Investor Presentaiton
D. Business Overview
Credit ratings
The Group's financial performance is highly correlated to the economic and operating conditions in Cyprus. In December
2022, Fitch Ratings upgraded the Bank's long-term issuer default rating to B+ from B-, whilst maintaining the positive
outlook. The two-notch upgrade reflects improved Bank's asset quality, supported by the completion of Project Helix 3
together with the organic reduction of impaired assets. The upgrade is also underpinned by Fitch's view of the resilience of
the Cypriot's economy, even in light of growing economic uncertainties. In October 2022, Moody's Investors Service
upgraded the Bank's long-term deposit rating to Ba2 from Ba3, maintaining the positive outlook. The main drivers for this
upgrade are the resilience of the Cypriot economy, that is supporting the operating conditions of the banking system to
external shocks and the gradual improvement in credit conditions. In September 2022, S&P Global Ratings raised the
long-term issuer credit rating of the Bank to BB- from B+ and revised the outlook to stable from positive. The upgrade
reflects the improvement in asset quality and easing economic risks.
Upgrade of financial targets
The Group is a diversified, leading, financial and technology hub in Cyprus. During 2022 the Group delivered positive
financial results and exceeded its 2022 financial targets, confirming the sustainability of its business model with well-
diversified revenues and disciplined cost containment despite inflationary pressures. Overall the Group achieved a recurring
ROTE of 11.3% for the year. The positive performance is expected to continue in 2023, leading to an upgrade of targeted
ROTE to over 13% from over 10% facilitated by the Group's positive gearing to rising interest rates, improved efficiencies,
healthy loan portfolio and robust capital position. Therefore, the intention to commence meaningful dividend distributions
from 2023 onwards, subject to regulatory approval and market conditions is reiterated. The Group expects to achieve ROTE
over 13% for 2024, on the back of stabilising margins and growth of the loan portfolio.
Favourable interest rate environment
The structure of the Group's balance sheet is geared towards higher interest rates facilitating immediate growth in net
interest income. As at 31 December 2022, cash balances with ECB (excluding TLTRO of c.€2.0 bn) amounted to c.€7.6
bn, well positioned to benefit from further interest rate rises. The repricing of the reference rates gradually benefits the
interest income on loans, as over 95% of the Group's loan portfolio is variable rate. The Group benefited from the steep
and fast increase of interest rates in 2022. The net interest income for FY2022 stood at €370 mn, reflecting an increase of
25% yoy. Factoring in the current expectations for the evolution of the interest rates, the net interest income guidance for
2023 is upgraded and the net interest income is now expected to grow by 40-50% year on year. This incorporates
assumptions of continuing to rebuild the fixed income portfolio, increased costs of funding, gradual increase in cost of
deposits and gradual change in deposit mix towards time deposits. Following the completion of Project Helix 3 and the end
of TLTRO III favourable terms, an overall amount of c.€28 mn, will not be repeated in net interest income for 2023. The
growth in the fixed income portfolio is expected to broadly offset foregone net interest income from TLTRO III and higher
wholesale funding costs.
Growing revenues in a more capital efficient way
The Group remains focused on growing revenues in a more capital efficient way. The Group aims to continue to grow its
high-quality new lending, drive growth in niche areas for further market penetration and diversify through non-banking
services, such as insurance and digital products.
The Group has continued to provide high quality new lending in FY2022 via prudent underwriting standards. Growth in new
lending in Cyprus has been focused on selected industries in line with the Bank's target risk profile.
During the year ended 31 December 2022, new lending amounted to a record of €2.1 bn, up by 17% yoy, returning to pre-
pandemic levels. The yoy increase is driven by increased activity across all sectors, with corporate being the main driver.
As a result, the net performing loan book expanded to €9.6 bn up by 3% yoy, despite uncertainties in the macroeconomic
environment. However, due to the continuing interest rate rises, demand for new loans is expected to slow down in 2023.
The short-term net interest income is expected to be supported primarily by asset repricing and higher investments in
securities.
As at 31 December 2022, the fixed income portfolio of the Group amounted to €2.5 bn, up by 30% on the prior year and
represents 10% of total assets. The portfolio comprises highly rated fixed rate bonds with low average duration, giving the
Group the flexibility to take advantage of rising interest rates. The completion of the balance sheet de-risking and the
Group's comfortable liquidity position is expected to allow the Group to continue rebuilding the fixed income portfolio in
2023, subject to market conditions.
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