Investor Presentaiton
D. Business Overview (continued)
Ukrainian crisis
The economic environment has evolved rapidly since February 2022 following Russia's invasion in Ukraine. In response to
the war in Ukraine, the EU, the UK and the US, in a coordinated effort joined by several other countries imposed a variety
of financial sanctions and export controls on Russia, Belarus and certain regions of Ukraine as well as various related
entities and individuals. As the war is prolonged, geopolitical tension persists and inflation remains elevated, impacted by
the soaring energy prices and disruptions in supply chains. The high inflation weighs on business confidence and
consumers' purchasing power. In this context the Group is closely monitoring the developments, utilising dedicated
governance structures including a Crisis Management Committee as required and has assessed the impact the crisis has
on the Group's operations and financial performance.
Direct impact
The Group does not have any banking operations in Russia or Ukraine, following the sale of its operations in Ukraine in
2014 and in Russia in 2015. The Group has run down its legacy net exposure to less than €1 mn as at 31 December 2022
in Russia through write-offs and provisions.
The Group has no exposure to Russian bonds or banks which are subject to sanctions.
The Group has limited direct exposure with loans related to Ukraine, Russia and Belarus, representing 0.4% of total assets
or c.1% of net loans as at 31 December 2022. The net book value of these loans stood at €108 mn as at 31 December
2022, of which €98 mn are performing, whilst the remaining were classified as NPEs well before the current crisis. The
portfolio is granular and secured mainly by real estate properties in Cyprus.
Customer deposits related to Ukrainian, Russian and Belarusian customers account for only 6% of total customer deposits
as at 31 December 2022. This exposure is not material, given the Group's strong liquidity position. The Group operates
with a significant surplus liquidity of €7.2 bn (LCR ratio of 291%) as at 31 December 2022.
Indirect impact
Although the Group's direct exposure to Ukraine, Russia or Belarus is limited, the crisis in Ukraine had a negative impact
on the Cypriot economy, mainly arising from the tourism and professional services sectors, increasing energy prices fuelling
inflation and disruptions to global supply chains. During 2022 the performance of the tourism sector was strong despite
challenges and represents 80% of 2019 levels, despite the sizeable loss of tourist arrivals from Russia and Ukraine. The
Group continues to monitor the exposures in sectors likely impacted by the prolonged geopolitical uncertainty and persistent
inflationary pressures and remains in close contact with customers to offer solutions as necessary.
Cyprus has no energy dependence on Russia as it imports oil from Greece, Italy and the Netherlands; however it is indirectly
affected by pricing pressures in the international energy markets. The focus on renewables increases, marked by a steady
improvement in contribution at 18% in 2022 (compared to 16% in 2021).
Professional services account for c.10% of GDP (based on FY2021) of which some relate to Russia or Ukraine and thus
expected to be adversely impacted. There is however no credit risk exposure as the sector is not levered.
Between 2018-2020, Cyprus recorded net foreign direct investment (FDI) outflow to Russia. While Russian gross FDI flows
in and out of Cyprus may be quite large, these often reflect the typical set-up of Special Purpose Entities, with limited actual
impact on the Cypriot economy, hence likely to have limited impact on domestic activity levels.
Overall, the Group expects limited impact from its direct exposure, while any indirect impact depends on the duration and
severity of the crisis and its impact on the Cypriot economy.
The Group continues to closely monitor the situation, taking all necessary and appropriate measures to minimise the impact
on its operations and financial performance, as well as to manage all related risks and comply with the applicable sanctions.
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