 30 June 2023			25,460,661
-     as at 30 June 2022 (restated)			25,142,255

	2023	2022 (restated)
Annualised total income for the six months ended 30 June (as per table 2.2 above) (€000)	1,030,244	568,249
Annualised total expenses for the six months ended 30 June (as per table 2.4 above) (€000)	(361,931)	(364,655)
Annualised operating profit for the six months ended 30 June (€000)	668,313	203,594
Quarterly average total assets as at 30 June (as per table above) (€000)	25,460,661	25,142,255
Operating profit return on average assets (annualised) (%)	2.6%	0.8%

4.           Cost of Risk

	Six months ended 30 June
	2023	2022
	€000	€000
Annualised loan credit losses (as per table 4 in section 'Reconciliation' above)	49,198	46,619
Average gross loans (as defined) (as per table 1 above)	10,247,455	10,951,845
Cost of Risk (CoR) %	0.48%	0.43%

5.           Basic earnings after tax and before non-recurring items per share attributable to the owners of the Company

The various components used in the determination of the 'Basic earnings after tax and before non-recurring items per share attributable to the owners of the Company (€ cent)' are provided below:

	2023	2022 (restated)
Profit after tax and before non-recurring items (attributable to the owners of the Company) per the underlying basis for the six months ended 30 June (as per table 5.1 below) (€000)	222,504	52,404
Weighted average number of shares in issue during the period, excluding treasury shares (€000) (Note 14)	446,058	446,058
Basic earnings after tax and before non-recurring items per share attributable to the owners of the Company (€ cent)	49.88	11.75

The reconciliation between the 'Profit after tax and before non-recurring items (attributable to the owners of the Company)' per the underlying basis to the 'Profit after tax (attributable to the owners of the Company)' per the statutory basis is provided in the table below:

5.1         Reconciliation of Profit after tax-attributable to the owners of the Company

	Six months ended 30 June
	2023	2022 (restated)
	€000	€000
Profit after tax and before non-recurring items (attributable to the owners of the Company) per the underlying basis	222,504	52,404
Reclassifications for:
Loan credit losses relating to NPE sales, disclosed under non-recurring items within 'Provisions/net loss relating to NPE sales' under the underlying basis (as per table 4 in section 'Reconciliations' above)	-	(385)
Operating expenses and restructuring costs relating to the NPE sales, presented within 'Restructuring and other costs relating to NPE sales' under the underlying basis (as per table 2.1.2 above)	-	(1,389)
Advisory and other transformation costs - organic, separately presented under the underlying basis (as per table 2.1.2 above)	(2,257)	(5,286)
Restructuring costs - voluntary exit plan, and other termination benefits, separately presented under the underlying basis (as per table 2.1.1 above)	-	(3,130)
Profit after tax (attributable to the owners of the Company) per the statutory basis	220,247	42,214

6.          Return on tangible equity (ROTE)

The various components used in the determination of 'Return on tangible equity (ROTE)' are provided below:

	2023	2022 (restated)
Annualised profit after tax (attributable to the owners of the Company) for the six months ended 30 June (as per table 5.1 above) (€000)	444,145	85,128
Quarterly average tangible shareholder's equity as at 30 June (as per table 6.2 below) (€000)	1,846,802	1,751,868
ROTE (%)	24.0%	4.9%

6.1       Tangible shareholder's equity	30 June 2023	31 March 2023	31 December 2022 (restated)
	€000	€000	€000
Equity attributable to the owners of the Company (as per the statutory basis)	1,984,459	1,899,202	1,806,266
Less: Intangible assets (as per the statutory basis)	(47,546)	(49,430)	(52,546)
Total tangible shareholder's equity	1,936,913	1,849,772	1,753,720
6.2       Quarterly average tangible shareholder's equity (€000)
-    as at 30 June 2023			1,846,802
-    as at 30 June 2022 (restated)			1,751,868

7.           Leverage ratio

	2023	2022 (restated)
Total assets as at 30 June 2023/31 December 2022 (€000)	25,706,637	25,288,541
Tangible total equity (including Other equity instruments) as at 30 June 2023/31 December 2022 (as per table 7.1 below) (€000)	2,172,430	1,973,720
Leverage ratio	8.5%	7.8%

7.1       Tangible total equity	30 June 2023	31 December 2022 (restated)
	€000	€000
Equity attributable to the owners of the Company (as per the statutory basis)	1,984,459	1,806,266
Other equity instruments	235,517	220,000
Less: Intangible assets (as per the statutory basis)	(47,546)	(52,546)
Total tangible equity	2,172,430	1,973,720

 

END