Bank of Cyprus Holdings Public Limited Company

Good morning everyone. Thank you for joining our financial results conference call for the year ended 31st December 2024.

I am joined by Eliza Livadiotou, Executive Director of Finance and Annita Pavlou, Manager IR and ESG. After my introductory remarks and updated financial targets, Eliza will go into more detail on our financial performance and then we will be 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 cost trends on slide number four. We are the leading financial group across banking in Cyprus, which is a highly liquid and concentrated banking sector, and we operate in a supportive macroeconomic environment.

The Cypriot economy remains strong, delivering good growth, proving once again its flexible and resilient characteristics. We are managing the headwinds from the normalization of interest rate, while simultaneously investing in new growth initiatives, leveraging on our key strengths under our control.

Our diversified business model, our robust asset quality and our strong capital position all support our commitment for attractive shareholder returns by continuing to deliver sustainable high teens ROTE on 15% CET1 ratio, in a normalized 2% interest rate environment. Slides 5 and 6 show an overview of the macroeconomic environment.

We operate in a strong, diversified, mainly service-based economy that exhibits continued growth. The economy expanded by 2.9% in Q4 and for 2024 overall delivered growth of 3.4%.

This is underpinned by a record year for tourist activity, lower unemployment, improved public debt-to-GDP and lower inflation. Going forward, based on the latest projections of the Ministry of Finance, economic growth is expected to be around 3.3% for 2025, once again outpacing the Eurozone average.

Economic trends are expected to remain strong in 2025 with unemployment rate remaining broadly stable year-on-year at 4.8% and inflation continues to improve modestly to 2% from the current 2.3% levels. Public debt-to-GDP continued to decline to 68% as of November 2024 and remains well below the Euro area average, with the latest projections indicating that by 2026 public debt-to-GDP will be below 60%.

This strength of the Cypriot economy is reflected in its credit rating, with recent sovereign ratings upgraded by the major rating agencies to three notches above investment grade. Let's now turn to Slide 7, which shows the Bank of Cyprus is placed at the center of this economy, supporting the wider ecosystem.

We are the leading bank in Cyprus with around three quarters of the population being customers of the bank. We have a leading market position in both loans and deposits with market shares of 43% and 37% respectively, as of the end of 2024.

We have a profitable life and non-life insurance subsidiaries with high market shares and we hold a 75% stake in the leading payment solution provider integrating our diversified business model and holistic offering. Slide 8 is a summary of our key achievements for 2024.

Our key milestones in 2024 included a 50% distribution payout of 2024 earnings, totally cumulative distribution of 400 million over the last three years, ROTE in excess of 20% for a second consecutive year, a record net profit of over 500 million, further improvements in our asset quality with NP ratio below 2% and full compliance with our MREL requirements. Importantly, we also moved our listing from London to Athens, improving our stock liquidity and visibility.

Moving now to Slide 9, 2024 saw significant shareholder value creation. Our strong ROTE of over 20% delivered 400 basis points of capital generation on a previous distribution level.

Our 241 million distribution takes a cumulative distributions to 400 million since 2022, representing a quartet of our market capitalization. This is well in excess of the target we had originally set ourselves at our Summer 2023 Investor Update in both size and timing.

And our book value per share again rose and is now almost 50% higher than it was two years ago. Let's now turn to Slide 10, shareholders distributions, a key focus area for us.

We have delivered on our promise of shareholders distributions. To remind you, a year ago we indicated a distribution payout ratio of between 30% and 50% for 2024 and at the time we still required ECB approval for the distributions.

During the course of last year we raised that commitment to 50% and today we are delivering on that for 2024, offering our investors a 12% distribution yield based on the share price as at the end of 2024 and we no longer require ECB approval for distributions. We are also today raising our distribution period policy to a raise between 50% and 70%, reflecting the steady sustained progress achieved, the profitability profile, and medium-term growth outlook of the bank.

We will also consider the introduction of interim dividends. We recognize how important capital returns are for our shareholders and we remain fully committed to generate shareholders distributions, continue to offer an attractive yield in effective context.

Looking at Slide 11, as at the start of 2024, we set ourselves several targets for the year, which we subsequently upgraded during the summer. I am delighted to report that we have exceeded every target we set ourselves, including ROTE and capital generation.

So looking forward on Slide 12, I would like to share with you our priorities for the group both for 2025 and beyond. My priorities for the group are navigate the normalization of interest rate, grow the business, strengthen the franchise investing in new business initiatives with no compromise to our risk appetite and of course maintaining our efficiency mindset.

Our guiding lighting is return on equity, which we expect to be in the mid teens on a reported CET1 basis and high teens based on a 15% internal ratio in 2025. This is assuming normalized rates of 2%.

For 2025, we expect to deliver organic CET1 capital generation of around 300 basis points, which in turn will support a distribution payout of between 50% and 70%. Supporting the ROTE are our expectations around income and costs which I will run through over the next few slides.

We are also assuming a cost of risk towards the lower end of our 14 to 15 basis points normalized range with our loan book continuing to demonstrate robust credit quality. Beyond 2025, we expect to stabilize and grow the business and will confirm our commitment to high-teens profitability of 15% CET1 in 2026 and beyond, a level we believe we can sustain in a 2% rate environment.

Looking at our net interest income expectation on Slide 13, analysts have indicated for some time we expect net interest income to decline in 2025 to below 700 million, largely as a result of lower interest rates. We expect some stabilization into 2026 with net interest income exceeding 650 million for 2026 based on our max expectations that rates will remain broadly stable at around 2%.

Within that, we expect deposit volumes and costs to remain broadly unchanged and we will continue to grow our fixed income portfolio and hedging activities, subject of course to market conditions. Supporting NII, we expect improved loan growth momentum, which I will come back to.

Note that this guidance is after factoring in higher expected wholesale funding costs from our 2024 MREL issuance. Moving now to Slide 14, one increasingly important offset to rate driven margin pressure which will be an expanding loan book, which we expect to grow around 4% per annum, a similar rate to 2024.

There will be two key elements to that. Domestically, 3% economic growth will support both retail and corporate loan demand, helped further by gradual recovery of loan repayments in a normalized interest rate environment.

Internationally, we are focusing on expanding our corporate business in Greece in selective sectors in line with the bank's target risk profile and overall expect that portfolio to grow to around 1.5 billion in the medium term. Moving to Slide 15, while there are downward pressures on net interest income, we are refocusing our efforts on growing our non-net interest income revenue sources.

Slide 15 gives the flavor of our initiatives around growing our fee and commission line where we expect high transaction volumes, growth in digital sales through our Jinius platform and growing assets under management in our private and affiliate banking business and increased fees from the FX platform eFX Convert. As a result, we expect fee and commission income to grow around 4% per annum.

In addition, as shown on Slide 16, we expect good growth from our two insurance business Eurolife and Genikes. In each business we have strong market shares and generate the highest profitability in their sector.

We target a growth of over 6% per annual income for Eurolife and approximately 6% in premium income for Genikes in the medium term. Finally moving to Slide 17, for several years we have maintained our focus on careful cost management and that will remain the case going forward.

Clearly, helped by the rate cycle, our cost-to-income ratio has declined 15 percentage points since 2022. While we expected fall in net interest income would place upward pressure on the cost income ratio for 2025, we remain focused on ensuring we remain very cost efficient and a ratio of around 40%, we believe, place us amongst the leading group of banks across Europe; importantly and incorporated into our existing plans are high levels of continued investments in the business.

This will be offset by savings and optimization achieved by the continuing digital transformation of our business and the embracing of new technology to improve efficiencies. So hopefully that gives you a flavor of what to expect from us both in 2025 and beyond.

I will now hand over to Eliza who will run through you our 2024 results in more detail.

Thank you, Panicos, and good morning from me too. Let's now provide more details to the full year 2024 highlights on Slide 19.

As the largest financial group in Cyprus, we extended a record 2.4 billion of new loans in 2024, an increase of 20% on the prior year whilst maintaining robust underwriting standards. Our gross performing loan book of 10.2 billion Euro grew 4% in the year.

During 2024, we recorded a profit after tax of 508 million Euro, equivalent to earnings per share of 114 cents, being 5% higher compared to the prior year. Our resilient NII, diversified business model, ample liquidity and healthy asset quality have been pivotal in achieving this strong profitability.

Our cost base was impacted by inflationary pressures on staff costs and higher IT, marketing and professional fees, delivering a cost-to-income ratio at 34% for the full year. On asset quality, our NPE ratio decreased further to 1.9% in Q4 and we are now fully covered following an additional agreement for a small NPE sale in the fourth quarter.

We maintained high liquidity this quarter with cash balances with central banks representing almost 30% of the group's total assets and our customer deposits grew 6% and 3% on a yearly and quarterly basis respectively to 20.5 billion. Now focusing on capital metrics, regulatory CET1 and total capital ratio stood at 19.2% and 24.0% respectively and, as mentioned earlier, we are proposing today a distribution at a targeted 50% payout ratio mainly by a cash dividend supplemented by a share buyback.

Slide 20 shows the snapshot of the fourth quarter performance driven by gradual declines in net interest income reflecting the lower interest rate, higher cost to income ratio, mainly due to seasonally higher expenses and the contained cost of risk well below our normalized provisioning range, on the back of robust credit performance. All in all, we concluded with a return on tangible equity of 17.1% in Q4.

Let us now discuss net interest income on Slide 23. Our net interest income for the full year stood at 822 million Euro, up 4% year-on-year, benefiting from higher rates, higher liquidity and a well managed cost of deposits.

On a quarterly basis, net interest income was modestly down 3% as the impact of lower ECB deposit rate was largely offset by the continuing increase in liquidity through the stock of deposits and the decline in loan yields of 34 basis points, reflects only partly the 60 basis points decline in new report, with the full impact evident in Q1. We expect 2025 NII to be lower than 700 million Euro reflecting lower rates and the slower re-pricing of deposits.

Let's now turn to Slide 24 on our hedging activity. Here I'd like to highlight our significant hedging efforts undertaken over the last couple of years that have reduced our NII sensitivity to 100 basis points parallel shift in rate by 43 million Euros since December 2022.

We added 4.5 billion of hedging in 2024, adding a total of 9.0 billion Euro or 37% of the group's interest earning assets. We plan an additional 1 billion Euro of hedging activity in 2025, subject to market conditions.

These hedging actions include receive fixed interest rate swaps, further investment in fixed rate bonds and reverse repositories. As of 31 December 2024, hedging carried an average yield of 2.9%, which means the hedge is already in Q1 as a net revenue contributor.

Simultaneously, about a quarter of the group's loan portfolio is linked with the bank's base rate, which provides a natural hedge against the cost of deposits. On Slide 25 you can see that those deposits increased by 3% on the prior quarter and 6% on the prior year to 20.3 billion Euro.

We are encouraged that the shift in deposit mix towards time and notice deposits remained flat quarter-on-quarter at 33% of the total. And if you look at the breakdown of our 20.5 billion deposit base, you can see on the bottom left chart that 80% of our deposits are from Cypriot residents.

Overall deposit costs remain low at 34 basis points in Q4. This reflects the very liquid Cypriot banking sector, cautious depositor behavior as well as our strong franchise and market position.

As a reminder, the sensitivity to each 10 basis points change in the cost of deposits is equivalent to 21 million Euro NII impact, while the percentage point change in the deposit mix impacts NII by 2 million Euro per annum. Moving now to Slide 26 and our lending activity, we are encouraged by the solid growth in new lending, achieving a record 2.4 billion Euro in new loans in 2024, driven mainly by corporate and international demand.

The gross performing loan book was up 4% year-on-year to 10.2 billion Euro, showing encouraging momentum that we expect to continue into 2025 and beyond. Importantly, we have of course maintained our strong underwriting standards as 99% of new exposure retained since remain performing today.

Slide 27 shows our progress on the fixed income portfolio. As of 31 December our fixed income book stood at 4.2 billion Euro, up by 19% on the prior year, representing 16% of total assets.

The majority of the portfolio is measured at amortized cost and it is held to maturity, hence no fair value of gains or losses are recognized in the Group's income statement or equity. The portfolio is comprised of high quality assets with average maturity of three to four years and is highly diversified.

We aim to grow the fixed income book further in the years to come so that it becomes to represent around 20% of our total assets in the medium term, subject to market conditions. Slide 28 provides a summary of the non-interest income.

In 2024 the group's non-NII fell by 9% mainly due to higher claims and recalibrations of some of our insurance models, subdued transactional fees and the revenue loss that occurred in the last quarter relating to a specific large illiquid revenue properties with the idiosyncratic characteristics. Despite this, non-interest income remains an important contributor to the Group profitability and covered almost 75% of its total OpEx during 2024.

I would also like to remind you that both FX and revenue gains are volatile profit contributors. Separately, our insurance businesses remain a valuable revenue stream for the Group despite the yearly lower insurance income in 2024.

They are capital light businesses and the net insurance result contributes to 17% of the group's non-NII. Slide 34 provides an overview of operating expenses.

Our cost-to-income ratio of 34% in 2024 was supported by strong revenue. Total OpEx rose by 8% year-on-year driven by a salary increment and inflationary pressures in staff costs, variable pay of around 11 million Euro to incentivize individual performance, and higher OpEx reflecting higher professional fees on the assets listing, higher IT and marketing expenses.

Additionally, in 2024 we completed a small scale targeted voluntary exit plan whereby 57 full time employees were approved to leave at a total cost of 9.5 million Euro. On a quarterly basis, our cost-to-income ratio increased to 38% driven by higher seasonal expenses.

Given the revenue normalization, we expect an increase in the cost-to-income ratio in 2025 to around 40%. Now turning to cost of risk on Slide 35, the continued robust performance of the credit portfolio along with the improved macroeconomic assumptions in 2024 drove our cost of risk down to 30 basis points.

On a quarterly basis, cost of risk stood at 32 basis points. Additionally, we incurred impairments of 17 million Euro in the fourth quarter relating to REMU stock properties due to impairments on large specific illiquid properties.

During Q4, there was also a provision of 13 million Euros relating mainly to the progress and final resolution on specific existing litigations and other matters. Now moving to capital on Slide 37, the bank's capital position remains robust.

Strong capital generation drove our CET1 and total capital ratios to 19.2% and 24.0% respectively, net of the distribution at the 50% payout ratio. And we confirmed that the regulatory requirement for dividends was lifted in January 2025 based on our final SREP letter.

CRR III became effective on 1st January 2025. The implementation of CRR III is expected to have a positive impact on the group on its initial application.

Moving now to Slide 38 on asset quality, we have achieved our 2024 NPE target early and reduced the NPE ratio to below 2% as at 31st December, pro forma for the NPE sales agreement and we are fully covered. We're encouraged by the fact that NPE inflows remain limited.

Slide 39 now on our Real Estate Management Unit. REMU is our engine to manage the stock of properties acquired from defaulted borrowers.

As you can see, the REMU repossessed stock decreased by 200 million Euro year-on-year to 660 million as at 31st December and we remain well on track to achieve our 2025 target of around 5 billion euro. And we carry revenue stock at a conservative value as it represents 72% of the current open market value.

It's important to note that we continue to sell on average close to independently assessed open market value and above book value. I would like now to hand back to Panicos for his closing remarks.

Thank you, Eliza. Moving to Slide 40.

Our priorities going forward will center on prudent capital management, driving new growth initiatives focused on loan book growth, non interest income diversification, maintaining cost discipline whilst re-investing in the business and protecting the fundamentals of our asset quality. This is to ensure we maintain a strongly capitalized and highly profitable organization generating high-teens ROTE on 15% CET1 ratio and delivering attractive returns to our shareholders.

This concludes our presentation. I will now open the floor for your questions.

Hello and congratulations for this strong set of results. I have a couple of questions.

One is on the NII dynamics and the second one is on capital. So my first question would be if you could talk us through the drivers behind your expectation of why deposit volumes are expected to remain broadly flat at current levels for 2025.

And if you could also confirm the interest rate assumptions based on your business plan for 2026 onwards. And the second set of questions is that, given your excess liquidity, would you consider any inorganic actions to strengthen the group's operating model, especially in a falling rates environment?

And on your new payout communication, as you said in your presentation, since you no longer require regulators approval for distribution, what is the likelihood of a 70% payout ratio of your full year 2025 profits? And what would indicate your decision on whether you will give a 60% or 70% payout?

Thank you.

Okay, thank you, Eleni. I will start with some general comment on the capital returns and then answer specifically your question.

So I would like to remind at all that cumulatively the last three years we pay 400 million, a quartet of our market cap and that, as we mentioned earlier, we no longer need the regulatory approval to pay dividends. And I remember that we started 2024 with a dividend between 30% to 50% and within the year we announced that we target 50% and now we're delivering the 50%.

So we now upped it to 50% to 70%. This is our current dividend policy and our intention is to get to the higher end of this policy soon as possible.

Then decisions will be taken by the Board based on market conditions at that time. But our intention is to go directly to the higher end of the dividend policy as soon as possible.

In terms of capital and inorganic actions, yes, it's our duty as management team to consider inorganic action as well. As I have said many times, we are willing to consider small inorganic add-ons that will facilitate and accelerate our, let's say, strategy, especially on the non-NII component, but they have to make financial sense and they will not jeopardize our risk profile, and of course our ability to be generous to our shareholders.

On the deposits, general common deposits, the endeavors are kind of management of volume and rate. In 2024 we are successful in managing both by increasing the volume and at the same time keeping the cost at very, very low levels.

So for 2025 onwards we have to make an assumption. The basic assumption is that both volume and cost will remain the same.

Of course, this is something that we will monitor. We have to see how depositors will behave in a reducing rate environment and if things tend to be different from this basic assumption, of course, this will be reflected positively in our NII, but the fundamentals of the market, very liquid cost market, remain the same.

And on the rates on Slide 13 where we show our NII drivers and you will see transparently, I mean our objective was to be as transparent as possible on our NII drivers and assumptions behind those, which is why we set them out on the left hand side of the slide and on the bottom right you see our average ECB and Euribor assumptions for the period. So I would refer you to that.

It's 2% for the ECB rate and 2.1 for the Euribor for next year.

Excellent. Thank you very much both and, again, congratulations for the results.

Thank you.

Yes, good morning, can you hear me?

Yes.

Yes.

Hi. Thank you.

Thank you for taking my questions. I actually have a couple.

So on the NPE sales in the third and fourth quarters, I think, it's a total of 66 million Euros. I was wondering if 2024 numbers include those one-offs, if any.

So that's the first question. The second question is on JCC and I'm asking this question because it's under strategic review.

I was wondering why the net income or profit after tax. I mean same thing -- why is that on a declining trajectory despite pretty good volume growth in the past couple of years?

So that's the second question. The third one is on litigation provisions.

I was wondering if we should expect more of those next year or 2026. Well, next year being actually this year, sorry.

And the last one, if I may, is on REMU. You mentioned that you can sell at or above book value, but you also take impairments on REMU, right.

So I was wondering if you conservatively mark to market the whole portfolio, what kind of loss you would take? If you were take the losses on a wholesale basis, what would the number be?

So those are my questions. Thank you very much.

Thank you. We didn't hear the first question very clearly.

Would you be kind enough to repeat it?

Of course. So the NPE sales in the third and the fourth quarter of last year, I think it's a total of 66 million Euros.

So I was wondering if your 2024 numbers include those one-offs, if any.

Okay, so let's start with that then. The NPE sale did have a very small impact to P&L, but it was significantly capital positive.

So we do have a very small assumption. We do have an overlay, let's say, in our cost of risk guidance for conservatism, which may or may not be used for incremental trades if we decide to do them.

But if I refer you to the NPE slide, our NPEs are currently at 201 million Euro, of which 74 -- it's on page 38, 74 million is re-performing. So our actual gross NPE stock before provisions is at 126 million Euro or thereabout.

So the numbers are very, very small these days. On litigation provisions and REMU and then I will hand over to Panicos -- on litigation provision, we did take advantage of a good year to de-risk on a specific legacy case that we had in Q4, which is why you see a relatively higher charge in this quarter compared to previous quarters.

We did not expect Q4 or even the year to be run rate on litigation provisions. Most of these legacy cases, we're running them down -- I mean we are at the end of this journey and we are conservatively provided on this risk.

Now on REMU, the question was on the mark to market of the portfolio and you refer to a wholesale transaction. Let me answer it differently.

The stock at the 31st of December was at 660 million Euro. We had a very, very good Q4 where we managed to achieve our 200 plus million stock reduction target and we are holding this stock currently as of December at 72% of open market value.

So there is an implied 28% buffer to OMV. The other point to say is that organically we continue to be selling significantly above book value and there is a graph on page 39 on the top right and broadly at the open market value level, and our strategy by the way is to continue this organic delivery of this sale.

So we believe we are prudently marking this real estate book on our balance sheet, given our track record of delivering sales at above the book value prices.

Okay, around JCC, general comment, first. We are constantly reviewing our business and our focus is always to extract the highest value for our shareholders.

So regarding specifically JCC, the current strategy assessment has reaffirmed that JCC is value added to the group. So I'm going to the numbers that specific Slide 31, you can see there that first the contribution to non-NII is growing since 2022.

So this is a valuable contribution to our non-NII. It's a very profitable business for us, 23% tangible equity.

In terms of profitability, there were some one offs and some of higher third-party expenses coming from Visa during 2024 and that's why you see this small drop in terms of the actual profit. By what remains the same that JCC, it's a utility, one-stop shop, a kind of utility for the country and that can gradually expand its product offerings.

Not just being a merchant acquiring and the contribution to our non-NII, it is significant and it's growing.

Thank you very much.

Yes, hello. Many thanks for taking my questions.

A quick question on deposits and repricing. You mentioned in the guidance that you expect deposit cost to remain relatively flat in 2025 compared to 2024.

However, we have already seen a slight decrease in deposit cost in the third quarter, so that may be a bit too pessimistic. Or if this what should we expect in 2026?

Assuming the 2% base case scenario on ECB rates, should we expect deposit cost at what level to stabilize? That's my first question and my second question regarding capital and the payout.

If we assume in your targets with a 70% payout ratio and 4% lending growth that you mentioned, would that lead to a relatively stable core or would it mean that you will start consuming part of the capital? Thank you.

Okay, thank you. Thank you, Alex.

In terms of deposits, let me say again that our basic assumption is that the volume, the mix and cost will remain broadly flat in middle term. There is always a time lag for deposit repricing and we need to wait and see how the depositors will behave and review again our assumptions.

So this assumption will probably be reviewed again, let's say, with our Q1 results. In terms of payout ratios, I think it's fair to say that our organic -- we aim to use most of our organic cash generation for dividend payments and growing the loan book.

So I don't expect the combination of 70% plus organic growth to consume any of the existing capital.

Great, Very clear. Thank you.

Hello. Thank you for the presentation and taking my questions.

I have a follow up on the question on the payout. As you say, it's unlikely that the total capital will decline and you usually say that ROTE calculation is made over 15% CET1.

So is that your long-term capital target? Do you think that you could find some way of accelerating the convergence to those levels?

And I have another question, if I may, which is on the cause of risk. We've not seen any significant deterioration of the asset quality actually and you are guiding for a high cost of risk ahead.

For sure it's not much higher, but what are the trends lying behind that could entail some increase in the cost of risk going forward? Thank you very much.

Okay, I will start with the cost of risk. Yes, you are right that -- okay, firstly, cost of risk this year, 30 basis points.

So this is kind of tick the box on our credit quality and the stable economic environment in the country. So in our middle term we reiterate our existing guidance which is 40 basis points to 50 basis points towards the lower end of this range.

Okay, I think we don't have any evidence of any deterioration, this is not the case. We are optimistic on our portfolio quality.

But okay, we remain cautious on the volatility in the market and because, you know, you also said that the difference is not significant, so 10 basis points is just 10 million for us. So it doesn't make too much difference in our projection but what I would like to reconfirm is that there are no trends in any segment of our portfolio or of our quality of our lending book that indicates towards higher risk.

On the capital question, okay, 15% is not our official target, it's the level that we have got the Board’s approval to pay dividends and for us it's kind of a stable measure based on which we measure our performance, given that generation of organic capital is much faster than the time we need to optimize the denominator. So yeah, I mean, we -- as we said, first, we want to reach the high end range of our new dividend policy, be aligned with peers in terms of how much we pay our shareholders.

As I said before, the new organic capital will probably be consumed with payout ratios and growth. Obviously these kind of capital levels that were the results of two year profitability, right.

We just have this surplus capital for the last two years. Give us a lot of flexibility, give us a lot of optionalities.

We feel very comfortable about it. But, okay, I believe that the trajectory of coming up to more normal levels will be gradual and this is something that the Board will decide in due course.

But even, sorry -- even just -- even with payout ratio with the organic capital generation, then dividend yield will be still very attractive for our shareholders.

Thanks.

Yes, hi and thank you for the opportunity. One question, given your cash balance in 2024, is there any type of regulatory restriction that would prevent you from going even higher on your fixed income portfolio than 18% this year and 20% in the medium term or is it just a decision based on market terms and finding a good enough yield?

The latter. There's no regulatory constraint , Dimitris, on this.

The risk return and capital allocation choice of the bank, which is why for those of you that have been following the buildup of our bond portfolio, we were conservative in the negative rates and low yields era and we started building the portfolio when market conditions were such that we like the risk return dynamics of the book and we continue to be at that place. We continue to like the risk return dynamics and to want to grow the book broadly in line with the existing mix and the existing rating profile.

Okay, thank you very much.

I thank you for the time and for the results. A question on fee growth and another on the capital.

On the fee growth, it has been negative in 2024. Can talked about, I think, transaction fees, but can you remind us why that shouldn't happen again in 2025?

And then on the excess capital, I think you've been quite clear so far, but I was just wondering if there's any -- you will continue to accrue capital, especially you mentioned positive impacts from Basel IV. So when will the Board look at the optionality of that excess capital and what kind of measures are you considering?

You said you could look at potentially bolt on. So if you could be a bit more specific about the timing and the measures to start to use your excess capital, I think, could be very helpful.

Thank you.

Okay. Starting from the fee and general NII revenues, okay, you all know that BoC is a very diversified group and okay.

NII has been the only game in town the last two years and -- okay. And let me remind you of our strong contribution of non NII, so we have one of the highest fees to assets in Europe at 1.1% and non-NII covers more than 70% of our cost.

Saying that, 2024 was not our best year in terms of non-NII but if we look a little bit deeper, we can see that the recurring income is 4% higher versus 2022. If we compare this with 2023, the main difference comes from insurance and there are, let's say, two reasons.

The first reason is that there was a calibration of our model in the life insurance and there were higher claims in non-life due to some severe conditions we had in Cyprus early 2024. So these are one-off incidents that happened in 2024.

Other than that, we have very strong and profitable franchise. We have a number of initiatives such as Jinius, Affluent Banking, eFX Convert, Asset Management.

So all these we support the growth of the non NII going forward and okay with spread of north 300 basis points it makes sense to prioritize NII revenue. So are there normal and there is strong liquidity in the CPU market?

I think it makes more sense now to encourage clients to move to off balance sheet products. So we reiterate that our net fee and commission growth of 4% per annum is still a feasible target for us.

And it's a major target for us because non-NII has always been our differentiate factor for you. In terms of excess capital, I think I answered the question in a way and I will say again that we have been the first bank that paid dividends.

We have been one of the first banks in the region, probably the first that has ECB restriction lifted. We paid one quartet of our market cap in basically two years and a half because I consider the first year of payment of dividends as symbolic one.

So we are having an attractive yield for our shareholders with organic generation not only in this year but the years to come. So the excess capital is something that the Board considers, okay, based on some strategic consideration.

And once we have this timing and decision, we will of course update the market.

Thank you very much.

Hi, good morning. Congrats on the results.

I've got a couple of questions and a quick one on MREL. Just on loan growth, I can see that the growth in the international division is pretty strong.

Just interested, is there anything you're doing to kind of win business from the Greeks or any other competing banks in that space? What's driving the growth there?

Any comments would be useful. On REMU, really good to see the progress there.

I guess in the past -- previous quarters have not seen the same progress and I guess it's been quite lumpy. Is there anything in Q4 that's happened to see REMU accelerate?

Maybe you could talk about what's happened in Q4. And then finally just on MREL quickly, I note that your requirements dropped by 110 basis points, 25 to 23.9 excluding the CBR.

Could you provide a bit of information on what's driven that? Thanks.

Thank you. So let me start with REMU.

It was lumpy. Actually it was a very good quarter, as I mentioned on a previous question in Q4, this was the case the previous year as well.

It's the nature of the business. I think there are some bigger transactions in the quarter where we managed to conclude them.

They make a difference -- more meaningful difference to the stock reduction target. So yes, we did have some meaningful large ticket sales in Q4 which took us to the 660 million level.

On MRE, it's the mechanics of the formula. I don't think there was anything noteworthy or specific that drove the change of the ratio.

And then on the international loan --

Okay, the international loan book, I mean many of you hear me saying about international for some quarters now and I think now you have seen -- you have started seeing the results. So we granted almost 400 million or 16% of our new lending in international.

And now the international exposure is roughly 1 billion 10% of our loan book. So I said before that there are connections in Cyprus.

There are Greek corporates that have their holding companies in Cyprus. There are Greek corporates that are expanded in Cyprus.

And it was a matter of decision for us to move to selective cooperation in the lending spectrum for some Greek corporates. So this is a work that has been done the last couple of years to prepare the setup, re-engage with our relationships.

And I think the results have been obvious in 2024 and we aim for moving to 1.5 billion in the middle term, so another 500 million.

Thanks for the details.

Nothing particular, just being more active and more focused on the market.

And if I may just go back to the MREL question, was the question on the minimum ratio or the actual because if it was on the minimum, we did get positive or reduction in our MREL target from the SRB. There is a discretion the SRB has for banks that deliver on their deliverables, on the quality of their deliverables and we ticked that box and got a slight relaxation on that rule.

So if the question was on the minimum ratio, then this is the reason.

Great. Yeah, it was on that.

Is this related to the market confidence charge or is it just --

Thank you.

Yeah, that's fine. I'll follow up offline.

Thank you for your comments.

Hello and thank you for taking my question. I have just a quick question regarding your hedging strategy.

You have successfully managed to reduce your sensitivity to rates from 35% of total NII to 10%. My question is that given the opportunity that is given now and in terms of securities book that you can increase or in terms of increasing your IRS position, do you expect that this sensitivity is going to be decreased further during the next year.

So it depends on the balance sheet evolution is the answer. So it should reduce as a result of the additional scheduling that we are implementing this year.

But on the other hand, it may change because of the balance sheet composition, the deposits, especially last year in 2024, the sensitivity “suffered” because of the increase in our deposit book, which meant we had more liquid assets, which are obviously rate sensitive assets. So the equation is not one sided.

It's not just the IRS and the hedging, it's also the balance sheet evolution. Net, we do want – net-net, we do want to reduce it.

We do aim to reduce the sensitivity in absolute terms. And what I'm saying is if we see the balance sheet evolution evolving in a way which increases it, we will adjust our hedging strategy accordingly over time.

Have you proceeded to any action until now -- I mean until mid February?

I don't think we should comment on this, but what I can say is that our hedging strategy involves and entails us delivering on the hedging throughout the year, obviously subject to market conditions.

Okay, thank you.

The target for this year by the way is to increase the IRF book by 1 billion Euros. And there is also the replacement of the existing hedges that eventually over time we will need to be doing.

So this is an active and alive process. It's not static.

We will not buy the 1 billion on a single day. We will phase it out in a year.

Understood. Very clear.

Hi, thank you for your time and the presentation. Just to follow up on the hedging and also on loan books.

On hedging, just to clarify, apologies if I missed it, this 1 billion addition, does that include the fixed income book expansion? That's my first question.

And you know, if so, what percent is roughly swap? What is income?

Osman, no, 1 billion, it is pure treasury hedging, not the fixed income book. The fixed income book is incremental to this.

Understood. And then on loan book, more of a strategic concept question.

So you mentioned 4%. There's quite a bit of opportunities in the region in Greece for you.

So in 2025, for example, is there a significant upside risk to this figure or is the management thinking is that we're going to strictly be disciplined and keep this around 4%? Just wanted to see if I can get more color on this.

Thank you.

No, 4% is a basic assumption, Osman. If there are opportunities for higher than 4%, there are no restrictions for us in doing so.

The basic assumptions include the growth of the economy in Cyprus, which is expected to be around 3% on average. The retail -- our retail book will continue grow.

There is corporate. Despite the gross new lending being at exceptionally high volumes, there were significant payments during 2024.

We expect the payments to gradually abate with the rate of normalization. And of course we expect this international book growth from 1 billion to 1.5 billion, so basic assumption is 4%; anything more than 4%, it will be an add-on to our existing NII guidance.

For 2025, would it be fair to say there's some upside here over that 4% figure?

This is something that we will probably talk about, let's say we have our current results. Let's stick to our current basic assumption, which is 4%.

Understood, thank you.

Yeah, just a quick one on Slide 12. Just to clarify now, especially given the fact that you've consistently beat the estimates that you have given, are we going for 2025 and 2026 ROTE estimates now and how comfortable are you on those numbers?

Thanks.

Yes, Christos [Phonetic], on our 2025 target, I mean, actually both are on this slide. Obviously we're more confident on 2025 by definition because we're here already, which is why we are guiding on every line in 2025.

Our guidance for 2026 is for high teens ROTE on a normalized CET1 and we believe we can achieve that at the 2% or about the 2% interest rate normalization level, let's say. We will aim to provide more color on 2026 later this year, as we do every year, especially given the volatility in rate and the timing of any of the movements that this may entail.

But generally how on a high level view of the bank, so there are some basic assumptions for ROTE. The first one is normalized rates around 2%.

The second one is continue being cost efficient with a cost to income ratio of around 40%. The third one is a change risk focus with normalized cost of risk 14 to 15 basis points.

The NII expected to reduce and stabilize starting from the extraordinary high point we have been in 2024 and this will support -- the loan growth we support the NII middle term growth. With non-NII, it will continue to be a substantial part of our income and this non-NII will be strengthened further with new investments in new initiatives like Jinius, Affluent Banking, Privilege FX and all this that I talked about earlier.

So all these assumptions will result in high profitability, high teens ROTE on 15% CET1 and mid-teens ROTE on a reported CET1 with attractive shareholder returns, cash dividend buybacks considering of Italy dividend as well and with capital surplus, ample liquidity, which always ample liquidity capital plus provide us optionality and for many other initiatives that will deliver additional value for our shareholders. So this is how we view the bank at least for the next two years.

Thank you.

Okay. Thank you for your questions.

I think we were very happy to see this of -- these number of questions. So it means that there are other things that we'd like to talk with you offline, so please communicate with us for further, let's say, discussion and questions after we finish this call.

Thank you very much.