TIDMBOCH

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 EUR4.1 bn (EUR2.0 bn net); 73% reduction since 2014 
   --      Gross NPE ratio reduced to 31%, coverage increased to 51% 

-- Organic NPE reduction continued ahead of guidance (EUR227 mn in 3Q2019; EUR684 mn in 9M2019)

   --      REMU sales of EUR355 mn in 9M2019 
   --      Good momentum in efforts to accelerate de-risking with further portfolio sales 

Active Liquidity Management

   --      Deposits flat qoq at EUR16.5 bn 
   --      Loan to deposit ratio at 66% 
   --      Liquidity surplus reduced to EUR3.0 bn on TLTRO repayment 
   --      Liquidity management strategy underway for specific customer groups 

Positive Performance in 3Q2019

   --      New lending of EUR491 mn for 3Q2019 and EUR1.6 bn for 9M2019 
   --      Total Income of EUR162 mn, Operating profit of EUR63 mn 
   --      Recurring income from on-going insurance business (EUR12 mn in 3Q2019; EUR42 mn in 9M2019) 
   --      Cost of risk at 0.90% 
   --      Underlying profit of EUR18 mn for 3Q2019 and EUR35 mn for 9M2019 
   --      Profit after tax of EUR19 mn for 3Q2019 and EUR116 mn for 9M2019 

Cost Management Actions in 4Q2019 Supported by Digital Transformation

-- Successful completion of VEP in 4Q2019 at one-off cost of EUR79 mn, supported by the on-going Digital Transformation Programme

   --      Full time employees reduced by 11% 
   --      Gross annual savings in staff costs of 13% (EUR28 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.EUR2.7 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.EUR800 mn for 2019. The organic NPE reduction in the third quarter of the year amounted to EUR227 mn, bringing the total organic reduction in the nine months of 2019 to EUR684 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 EUR4.1 bn. This stock of NPEs is now covered by 51% loan credit losses. Overall, since 2014 we have managed a reduction in NPEs of EUR10.9 bn, of which EUR8.2 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 EUR16.5 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 EUR491 mn, helping support the continued growth in the Cypriot economy. Overall in the first nine months of 2019, we lent EUR1.6 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 EUR162 mn and a positive operating result of EUR63 mn. The underlying result was a profit after tax of EUR18 mn, whilst the reported profit after tax for the third quarter was EUR19 mn. After the net loss from the sale of our investment in CNP of EUR21 mn and the net impact from the reversal of impairments of EUR101 mn, the reported profit after tax for the first nine months of the year amounted to EUR116 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 EUR830 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 EUR3.0 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.EUR79 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.EUR28 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 
-------------------------------------------------------------------------------------------------------- 
                                               9M2018(1)                                  qoq 
EUR mn                   9M2019(1)        represented(2)      3Q2019(1)    2Q2019(1)       +%     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                                                                           qoq 
 Ratios(2)               9M2019(1)           9M2018(1,2)      3Q2019(1)    2Q2019(1)        +      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 (EUR 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 (EUR 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 
====================================================================================================== 
 EUR 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                                            31.12.2018                 + 
  ratios                                                     30.09.2019 
==================================  ====================  =============  ===========  ================ 
 Gross loans (EUR mn)                                            13,035       13,148               -1% 
==================================  ====================  =============  ===========  ================ 
 Allowance for expected loan 
  credit losses (EUR mn)                                          2,086        2,254               -7% 
==================================  ====================  =============  ===========  ================ 
 Customer deposits (EUR 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             30.09.2019     30.09.2019   31.12.2018                 + 
  assets                                       Pro forma 
                                                 for CNP 
                                                 and VEP 
==================================  ====================  =============  ===========  ================ 
 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 (EUR 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 EUR37 mn and an increase in liabilities of EUR37 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.

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 EUR103 mn was reclassified from 'Stock of property' to 'Investment Properties'.

Reclassifications to comparative information were also made for unrecognised interest on previously credit impaired loans which have cured during the period amounting to EUR24 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 EUR12 mn.

A.1. Balance Sheet Analysis

A.1.1 Capital Base

Total equity excluding non-controlling interests totalled EUR2,454 mn at 30 September 2019, compared to EUR2,442 mn at 30 June 2019 and EUR2,341 mn at 31 December 2018. Shareholders' equity totalled EUR2,234 mn at 30 September 2019, compared to EUR2,222 mn at 30 June 2019 and EUR2,121 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 EUR220 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.EUR285 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 EUR97.5 mn.

Voluntary Staff Exit Plan

In October 2019, the Group completed a voluntary staff exit plan with an estimated cost of EUR79 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.EUR551 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.EUR1 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 EUR830 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 EUR16,473 mn at 30 September 2019, compared to EUR16,377 mn at 30 June 2019 and EUR16,844 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 EUR268 mn (compared to EUR261 mn at 30 June 2019 and EUR271 mn as at 31 December 2018) and relates to unsecured subordinated Tier 2 Capital Notes of nominal value EUR250 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 EUR3.0 bn, from EUR3.8 bn at 30 June 2019, following the repayment of ECB funding amounting to EUR830 mn. At 30 June 2019, the liquidity surplus had increased to EUR3.8 bn, from EUR2.7 bn at 31 March 2019, reflecting a EUR1.2 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 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 EUR13,035 mn at 30 September 2019, compared to EUR13,072 mn at 30 June 2019, EUR15,882 mn at 31 March 2019 and EUR15,900 mn at 31 December 2018. Gross loans in Cyprus totalled EUR12,942 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 EUR2.8 bn of gross loans of which EUR2.7 bn related to non-performing loans) and to a lesser extent to the completion of Project Velocity (sale of EUR30 mn gross loans as at the date of disposal, relating wholly to non-performing loans) in 2Q2019. New loans granted in 3Q2019 reached EUR491 mn, bringing the new loans granted in 9M2019 to EUR1,602 mn, exceeding new lending in Cyprus in 9M2018.

At 30 September 2019, the Group net loans and advances to customers totalled EUR10,971 mn (compared to EUR10,949 mn at 30 June 2019, EUR10,955 mn at 31 March 2019 pro forma for Helix (and Velocity) and EUR10,922 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 EUR227 mn or 5% during 3Q2019, bringing the total organic reduction in NPEs in 9M2019 to EUR684 mn, ahead of the target for organic NPE reduction of c.EUR800 mn for 2019. NPEs at 30 September 2019 amounted to EUR4,085 mn, compared to EUR4,312 mn at 30 June 2019 and EUR7,419 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 
 
                                                % gross                % gross 
                                       EUR       loans      EUR mn      loans 
                                       mn 
 ===============================   ========  ==========  =========  ========== 
 
  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 arrears(1) 
===============================    ========  ==========  =========  ========== 
 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.EUR800 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 EUR2.8 bn (of which EUR2.7 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.EUR1.2 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 EUR450 mn to c.EUR45 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.EUR0.83 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.EUR120 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 EUR245 mn and a gross book value of EUR34 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 EUR30 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 EUR2 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 EUR159 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 EUR159 mn in 9M2019 (compared to EUR154 mn in 9M2018), resulting in a profit on disposal of EUR26 mn for 9M2019. During the nine months ended 30 September 2019, the Group executed sale-purchase agreements (SPAs) with contract value of EUR195 mn (433 properties), excluding the sale of the Cyreit. In addition, the Group signed SPAs for disposals of assets with contract value of EUR65 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.EUR1 mn. The total proceeds from the disposal of Cyreit were EUR160 mn.

Completion of Project Helix

With the completion of Project Helix in 2Q2019, properties with carrying value of EUR109 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 EUR98 mn were included in the portfolio for the NPE sale (Helix), compared to EUR74 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 EUR103 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 EUR118 mn.

This change in classification had no material impact on the Group's comparative retained earnings and a cumulative impact of EUR1 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 EUR1,513 mn (comprising properties of EUR1,399 mn classified as 'Stock of property' and EUR114 mn as 'Investment Properties'), compared to EUR1,548 mn as at 30 June 2019 (comprising properties of EUR1,430 mn classified as 'Stock of property' and EUR118 mn as 'Investment Properties') and to EUR1,530 mn as at 31 December 2018 (comprising properties of EUR1,427 mn classified as 'Stock of property' and EUR103 mn as 'Investment Properties').

In addition to assets held by REMU, properties classified as 'Investment properties' with carrying value of EUR24 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)                                                                         qoq 
 EUR mn                                                            9M2019  9M2018  3Q2019  2Q2019    +%  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 (EUR 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 (EUR 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:

 
 EUR 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 EUR8 mn was completed.

In addition to the above, as at 30 September 2019, there were overseas exposures of EUR279 mn in Greece, relating to both loans and properties (compared to EUR311 mn at 30 June 2019 and EUR144 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

 
                                                           9M2018(1)                            qoq 
EUR mn                                    9M2019(1)   represented(2)  3Q2019(1)  2Q2019(1)       +%  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 assets(1) 
 (EUR 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 EUR260 mn (up 4% yoy) and 1.92% respectively (up by 8 bps yoy). NII for 3Q2019 amounted to EUR90 mn (compared to EUR85 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 EUR18,103 mn, flat yoy. Quarterly average interest earning assets for 3Q2019 amounted to EUR17,962 mn compared to EUR18,149 mn for 2Q2019, down by 1%, primarily driven by the repayment of ECB funding.

Non-interest income for 9M2019 amounted to EUR235 mn, comprising net fee and commission income of EUR111 mn, net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates of EUR34 mn, net insurance income of EUR42 mn, net gains from revaluation and disposal of investment properties and on disposal of stock of properties of EUR26 mn and other income of EUR22 mn. Net fee and commission income for 9M2019 amounted to EUR111 mn, decreased by 9% yoy (EUR122 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 EUR34 mn for 9M2019, comprising mainly net foreign exchange gains of EUR21 mn and net gains on revaluation of financial instruments of EUR13 mn, decreased by 34% yoy mainly due to one-off gain on disposal of bonds during 1Q2018 amounting to EUR19 mn. Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and associates totalled EUR8 mn for 3Q2019, compared to EUR16 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 EUR42 mn for 9M2019, compared to EUR38 mn for 9M2018, up by 11% yoy, reflecting increased income and positive investment returns in 2Q2019. Net insurance income amounted to EUR12 mn for 3Q2019, compared to EUR18 mn for 2Q2019, down by 34% qoq mainly due to a one-off amount of c.EUR2.5 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 EUR26 mn, comprising a net profit from the disposal of stock properties of EUR24 mn (REMU gains) and a net gain from revaluation of EUR2 mn (compared to net gains of EUR15 mn for 9M2018). Net gains from revaluation and disposal of investment properties and on disposal of stock of properties for 3Q2019 amounted to EUR10 mn compared to EUR12 mn in the previous quarter. REMU profit remains volatile.

Total income for 9M2019 amounted to EUR495 mn, at similar levels to the previous year. Total income for 3Q2019 amounted to EUR162 mn, compared to EUR177 mn in 2Q2019, down by 9% qoq.

A.2.2 Total expenses

 
                                                  9M2018(1)                            qoq 
EUR mn                           9M2019(1)   represented(2)  3Q2019(1)  2Q2019(1)       +%   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 EUR307 mn (compared to EUR286 mn for 9M2018), 54% of which related to staff costs

(EUR167 mn), 40% to other operating expenses (EUR122 mn) and 6% (EUR18 mn) to special levy and contribution to Single Resolution Fund (SRF).

Total operating expenses for 9M2019 were EUR289 mn, increased by 8% yoy, compared to EUR268 mn for 9M2018. Total operating expenses for 3Q2019 were EUR93 mn, decreased by 7% qoq, compared to EUR99 mn in 2Q2019.

Staff costs of EUR167 mn for 9M2019 increased by 8% yoy (compared to EUR154 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 EUR55 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.EUR79 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.EUR28 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 EUR122 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 EUR38 mn, compared to EUR43 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

 
                                                         9M2018(1)                          qoq 
EUR mn                                  9M2019(1)   represented(2)  3Q2019(1)  2Q2019(1)     +%  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 EUR188 mn, compared to EUR208 mn for 9M2018, down by 10% yoy, mainly due to the increase in total operating expenses.

The loan credit losses for 9M2019 totalled EUR117 mn (compared to EUR104 mn for 9M2018 up by 12% yoy), reflecting further balance sheet de-risking. The loan credit losses for 3Q2019 amounted to EUR30 mn, compared to EUR40 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 EUR2.8 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 EUR2,086 mn (compared to EUR2,145 mn at 30 June 2019, EUR2,227 mn at 31 March 2019 pro forma for Helix and EUR2,254 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 EUR9 mn, compared to EUR12 mn for 9M2018. Reversal of impairments of other financial and non-financial assets for 3Q2019 amounted to EUR1 mn (compared to impairments of EUR9 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 EUR3 mn, compared to EUR9 mn for 9M2018. Provisions for litigation, regulatory and other matters for 3Q2019 totalled EUR6 mn, compared to a reversal of EUR3 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

 
                                                                 9M2018(1)                         qoq 
EUR mn                                          9M2019(1)   represented(2)  3Q2019(1)  2Q2019(1)    +%  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 EUR1 mn, compared to a tax charge of EUR4 mn a year earlier, primarily due to lower taxable profit in the current period. The tax charge for 3Q2019 amounted to EUR1 mn compared to a tax credit of EUR2 mn in 2Q2019.

Profit after tax and before non-recurring items for 9M2019 was EUR56 mn, compared to a profit of EUR82 mn for 9M2018, down by 32% yoy. Profit after tax and before non-recurring items for 3Q2019 was EUR27 mn, at similar levels to the previous quarter.

Advisory and other restructuring costs - excluding discontinued operations and NPE sale (Helix) for 9M2019 amounted to EUR21 mn, compared to EUR26 mn for 9M2018, down by 18% yoy.

Profit after tax arising from the organic operations of the Group for 9M2019 amounted to EUR35 mn, compared to EUR56 mn for 9M2018, down by 38% yoy. Profit after tax arising from the organic operations of the Group for 3Q2019 amounted to EUR18 mn, compared to a EUR21 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 EUR1 mn, compared to a profit of EUR4 mn for the previous quarter, bringing the net result from the Project for 9M2019 to EUR1 mn, compared to a net loss of EUR105 mn for 9M2018.

Loss on remeasurement of investment in associate classified as held for sale (CNP) net of share of profit from associates totalled EUR21 mn for 9M2019, comprising a loss on remeasurement of investment in associate classified as held for sale of EUR26 mn and a share of profit from associates of EUR5 mn (compared to a share of profit from associates of EUR8 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 EUR97.5 mn.

Reversal of impairment of DTA and impairment of other tax receivables totalled EUR101 mn for 9M2019, comprising the positive impact of EUR109 mn following amendments to the Income Tax legislation in Cyprus adopted in March 2019, and an impairment of EUR8 mn relating to Greek tax receivables adversely impacted from legislative changes. The carrying value of the remaining receivable at the quarter end was c.EUR5 mn.

Profit after tax attributable to the owners of the Company for 9M2019 was EUR116 mn, compared to a loss of EUR37 mn for 9M2018. Profit after tax attributable to the owners of the Company for 3Q2019 was EUR19 mn, compared to a profit of EUR2 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 EUR21.3 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 EUR20.9 bn at the end of December 2017 to EUR10.4 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 EUR9.8 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.EUR800 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 EUR2 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 (<EUR350 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 EUR1.6 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 EUR42 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 EUR150 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 EUR500 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) 
                                                        ------------------  ------------------- 
                                                              EUR000               EUR000 
                                                        ------------------  ------------------- 
 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              (25,943)                    - 
  as held for sale 
                                                        ------------------  ------------------- 
 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 (EUR cent) - continuing 
  operations                                               25.9   (9.9) 
                                                          =====  ====== 
 Basic and diluted profit/(loss) per share attributable 
  to the owners of the Company (EUR cent)                  25.9   (8.3) 
                                                          =====  ====== 
 

Unaudited Interim Consolidated Statement of Comprehensive Income

 
                                                           Nine months ended 
                                                              30 September 
                                                            2019       2018 
                                                         ---------  --------- 
                                                           EUR000     EUR000 
                                                         ---------  --------- 
 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     31 December 
                                                          2019        2018 (restated) 
 Assets                                                  EUR000           EUR000 
                                                     -------------  ----------------- 
 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 EUR37,474 thousand and an increase in liabilities of EUR37,474 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 EUR103,531 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 EUR24,346 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 EUR12,337 thousand.

Unaudited Interim Consolidated Statement of Changes in Equity

 
                                                   Attributable to the owners of the Company                                       Other         Non-         Total 
                                                                                                                                  equity      controlling     equity 
                                                                                                                                instruments    interests 
                   Share      Share     Treasury   Retained    Property      Financial      Life        Foreign       Total 
                  capital    premium     shares    earnings   revaluation   instruments   insurance    currency 
                                                                reserve     fair value    in-force    translation 
                                                                              reserve     business      reserve 
                                                                                           reserve 
                 --------  ----------  ---------  ---------  ------------  ------------  ----------  ------------  ---------- 
                  EUR000     EUR000      EUR000     EUR000      EUR000        EUR000       EUR000       EUR000       EUR000       EUR000        EUR000       EUR000 
                 --------  ----------  ---------  ---------  ------------  ------------  ----------  ------------  ----------  ------------  ------------  ---------- 
 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-         Total 
                                                                                                                                                controlling     equity 
                                                                                                                                                 interests 
                     Share      Share     Treasury   Accumulated    Property      Financial     Other       Life        Foreign       Total 
                    capital    premium     shares       losses     revaluation   instruments   reserves   insurance    currency 
                                                                     reserve     fair value               in-force    translation 
                                                                                   reserve                business      reserve 
                                                                                                           reserve 
                   --------  ----------  ---------  ------------  ------------  ------------  ---------  ----------  ------------  ---------- 
                    EUR000     EUR000      EUR000      EUR000        EUR000        EUR000       EUR000     EUR000       EUR000       EUR000       EUR000       EUR000 
                   --------  ----------  ---------  ------------  ------------  ------------  ---------  ----------  ------------  ----------  ------------  ---------- 
 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 
 
 EUR million                         Underlying     Helix       Investment       Tax      Other   Statutory 
                                        basis      portfolio    in associate    related             basis 
                                                                 classified      items 
                                                                  as held 
                                                                  for sale 
 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 EUR34 million and fee and 
            commission income of EUR9 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 EUR4 million, 
            operating expenses of EUR12 million and restructuring 
            costs of EUR9 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 EUR17 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 EUR21 million comprises the 
                       share of profit of associate of EUR5 million, which 
                       is reported in the 'Share of profit from associates' 
                       under the statutory basis, and the loss on 
                       remeasurement of EUR26 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 EUR115 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 EUR6 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 EUR8 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 EUR21 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 EUR3 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 EUR1 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   31 December 
                                            2019           2018 
 By type of deposit                        EUR000        EUR000 
                                       -------------  ------------ 
 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   31 December 
                                                           2019           2018 
                                                          EUR000        EUR000 
                                                      -------------  ------------ 
 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        Total        Residual      Gross loans 
                                           countries                 fair value     at amortised 
                                                                     adjustment      cost after 
                                                                     on initial       residual 
                                                                     recognition     fair value 
                                                                                     adjustment 
                                                                                     on initial 
                                                                                    recognition 
 By economic activity          EUR000       EUR000       EUR000        EUR000         EUR000 
                            -----------  -----------  -----------  -------------  -------------- 
 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        Total        Residual      Gross loans 
                                           countries                 fair value     at amortised 
                                                                     adjustment      cost after 
                                                                     on initial       residual 
                                                                     recognition     fair value 
                                                                                     adjustment 
                                                                                     on initial 
                                                                                    recognition 
 By economic activity          EUR000       EUR000       EUR000        EUR000         EUR000 
                            -----------  -----------  -----------  -------------  -------------- 
 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 EUR197,765 thousand (31 December 2018: EUR55,789 thousand) and lending exposures in Cyprus with collaterals in Greece with a carrying value of EUR80,770 thousand (31 December 2018: EUR76,303 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        Total       Residual      Gross loans 
                                          countries                fair value     at amortised 
                                                                   adjustment      cost after 
                                                                   on initial       residual 
                                                                   recognition     fair value 
                                                                                   adjustment 
                                                                                   on initial 
                                                                                  recognition 
 By economic activity         EUR000       EUR000      EUR000        EUR000         EUR000 
                            ----------  -----------  ----------  -------------  -------------- 
 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       Stage       Stage       POCI        Total 
                                           1           2           3 
                                        EUR000      EUR000      EUR000      EUR000       EUR000 
                                      ----------  ----------  ----------  ----------  ----------- 
 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           Stage       Stage       Stage      POCI       Total 
  before residual fair value               1           2           3 
  adjustment on initial recognition 
 30 September 2019 
 By business line                       EUR000      EUR000      EUR000     EUR000      EUR000 
                                      ----------  ----------  ----------  --------  ----------- 
 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     Stage      Stage      Stage       POCI        Total 
  on initial recognition               1          2          3 
 30 September 2019 
 By business line                   EUR000     EUR000     EUR000     EUR000      EUR000 
                                  ---------  ---------  ---------  ----------  ---------- 
 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           Stage       Stage       Stage      POCI       Total 
  after residual fair value                1           2           3 
  adjustment on initial recognition 
 30 September 2019 
 By business line                       EUR000      EUR000      EUR000     EUR000      EUR000 
                                      ----------  ----------  ----------  --------  ----------- 
 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       Stage       Stage       POCI        Total 
                                           1           2           3 
                                        EUR000      EUR000      EUR000      EUR000       EUR000 
                                      ----------  ----------  ----------  ----------  ----------- 
 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           Stage       Stage       Stage      POCI       Total 
  before residual fair value               1           2           3 
  adjustment on initial recognition 
 31 December 2018 
    By business line                    EUR000      EUR000      EUR000     EUR000      EUR000 
                                      ----------  ----------  ----------  --------  ----------- 
    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        Stage      Stage      Stage       POCI        Total 
  on initial recognition                  1          2          3 
 31 December 2018 
    By business line                   EUR000     EUR000     EUR000     EUR000      EUR000 
                                     ---------  ---------  ---------  ----------  ---------- 
    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           Stage       Stage       Stage      POCI       Total 
  after residual fair value                1           2           3 
  adjustment on initial recognition 
 31 December 2018 
    By business line                    EUR000      EUR000      EUR000     EUR000      EUR000 
                                      ----------  ----------  ----------  --------  ----------- 
    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       Stage       Stage      POCI       Total 
                          1           2           3 
                       EUR000      EUR000      EUR000     EUR000      EUR000 
                     ----------  ----------  ----------  --------  ----------- 
 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       Stage       Stage      POCI       Total 
                         1           2           3 
                      EUR000      EUR000      EUR000     EUR000      EUR000 
                    ----------  ----------  ----------  --------  ----------- 
 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     Stage      Stage       POCI        Total 
                                             1        2          3 
                                          EUR000   EUR000     EUR000      EUR000      EUR000 
                                         -------  --------  ----------  ----------  ---------- 
    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         Stage    Stage      Stage      POCI       Total 
  before residual fair value              1        2         3 
  adjustment on initial recognition 
 31 December 2018 
 By business line                      EUR000   EUR000    EUR000     EUR000     EUR000 
                                      -------  -------  ----------  --------  ---------- 
    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     Stage     Stage     Stage       POCI        Total 
  on initial recognition               1        2          3 
 31 December 2018 
 By business line                   EUR000   EUR000     EUR000     EUR000      EUR000 
                                   -------  --------  ---------  ----------  ---------- 
    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         Stage    Stage      Stage      POCI       Total 
  after residual fair value               1        2         3 
  adjustment on initial recognition 
 31 December 2018 
 By business line                      EUR000   EUR000    EUR000     EUR000     EUR000 
                                      -------  -------  ----------  --------  ---------- 
    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    Stage      Stage      POCI       Total 
                        1        2         3 
                     EUR000   EUR000    EUR000     EUR000     EUR000 
                    -------  -------  ----------  --------  ---------- 
 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) 
                                                   ---------  ------------------- 
                                                     EUR000          EUR000 
                                                   ---------  ------------------- 
 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 
                                                EUR000          EUR000          EUR000 
                                             ------------  ----------------  ------------ 
 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 EUR1,557,852 thousand.

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

 
    30 September 2018                                    Cyprus        Other         Total 
                                                                      countries 
                                                         EUR000        EUR000       EUR000 
                                                      ------------  -----------  ------------ 
    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    Stage      Stage      POCI       Total 
                             1        2         3 
                          EUR000   EUR000    EUR000     EUR000     EUR000 
                         -------  -------  ----------  --------  ---------- 
 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 EUR1,689,497 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 EUR185,700 thousand (nine months ended 30 September 2018: EUR2,229,691 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        Total 
                                      countries 
    30 September 2019     EUR000       EUR000      EUR000 
                        ----------  -----------  ---------- 
    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 EUR500 or number of instalments in arrears is greater than one.

   -    Overdrafts: Excess amount is greater than EUR500 or greater than 10% of the approved limit. 

- Exposures other than retail: Total customer arrears/excesses are greater than EUR1,000 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            Gross loans and advances to customers             Provision for impairment and fair value 
 2019                                                                                     adjustment 
                                                                                    on initial recognition 
                   Group gross   Of which      Of which exposures         Total      Of which      Of which exposures 
                    customer        NPEs         with forbearance       provision       NPEs              with 
                      loans                          measures              for                    forbearance measures 
                       and                                             impairment 
                   advances(1)                                          and fair 
                                                                          value 
                                                                       adjustment 
                                                                       on initial 
                                                                       recognition 
                  ------------  ----------  ------------------------  ------------  ----------  ----------------------- 
                                                Total      Of which                                 Total      Of which 
                                              exposures     on NPEs                               exposures     on NPEs 
                                                with                                                with 
                                             forbearance                                         forbearance 
                                              measures                                            measures 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  --------- 
                     EUR000       EUR000       EUR000       EUR000       EUR000       EUR000       EUR000       EUR000 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  --------- 
 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 
  Enterprises(2) 
  (SMEs)             4,834,350   1,199,854       900,616     609,257       714,880     639,270       273,193    261,323 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  --------- 
 Of which: 
  Commercial 
  real estate(2)     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 
  loans(2)           4,871,501   1,912,090     1,363,925   1,081,850       782,707     726,589       349,607    341,464 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  --------- 
 Of which: 
  Credit for 
  consumption(2)       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.

 
                         Gross loans and advances to customers              Provision for impairment and fair value 
                                                                               adjustment on initial recognition 
                   Group gross   Of which      Of which exposures         Total      Of which      Of which exposures 
                    customer        NPEs         with forbearance       provision       NPEs        with forbearance 
                      loans                          measures              for                          measures 
                       and                                             impairment 
                   advances(3)                                          and fair 
                                                                          value 
                                                                       adjustment 
                                                                       on initial 
                                                                       recognition 
                  ------------  ----------  ------------------------  ------------  ----------  ------------------------ 
                                                Total      Of which                                 Total      Of which 
                                              exposures     on NPEs                               exposures     on NPEs 
                                                with                                                with 
 31 December                                 forbearance                                         forbearance 
 2018                                         measures                                            measures 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  ---------- 
                     EUR000       EUR000       EUR000       EUR000       EUR000       EUR000       EUR000       EUR000 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  ---------- 
 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 
  Enterprises(4)     4,573,824   1,488,289     1,108,153     793,579       759,484     692,343       280,675     266,736 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  ---------- 
 Of which: 
  Commercial 
  real estate(4)     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 
  loans(4)           5,022,617   2,112,152     1,552,445   1,180,705       828,205     774,656       336,651     327,956 
                  ------------  ----------  ------------  ----------  ------------  ----------  ------------  ---------- 
 Of which: 
  Credit for 
  consumption(4)       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 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                   30 September 2019                       31 December 2018 
  the liquidity 
  reserves 
                          Internal      Liquidity reserves       Internal      Liquidity reserves 
                          Liquidity     as per LCR Delegated     Liquidity     as per LCR Delegated 
                          reserves            Reg (EU)           reserves            Reg (EU) 
                                        2015/61 LCR eligible                   2015/61 LCR eligible 
                        -----------  ------------------------  -----------  ------------------------ 
                                        Level 1       Level                     Level        Level 
                                                        2A                         1           2A 
                        -----------  -------------  ---------  -----------  -------------  --------- 
                           EUR000        EUR000       EUR000      EUR000        EUR000       EUR000 
                        -----------  -------------  ---------  -----------  -------------  --------- 
 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           144,644              -          -            -              -          - 
  with banks 
                        -----------  -------------  ---------  -----------  -------------  --------- 
 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.

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.

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   31 December   30 September   31 December 
                                      2019         2018(5)         2019           2018 
                                 -------------  ------------  -------------  ------------ 
                                     EUR000        EUR000         EUR000        EUR000 
                                 -------------  ------------  -------------  ------------ 
 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 
  capital(7)                         2,505,765     2,296,000      2,590,751     2,331,098 
                                 =============  ============  =============  ============ 
 Risk weighted assets - 
  credit risk(8)                    12,219,112    13,832,589     12,247,267    13,820,385 
                                 -------------  ------------  -------------  ------------ 
 Risk weighted assets -                      -         2,182              -             - 
  market risk 
                                 -------------  ------------  -------------  ------------ 
 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   31 December   30 September   31 December 
                                  2019(9)       2018(10)       2019(9)       2018(10) 
                              -------------  ------------  -------------  ------------ 
                                  EUR000        EUR000         EUR000        EUR000 
                              -------------  ------------  -------------  ------------ 
 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 profit(11) for the period of EUR123,832 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.

The Group has elected to apply the EU transitional arrangements for regulatory capital purposes (EU Regulation 2017/2395) where the impact on the impairment amount from the initial application of IFRS 9 on the capital ratios is phased-in gradually over a five year period. The Group has notified its regulator about its election to adopt the transitional arrangements. The amount added back over the transitional period decreases based on a weighting factor of 95% in 2018, 85% in 2019, 70% in 2020, 50% in 2021 and 25% in 2022. The impact of IFRS 9 is fully absorbed after the five year transitional period.

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

6. CET1 includes regulatory deductions, comprising intangible assets amounting to EUR43,383 thousand as at 30 September 2019 (31 December 2018: EUR43,364 thousand). As at 31 December 2018 CET1 included regulatory deductions comprising deferred tax assets amounting to EUR163,082 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    30 June      30 September 
                                                    2019          2019            2019 
-----    ------------------------------------  -------------               ---------------- 
                                                   EUR000        EUR000         EUR000 
     ----------------------------------------  -------------  -----------  ---------------- 
      Credit risk (excluding counterparty 
 1    credit risk (CCR))                          11,837,609   11,974,850           947,009 
     ----------------------------------------  -------------  -----------  ---------------- 
      Of which the Standardised 
 2     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 
     ----------------------------------------  -------------  -----------  ---------------- 
      Of which Credit Valuation 
 12    Adjustment (CVA)                                4,788        6,313               383 
     ----------------------------------------  -------------  -----------  ---------------- 
 13   Settlement risk                                      -            -                 - 
     ----------------------------------------  -------------  -----------  ---------------- 
      Securitisation exposures 
       in the banking book (after 
 14    the cap)                                       49,700       52,504             3,976 
     ----------------------------------------  -------------  -----------  ---------------- 
 18   Of which Standardised Approach                  49,700       52,504             3,976 
     ----------------------------------------  -------------  -----------  ---------------- 
 19   Market risk                                          -       61,712                 - 
     ----------------------------------------  -------------  -----------  ---------------- 
      Of which the Standardised 
 20    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 
     ----------------------------------------  -------------  -----------  ---------------- 
      Amounts below the thresholds 
       for deduction (subject to 
 27    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 
                               -----------  ------------  -----------  ------------ 
                                  EUR000          %          EUR000          % 
                               -----------  ------------  -----------  ------------ 
 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   31 December 
                                 2019           2018 
 Transitional basis             EUR000        EUR000 
                            -------------  ------------ 
 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 EUR123,832 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   31 December 
                                                           2019           2018 
                                                          EUR000        EUR000 
                                                      =============  ============ 
 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 EUR59,043 thousand (31 December 2018: EUR60,326 thousand).

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

 
                                                        30 September   31 December 
                                                            2019           2018 
                                                           EUR000        EUR000 
                                                       =============  ============ 
 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 
                                                       =============  ============ 
 

* Including fair value adjustment on initial recognition of loans and advances to customers measured at fair value through profit and loss amounting to EUR59,043 thousand (31 December 2018: EUR60,326 thousand).

   3.           Reconciliation of NPEs 
 
                                                       30 September   31 December 
                                                           2019           2018 
                                                          EUR000        EUR000 
                                                      =============  ============ 
 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 
                                                      =============  ============ 
 NPEs (as per table above) (EUR000)                       4,084,918     7,418,613 
                                                      =============  ============ 
 Gross loans and advances to customers (as per 
  table above) (EUR000)                                  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         EUR000        EUR000 
                                                    ========  =============== 
 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    30 June      31 March    31 December 
                                            2019          2019         2019          2018 
                                           EUR000        EUR000       EUR000       EUR000 
                                       =============  ===========  ===========  ============ 
 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 (EUR000) 
                                       =============  ===========  ===========  ============ 
 
        *    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    30 June      31 March    31 December 
                                      2019          2019         2019          2018 
                                     EUR000        EUR000       EUR000       EUR000 
                                 =============  ===========  ===========  ============ 
 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    30 September 
                                       2019            2018 
                                                   (represented) 
                                      EUR000          EUR000 
                                  =============  =============== 
 Annualised operating profit            251,676          278,323 
                                  =============  =============== 
 Quarterly average total assets      21,705,559       21,575,953 
                                  =============  =============== 
 
 
 Accelerated            Following the Regulation (EU) 2016/445 of the ECB 
  phase-in period        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          Comprise (i) allowance for expected credit losses 
  expected loan          (ECL) on loans and advances to customers, (ii) the 
  credit losses          fair value adjustment on initial recognition of loans 
  (previously            and advances to customers, (iii) allowance for expected 
  'Accumulated           credit losses for off-balance sheet exposures (financial 
  provisions')           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           Comprise mainly: fees of external advisors in relation 
  other restructuring    to: (i) disposal of operations and non-core assets, 
  costs                  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           CET1 capital ratio (transitional basis) is defined 
  ratio (transitional    in accordance with the Capital Requirements Regulation 
  basis)                 (EU) No 575/2013. 
 
 CET1 fully loaded      The CET1 fully loaded (FL) ratio is defined in accordance 
  (FL)                   with the Capital Requirements Regulation (EU) No 575/2013. 
 
 Contribution           Relates to the contribution made to the Single Resolution 
  to SRF                 Fund. 
 
 Cost to Income         Cost-to-income ratio comprises total expenses (as 
  ratio                  defined) divided by total income (as defined). 
 
 Data from the          The latest data from the Statistical Service of the 
  Statistical            Republic of Cyprus, Cyprus Statistical Service, was 
  Service                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 EUR278 mn at 30 September 
                         2019 (compared to EUR290 mn at 30 June 2019 and EUR462 
                         mn at 31 December 2018). 
 
                         Additionally, gross loans (i) include loans and advances 
                         to customers measured at fair value through profit 
                         and loss of EUR430 mn at 30 September 2019 (compared 
                         to EUR454 mn at 30 June 2019 and EUR456 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 EUR99 mn at 31 December 
                         2018). 
 
 Group                  The Group consists f 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            Loan credit losses comprise: (i) credit losses to 
  losses (PL)            cover credit risk on loans and advances to customers, 
  (previously            (ii) net gains on derecognition of financial assets 
  'Provision charge')    measured at amortised cost and (iii) net gains on 
                         loans and advances to customers at FVPL. 
 
 Loan credit            Loan credit losses charge (cost of risk) (year to 
  losses charge          date) is calculated as the annualised 'loan credit 
  (previously            losses' (as defined) divided by average gross loans 
  'Provisioning          (the average balance is calculated as the average 
  charge') (cost         of the opening balance and the closing balance). 
  of risk) 
 
 
 
 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 EUR1 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 EUR6 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 EUR2.1 bn, due to loan reclassifications, 
                       revaluations, exchange rate or other adjustments (CBC). 
 
 Net fee and          Fee and commission income less fee and commission 
  commission income    expense divided by total income (as defined). 
  over total income 
 
 Net Interest         Net interest margin is calculated as the net interest 
  Margin               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        Comprise gross loans (as defined) net of allowance 
  advances to          for expected loan credit losses (as defined, but excluding 
  customers            credit losses on off-balance sheet exposures). 
 
 Net loan to          Net loan to deposit ratio is calculated as gross loans 
  deposit ratio        (as defined) net of allowance for expected loan credit 
                       losses (as defined) divided by customer deposits. 
 
 Net Stable Funding   The NSFR is calculated as the amount of "available 
  Ratio (NSFR)         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         Non-interest income comprises Net fee and commission 
  income               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       According to the EBA reporting standards on forbearance 
  exposures (NPEs)     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           Non-recurring items as presented in the 'Interim Condensed 
  items                   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            The NPE coverage ratio is calculated as the allowance 
  ratio (previously       for expected loan credit losses (as defined) over 
  'NPE Provisioning       NPEs (as defined). 
  coverage ratio') 
 
 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        Operating profit return on average assets is calculated 
  return on average       as the annualised operating profit (as defined) divided 
  assets                  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       In accordance with the legislation in Cyprus which 
  Conservation            has been set for all credit institutions, the applicable 
  Buffer (CCB)            rate of the CCB is 1.25% for 2017, 1.875% for 2018 
                          and 2.5% for 2019 (fully phased-in). 
 
 Pro forma for           Includes the impact from the completion of the sale 
  CNP                     of the investment in CNP 
 
 Pro forma for           Includes the impact from the completion of the sale 
  CNP and VEP             of the investment in CNP and the Voluntary Staff Exit 
                          Plan (VEP) 
 
 Pro forma for           Includes the impact from the completion of Project 
  Helix                   Helix, as well as the impact from the agreement for 
                          the sale of a portfolio of retail unsecured NPEs, 
                          with gross book value EUR33 mn as at 31 March 2019, 
                          known as Project Velocity. 
 
 Profit/(loss)           Excludes non-recurring items (as defined) 
  after tax and 
  before non-recurring 
  items 
 
 Profit/(loss)           Profit/(loss) after tax and before 'non-recurring 
  after tax -             items' as defined, except for the "Advisory and other 
  Organic                 restructuring costs - excluding discontinued operations 
                          and NPE sale (Helix)". 
 
 Quarterly average       Average of interest earning assets as at the beginning 
  interest earning        and end of the relevant quarter. Interest earning 
  assets                  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           Total capital ratio is defined in accordance with 
  ratio                   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 EUR9 mn, compared to EUR5 mn for 2Q2019. 
                         'Advisory and other restructuring costs-excluding 
                         discontinued operations and NPE sale (Helix)' for 
                         9M2019 were EUR21 mn, compared to EUR26 mn for 9M2018. 
 
                         Restructuring costs relating to NPE sale (Helix) for 
                         3Q2019 were EUR1 mn, compared to EUR7 mn for 2Q2019. 
                         Restructuring costs relating to NPE sale (Helix) for 
                         9M2019 were EUR9 mn, compared to EUR17 mn for 9M2018. 
 
 Total income           Total income comprises net interest income and non-interest 
                         income (as defined). 
 
 Total loan credit      Total loan credit losses, impairments and provisions 
  losses, impairments    comprises loan credit losses (as defined), plus (provisions)/reversal 
  and provisions         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 (EUR) 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 EUR21.1 bn and Total Equity was EUR2.5 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.

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