Bank of Cyprus Holdings

Good morning, everyone. Thank you for joining our financial results conference call for the 9th of March, ended 30 September 2025. I am joined by Elisa Libadziodou, Executive Director of Finance, and Anita Pavlou, Managing Strategy, Strategy, IR, and ESG. After my introductory remarks, Elisa will go into more detail on our financial performance, and then we will be very happy to take your questions, both during this conference call and afterwards. I would like to start by briefly reminding you of our powerful equity story and our core strengths on slide number 3. We are a leading player in a highly liquid and concentrated banking sector in Cyprus and we operate in a supportive microeconomic environment that is resilient and growing. We have a diversified business model with services extended beyond banking allowing us to navigate successfully the current interest rate cycle while investing in new growth initiatives and leveraging key strengths that are under our control. Our strong capital position and organic generation allow us to deliver attractive dividend distributions and overall shareholder returns. We confirm our intention to distribute 70% of 2025 earnings And in October, we paid out first interim dividend in the past 15 years of $0.20 per share. All in all, we remain confident that we can achieve a high-tax rate on 15% CPI ratio in a circa 2% normalized interest rate environment. Slides 4 and 5 show an overview of the microeconomy development. We operate in a strong, diversified, mainly service-based economy that is growing faster than Europe. The economy expanded by 3.6% in Q2 of 2025. According to the latest projections from the Ministry of Finance, Cyprus GDP is expected to grow by 3.2% in real terms in 2025, exceeding the average growth rate of the Eurozone. Inflation is contained, the economy is operating at almost full capacity in terms of employment, and we continue to see strong results of tourists, which is set to exceed the 2024 record levels, both in terms of arrivals and revenue. Cyprus stands on solid fiscal ground, underpinned by significantly improved public debt to GDP, which at 62% is well below the euro area average and is expected to drop further. to below 60% by the end of this year. The line number 6 shows the snapshot of the performance in Q3. Turning to our financial performance this quarter, our net interest income of $180 million remained resilient thanks to hedging and strong volume growth, which cushioned the impact from lower interest rates. Our cost-to-income ratio at 35% demonstrates good cost efficiency While our cost of risk at 33 base points reflects strong asset quality. All in all, our profitability remains flat of the prior quarter at 180 million. Moving now to slide 7 and the key drivers of shareholder value creation. We maintain a strong rate of over 80% on a high capital base with a CTR ratio exceeding 20%. and a low balance sheet risk, delivering another 111 basis points for organic carbon generation in the quarter on a pre-distribution level. Our tangible book value per share of €5.86 grew by 6% year-on-year after paying $0.68 cash dividend per share during 2025. Looking at slide 8, you can see that our 9-month performance is tracking ahead of the targets we have set in February. We are upgrading today our 2025 ROTA target to high teams from mid-teams, driven mainly by higher net return income. Our ROTA target, based on 15% CQR ratio, is expected to exceed 30%. Looking beyond this year, we look forward to update you on our new financial targets and strategy during the first quarter of next year. Let's now turn to slide 9 and our distribution track record. In October, we paid an entire dividend of 20 cents per octane ratio, which corresponded to circa 40% per ratio out of first half 2025 earnings. For 2025, we are reaffirming our distribution target for 70% PR ratio, which is at the top end of our policy, implying a high single-digit yield based on current share prices. I will now hand over to Elisa, who will run you through our first house results in more detail.

Thank you, Vanikos, and good morning from me, too. Let's turn to slide 10 and the summary of our key highlights in the first nine months of the year. Healthy volume growth with new lending of €2.2 billion and performing loan book growing at 6% since December 2024. A strong return on tangible equity of 18.4% supported by resilient revenues and the low cost-to-income ratio of 35%. Further improvements in asset quality with the MTE ratio reaching 1.2% and cost of risk at 35 basis points. In September 2025, we successfully refinanced our 300 million subordinated Tier 2 notes at a significantly lower coupon rate and strong capital ratios of over 20% driven by strong capital generation, including a distribution accrual at 70% payout ratio. Moving on to slide 12, we have a simple balance sheet characterized by high liquidity with our deposit base twice the size of our loan portfolio. Our balance rate has grown by 5% since the beginning of the year, mainly as a result of higher customer deposits, while our strong liquidity is gradually being deployed to our loan and fixed income portfolios. Slide 13 shows the net interest income headwinds moderating. Our NII for the third quarter displayed a modest decline of 1% Q and Q, being supported by hedging and volume growth, mitigating the impact of lower rates and the related repricing of loans. Our cost of wholesale funding is expected to decrease in the coming quarters, following the refinance of our tier two note at 4.25% coupon versus the previous coupon of 6.625. With rates expected to remain unchanged into year end, we expect to close the year with net interest income of around 720 million euro underpinned by hedging activity, strong volume growth, and positive deposit trends. We'll come back to you with more precise guidance for 2026 in the first quarter of next year, but I want to observe that should rates stay at the 2% level, we should expect most of the negative headwinds to now be behind us. Moving on now to our hedging activity and slide 14. I want to remind you of our significant hedging efforts undertaken over the last couple of years. that have reduced our NII sensitivity to 100 basis points parallel shifting interest rates by 58 million euro since December 2022. We have added around 600 million euro of hedging in the first quarter, adding to a total of 10.9 billion euro, or 43% of our interest earning assets. These hedging actions include the received fixed interest rate swaps and further investment in fixed rate bonds. The hedging was carried out on an average yield of 2.7%, meaning that hedging is already a net revenue contributor. We will continue to manage our balance sheet dynamically and carry out hedging appropriate to the interest rate outlook evolution. On slide 15, you can see that our deposit base of €21.5 billion continues to grow, up 3% on the prior quarter and up 7% on the prior year. And the breakdown of our deposit base on the bottom left chart shows that more than 80% of our deposits are from Cypriot residents. We have seen deposit costs declining from the peak in 2024 and now stand at 27 basis points for the third quarter, while the share of term deposits remains broadly unchanged on the prior quarter at 31%. The well-managed deposit cost reflects mainly the very liquid Cypriot banking sector, as well as our strong franchise and market position. Let's now turn to slide 16 and new lending. We are encouraged by the growth of our performing loan book. During the first nine months of the year, we granted new loans of 2.2 billion euros at 31% on an annual basis. We're pleased to see our loan book growing by 6% since December 24, reflecting 4% broad-based domestic loan growth, and the careful build-up of our international book to €1.2 billion, on track to achieve the €1.5 billion medium-term target.

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