Investor Presentaiton
D. Business Overview (continued)
Lean operating model (continued)
The cost to income ratio excluding special levy on deposits and other levies/contributions for 2023 is expected to
decrease to mid-40s, reflecting management's ongoing focus on efficiency and cost discipline in an inflationary
environment. This target includes a commitment of maintaining total operating expenses of a range between €350-
360 mn, reflecting some upward pressure on costs from investments in transformation and digitalisation and the renewal
of collective agreement in 2023. The cost to income ratio excluding special levy on deposits and other levies/contributions
for 2024 is expected to remain around similar levels to 2023.
Transformation plan
The Group 's focus continues to deepen the relationship with its customers as a customer centric organisation. A
transformation plan is already in progress and aims to enable the shift to modern banking by digitally transforming
customer service, as well as internal operations. The holistic transformation aims to (i) shift to a more customer-centric
operating model by defining customer segment strategies, (ii) redefine distribution model across existing and new channels,
(iii) digitally transform the way the Group serves its customers and operates internally, and (iv) improve employee
engagement through a robust set of organisational health initiatives.
Digital transformation
The Bank's digital transformation focuses on developing digital services and products that improve the customer
experience, streamlining internal processes, and introducing new ways for improving the workplace environment.
During 4Q2022, the Bank continued to enrich and improve its digital portfolio with new innovative services to its customers.
The introduction of the QuickLoan new lending products available through the Group's digital channels (Mobile App and
Internet Banking), further differentiates the Bank within the Cypriot market and enhances its status as a digital leader in
banking. The introduction of QuickLoan allows the Bank's retail customers to apply for a loan and have an instant update
of the approval status of their application.
The adoption of digital products and services continued to grow and gained momentum in the fourth quarter of 2022 and
beyond. As at the end of December 2022, 93.9% of the number of transactions involving deposits, cash withdrawals and
internal/external transfers were performed through digital channels (up by 27.5 p.p. from 66.4% in September 2017 when
the digital transformation programme was initiated). In addition, 81.7% of individual customers were digitally engaged (up
by 21.5 p.p. from 60.2% in September 2017), choosing digital channels over branches to perform their transactions. As at
the end of December 2022, active mobile banking users and active QuickPay users have grown by 12.8% and 31.3%
respectively over the last 12 months. The highest number of QuickPay users to date was recorded in December 2022 with
169 thousand active users. Likewise, the highest number of QuickPay payments was recorded in December 2022 with 565
thousand transactions.
Asset quality
Balance sheet de-risking was largely completed in 2022, marked by the completion of Project Helix 3 which refers to the
sale of non-performing exposures with gross book value of €550 mn as at the date of completion. Project Helix 3 represents
a further milestone in the delivery of one of the Group's strategic priorities of improving asset quality through the reduction
of NPEs. Overall, since the beginning of 2022, and including organic NPE reductions of €360 mn, the Group reduced its
NPEs by 69% and its NPE ratio from 12.4% to 4.0% delivering the 2022 NPE ratio target of sub-5%. As a result, the Group's
priorities remain intact, maintaining high quality new lending with strict underwriting standards and preventing asset quality
deterioration in this uncertain outlook.
The cost of risk target and NPE ratio target display conservative assumptions on both NPE inflows and
provisioning to weather the ongoing macroeconomic uncertainty. Although there are currently no signs of asset
quality deterioration, the cost of risk target of 50-80 bps and NPE ratio target of sub 5% remain unchanged for
2023. The cost of risk is expected to start normalising from 2024 onwards to around 40-50 bps.
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