Bank of Cyprus Public : Press release

Announcement

Group Financial Results for the quarter ended 31 March 2024

Nicosia, 16 May 2024

1

Key Highlights for the quarter ended 31 March 2024

Resilient economic outlook

• 3.3% GDP growth in 1Q2024; projected to grow by c. 2.9%1 in 2024 outpacing Euro area average
• Seasonally strong quarter of new lending of €676 mn, up 46% qoq and 8% yoy
• Gross performing loan book at €10.0 bn, up 2% qoq

Delivering ROTE of 23.6% in 1Q2024

• NII of €213 mn down 3% qoq, reflecting modest decline in Euribor, hedging and marginally higher cost of deposits
• Total operating expenses2 down 14% on prior quarter due to quarterly seasonality and broadly flat yoy; cost to income ratio2 reduced to 29% (vs 34% in 1Q2023)
• Profit after tax of €133 mn down 4% qoq and up 40% yoy; basic earnings per share of €0.30 for 1Q2024

Liquid and resilient balance sheet

• NPE ratio at 3.4% (0.8% on net basis) down 20 bps qoq
• NPE Coverage at 77% up 4 p.p. on prior year; cost of risk at 27 bps
• Retail funded deposit base at €19.3 bn, flat qoq and up 2% yoy
• Highly liquid balance sheet with €7.2 bn placed at the ECB; €1.7 bn TLTRO repaid in March 2024
• In compliance with 2024 final MREL target post successful issuance of €300 mn Green Senior Preferred Notes in April 2024

Robust capital and shareholder focus

• Regulatory CET1 ratio and Total Capital ratio of 17.1% and 22.0% respectively
• Including 1Q2024 profits net of distribution accrual, CET1 ratio at 17.6% and Total Capital ratio at 22.5%
• Organic capital generation3 of 128 bps in 1Q2024
• Tangible book value per share of €5.234 as at 31 March 2024 up 26% yoy

1. Source: Cyprus' Ministry of Finance; projections as of April 2024
2. Excluding special levy on deposits and other levies/contributions
3. Based on profit after tax (pre-distributions)
4. This includes cash dividend which is expected to be paid on 14 June 2024

*Key Highlights are based on the financial results on an 'Underlying Basis'.

2

Group Chief Executive Statement

"We had a strong start to the year underpinned by compelling financial results and the approval of a meaningful distribution, representing another important milestone in our strategic progress. We proposed a total distribution of €137 mn in respect of 2023 earnings comprising a cash dividend of €112 mn and an inaugural share buyback of up to €25 mn, corresponding to an overall payout ratio of 30%, a material increase compared to the previous year.

During the first quarter of the year, we delivered a ROTE of 23.6%, the fifth consecutive quarter with a ROTE over 20%, tracking ahead of our 2024 targets. Our performance was supported by continued strong net interest income, declining only modestly from the previous quarter, reflecting high rates and ample liquidity as well as our continuous focus on cost discipline and robust asset quality.

This was all supported by a Cypriot economy that continues to display strength and resilience against the backdrop of geopolitical uncertainty. In the first quarter of 2024, GDP increased by 3.3% in Cyprus and is forecast to grow by c.2.9%1 in 2024, expected to outpace the Eurozone average.

Our balance sheet is characterised by a robust capital position, high liquidity and healthy asset quality. Our regulatory CET1 ratio stood at 17.1% as at 31 March 2024 or 17.6% including profits in the quarter net of distribution accrual2. Organic capital generation was again strong at c.130 bps. Our tangible book value per share improved by 26% year on year to €5.23, reflecting our delivery for shareholder value creation.

In April 2024 the Group successfully issued €300 mn MREL-eligible green senior preferred notes, thereby finalising our MREL requirements and including a comfortable buffer. This issuance was the first ever green bond issuance for Bank of Cyprus, representing an important step to lead the transition of Cyprus to a sustainable future.

Our positive set of financial results this quarter provides the foundations to deliver a ROTE of over 17% on a 15% CET1 ratio. We will review our financial targets alongside our 1H2024 financial results. We continue to execute our strategy, with a clear focus on supporting our customers, delivering shareholder value and assisting the development of the Cypriot economy."

Panicos Nicolaou

1. Source: Cyprus' Ministry of Finance; projections as of April 2024
2. In line with Commission Delegated Regulation (EU) No 241/2014 principles. The distribution accrual does not constitute an approval by regulators or a decision by the Bank with respect to distribution payments for 2024. Any recommendation of a distribution is subject to regulatory approval

3

A. Group Financial Results - Underlying Basis

Unaudited Interim Condensed Consolidated Income Statement

€ mn	1Q2024	4Q2023	1Q2023	qoq +%	yoy +%
Net interest income	213	220	162	-3%	31%
Net fee and commission income	42	46	44	-10%	-5%
Net foreign exchange gains and net gains on	7	8	13	-12%	-44%
financial instruments
Net insurance result	10	16	10	-37%	4%
Net gains/(losses) from revaluation and disposal
of investment properties and on disposal of	1	3	2	-81%	-65%
stock of properties
Other income	3	3	3	-8%	1%
Total income	276	296	234	-7%	18%

Staff costs

Other operating expenses

Special levy on deposits and other levies/contributions

(48)	(51)	(46)	-6%	5%
(33)	(42)	(34)	-24%	-3%
(11)	(13)	(11)	-8%	4%

Total expenses	(92)	(106)	(91)	-13%	2%
Operating profit	184	190	143	-3%	28%

Loan credit losses	(7)
Impairments of other financial and non-financial	(8)
assets
Provisions for pending litigations, claims,	(10)
regulatory and other matters (net of reversals)
Total loan credit losses, impairments and	(25)
provisions
Profit before tax and non-recurring items	159

(19)	(11)	-64%	-39%
(15)	(11)	-45%	-22%
(8)	(6)	24%	55%
(42)	(28)	-40%	-12%
148	115	7%	39%

Tax	(25)	(10)	(18)	148%	40%
Profit attributable to non-controlling interests	(1)	0	(1)	-	5%
Profit after tax and before non-recurring
items (attributable to the owners of the	133	138	96	-4%	38%
Company)
Advisory and other transformation costs -	-	-	(1)	-	-100%
organic
Profit after tax (attributable to the owners of	133	138	95	-4%	40%
the Company)

4

A. Group Financial Results - Underlying Basis (continued)

Unaudited Interim Condensed Consolidated Income Statement- Key Performance Ratios

Key Performance Ratios	1Q2024	4Q2023	1Q2023	qoq +%	yoy +%
Net Interest Margin (annualised)	3.70%	3.66%	2.91%	4 bps	79 bps
Net Interest Margin (annualised) excluding	3.90%	4.00%	3.18%	-10 bps	72 bps
TLTRO III
Cost to income ratio	33%	36%	39%	-3 p.p.	-6 p.p.
Cost to income ratio excluding special levy on	29%	32%	34%	-3 p.p.	-5 p.p.
deposits and other levies/contributions
Operating profit return on average assets	2.9%	2.8%	2.3%	0.1 p.p.	0.6 p.p.
(annualised)
Basic earnings per share attributable to the	0.30	0.31	0.21	-0.01	0.09
owners of the Company (€)1
Return on tangible equity (ROTE)	23.6%	25.6%	21.3%	-2.0 p.p.	2.3 p.p.
Return on tangible equity (ROTE) on 15%	29.1%	28.8%	21.9%	0.3 p.p.	7.2 p.p.
CET1 ratio2
Tangible book value per share (€)	5.23	4.93	4.15	0.30	1.08
Tangible book value per share excluding the	4.98	4.68	4.10	0.30	0.88
proposed cash dividend

1. The diluted earnings per share attributable to the owners of the Company for 1Q2024 amounted to €0.30 (compared to €0.31 for 4Q2023 and €0.21 for 1Q2023)

2. Calculated as Profit/(loss) after tax (attributable to the owners of the Company) (annualised - (based on year - to - date days), divided by the quarterly average of Shareholders' equity minus intangible assets and after deducting the excess CET1 capital on a 15% CET1 ratio from the tangible book value

p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 percentage point

Commentary on Underlying Basis

The financial information presented in this Section provides an overview of the Group financial results for the quarter ended 31 March 2024 on the 'underlying basis' which management believes best fits the true measurement of the performance and position of the Group, as this presents separately any non-recurring items and also includes certain reclassifications of items, other than non-recurring items, which are done for presentational purposes under the underlying basis for aligning the presentation with items of a similar nature.

Reconciliations between the statutory basis and the underlying basis to facilitate the comparability of the underlying basis to the statutory information, are included in Section F.1 'Reconciliation of Interim Consolidated Income statement for the three months ended 31 March 2024 between statutory and underlying basis' and Section H under 'Alternative Performance Measures' and Section I under 'Definitions & Explanations.

5

A. Group Financial Results- Underlying Basis (continued)

Unaudited Interim Condensed Consolidated Balance Sheet

€ mn			31.03.2024	31.12.2023	+%
Cash and balances with central banks			7,217	9,615	-25%
Loans and advances to banks			384	385	0%
Reverse repurchase agreements			708	403	75%
Debt securities, treasury bills and equity investments			3,876	3,695	5%
Net loans and advances to customers			10,028	9,822	2%
Stock of property			804	826	-3%
Investment properties			62	62	0%
Other assets			1,862	1,821	2%
Total assets			24,941	26,629	-6%
Deposits by banks			396	472	-16%
Funding from central banks			310	2,044	-85%
Customer deposits			19,260	19,337	0%
Debt securities in issue			673	672	0%
Subordinated liabilities			309	307	1%
Other liabilities			1,370	1,309	5%
Total liabilities			22,318	24,141	-8%
Shareholders' equity			2,381	2,247	6%
Other equity instruments			220	220	-
Total equity excluding non-controlling interests			2,601	2,467	5%
Non-controlling interests			22	21	3%
Total equity			2,623	2,488	5%
Total liabilities and equity			24,941	26,629	-6%
Key Balance Sheet figures and ratios			31.03.2024	31.12.2023		+
Gross loans (€ mn)			10,276	10,070		2%
Allowance for expected loan credit losses (€ mn)			267	267		0%
Customer deposits (€ mn)			19,260	19,337		0%
Loans to deposits ratio (net)			52%	51%		1 p.p.
NPE ratio			3.4%	3.6%		-20 bps
NPE coverage ratio			77%	73%		+4 p.p.
Leverage ratio			10.2%	9.1%		+110 bps
				31.03.2024
Capital ratios and risk weighted assets	31.03.2024	(including	31.12.2023		+
(Regulatory)	Retained	(Regulatory)2
				Earnings1)
Common Equity Tier 1 (CET1) ratio (transitional)	17.1%	17.6%	17.4%		+20 bps
Total capital ratio (transitional)	22.0%	22.5%	22.4%		+10 bps
Risk weighted assets (€ mn)	10,548	10,548	10,341		+2%

1. Includes unaudited/unreviewed profits for 1Q2024 net of distribution accrual (refer to A.2.1 'Capital Base'. Any recommendation for a distribution is subject to regulatory approval
2. Includes profits for the year ended 31 December 2023 net of distribution at 30% payout ratio, following ECB approval in March 2024 (refer to section A.2.1). p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1 p.p.

6

A. Group Financial Results - Underlying Basis (continued)

A.2 Balance Sheet Analysis

A.2.1 Capital Base

Total equity excluding non-controllinginterests totalled €2,601 mn as at 31 March 2024 compared to €2,467 mn as at 31 December 2023 and €2,119 mn as at 31 March 2023. Shareholders' equity totalled to €2,381 mn as at 31 March 2024 compared to €2,247 mn as at 31 December 2023 and to €1,899 mn as at 31 March 2023.

The regulatory Common Equity Tier 1 capital (CET1) ratio on a transitional basis stood at 17.1% as at 31 March 2024 compared to 17.4% as at 31 December 2023. Throughout this announcement, the regulatory capital ratios as at 31 March 2024 do not include profits for the quarter ended 31 March 2024 (such ratios are referred as regulatory). Including the profits for 1Q2024 of c.130 bps, net of distribution accrual at the top end of the Group's approved distribution policy in line with Commission Delegated Regulation (EU) No 241/2014 principles of c.70 bps, the CET1 ratio on a transitional basis (referred as ratios including retained earnings) increased to 17.6% as at 31 March 2024. As per the latest SREP decision, any distribution is subject to regulatory approval. Such distribution accrual in respect of 2024 earnings does not constitute a binding commitment for a distribution payment nor does it constitute a warranty or representation that such a payment will be made. Since September 2023, a charge is deducted from own funds in relation to the ECB prudential expectations for NPEs, which amounted to 32bps as at 31 March 2024, broadly flat compared to prior quarter. A prudential charge in relation to an onsite inspection on the value of the Group's foreclosed assets is being deducted from own funds since June 2021, the impact of which was 10 bps on Group's CET1 ratio as at 31 March 2024 (compared to 12 bps on 31 December 2023). In addition, the Group is subject to increased capital requirements in relation to its real estate repossessed portfolio which follow a SREP provision to ensure minimum capital levels retained on long-termholdings of real estate assets, with such requirements being dynamic by reference to the in-scopeREMU assets remaining on the balance sheet of the Group and the value of such assets. As at 31 March 2024 the impact of these requirements was 41 bps on Group's CET1 ratio, compared to 24 bps as at 31 December 2023. The above-mentionedrequirements are within the capital plans of the Group and incorporated within its capital projections.

The regulatory Total Capital ratio on a transitional basis stood at 22.0% as at 31 March 2024 compared to 22.4% as at 31 December 2023. Including the profits for 1Q2024 of c.130 bps, net of distribution accrual at the top end of the Group's approved distribution policy in line with Commission Delegated Regulation (EU) No 241/2014 principles of c.70 bps the Total Capital ratio on transitional basis (including retained earnings) increases to 22.5% as at 31 March 2024.

The Group's capital ratios are above the Supervisory Review and Evaluation Process (SREP) requirements.

As at 31 March 2024 the Group's minimum phased-in CET1 capital ratio is set at 10.91%, comprising a 4.50% Pillar I requirement, a 1.55% Pillar II requirement, the Capital Conservation Buffer of 2.50%, the O-SII Buffer of 1.875% and CcyB of 0.49%. Likewise, the Group's minimum phased-in Total Capital ratio requirement is set at 15.61%, comprising an 8.00% Pillar I requirement, of which up to 1.50% can be in the form of AT1 capital and up to 2.00% in the form of T2 capital, a 2.75% Pillar II requirement, the Capital Conservation Buffer of 2.50%, the O-SII Buffer of 1.875% and the CcyB of 0.49%. The ECB has also provided revised lower non-public guidance for an additional Pillar II CET1 buffer (P2G) compared to previous year. From 2 June 2024 both CET1 capital and Total Capital requirements are expected to increase by c.0.50% as a result of the increase in the CcyB.

On 30 November 2022, the CBC, following the revised methodology described in its macroprudential policy, decided to increase the CcyB from 0.00% to 0.50% of the total risk exposure amounts in Cyprus of each licensed credit institution incorporated in Cyprus effective from 30 November 2023. Further, in June 2023, the CBC announced an additional increase of 0.50% in the CcyB of the total risk exposure amounts in Cyprus of each licensed credit institution incorporated in Cyprus to be observed from June 2024, increasing the CcyB to 1.00%.

The Bank has been designated as an Other Systemically Important Institution (O-SII) by the Central Bank of Cyprus (CBC) in accordance with the provisions of the Macroprudential Oversight of Institutions Law of 2015 and the relevant buffer increased by 37.5 bps to 1.875% on 1 January 2024. In April 2024, following a revision by the CBC of its policy for the designation of credit institutions that meet the definition of O-SII institutions and the setting of O-SII buffer to be observed, the Group's O-SII buffer has been reduced to 2.00% on 1 January 2026 (from the previous assessment of 2.25% on 1 January 2025) to be phased by 6.25 bps annually to 1.9375% on 1 January 2025 and 2.00% as of 1 January 2026 from the current level of 1.875%.

Own funds held for the purposes of P2G cannot be used to meet any other capital requirements (Pillar I, Pillar II requirements or the combined buffer requirement), and therefore cannot be used twice.

7

A. Group Financial Results - Underlying Basis (continued)

A.2 Balance Sheet Analysis (continued)

A.2.1 Capital Base (continued)

The Group's minimum phased-in CET1 capital ratio requirement as at 31 December 2023 was set at 10.72%, comprising a 4.50% Pillar I requirement, a 1.73% Pillar II requirement, the Capital Conservation Buffer of 2.50%, the O-SII Buffer of 1.50% and the CcyB of c.0.48%. The Group's minimum phased-in Total Capital ratio requirement was set at 15.56%, comprising an 8.00% Pillar I requirement, of which up to 1.50% can be in the form of AT1 capital and up to 2.00% in the form of T2 capital, a 3.08% Pillar II requirement, the Capital Conservation Buffer of 2.50%, the O-SII Buffer of 1.50% and the CcyB of c.0.48%. Following the annual SREP performed by the ECB in 2022, ECB has also maintained the non-public guidance for an additional Pillar II CET1 buffer (P2G) unchanged compared to 2022.

Distributions

Following the 2022 SREP decision, the equity distribution prohibition was lifted for both the Company and the Bank, with any distribution being subject to regulatory approval.

In April 2023, the Company obtained the approval of the ECB to pay a dividend of €0.05 per ordinary share in respect of earnings for the year ended 31 December 2022. This was the first dividend payment after 12 years underpinning the Group's position as a strong and well-diversified organisation, capable of delivering sustainable shareholder returns.

In March 2024, the Company obtained the approval of the ECB to pay a cash dividend and to conduct a share buyback (together the 'Distribution'). The Distribution corresponded to a 30% payout ratio of FY2023 adjusted recurring profitability and amounted to €137 mn in total, comprising a cash dividend of €112 mn and a share buyback of up to €25 mn. The payout ratio for FY2023 of 30% is in line with the updated Distribution Policy (see below for further details) and represents a material increase compared to the previous year (at 14% payout ratio). Following ECB approval, the Board of Directors of the Company has resolved to propose to the AGM that will be held on 17 May 2024 for approval, a final cash dividend of €0.25 per ordinary share in respect of earnings for the year ended 31 December 2023, representing a five-fold increase compared to prior year (€0.05 per ordinary share). Subject to approval at the AGM, the dividend will be paid in cash on 14 June 2024 to those shareholders on the register on 26 April 2024 ('Record date') with an Ex-dividend date of 25 April 2024.

In April 2024 the Group launched its inaugural programme to buy back ordinary shares in the Company for an aggregate consideration of up to €25 mn (the 'Programme'). The purpose of the Programme is to reduce the Company's share capital and therefore shares purchased under the Programme will be cancelled. The Company has entered into non-discretionary agreements with Numis Securities Limited (trading as 'Deutsche Numis') and The Cyprus Investment and Securities Corporation Ltd ('CISCO') acting as joint lead managers, to conduct the Programme and to repurchase Shares on the Company's behalf and to make trading decisions under the Programme independently of the Company in accordance with certain pre-set parameters. The Programme takes place on both the London Stock Exchange and the Cyprus Stock Exchange and may continue until 14 March 2025 subject to market conditions, the ongoing capital requirements of the business and early termination rights customary for a transaction of this nature. The implementation of the share buyback programme complies with the Company's general authority to repurchase the Company's ordinary shares as approved by shareholders at the Company's AGM on 26 May 2023, which is subject to renewal at the AGM scheduled to take place on 17 May 2024, and with the terms of the approval received from the ECB. The maximum number of shares that may be repurchased under the ECB Approval is 1.6% of the total outstanding shares as at 31 December 2023 (i.e. up to 7,343,249 Shares).

The Distribution in respect of 2023 earnings was equivalent to c.130 bps on CET1 ratio as at 31 December 2023.

Distribution policy

The Group aims to provide a sustainable return to shareholders. In line with the Group's distribution policy, distributions are expected to build prudently and progressively over time, towards a payout ratio in the range of 30-50% of the Group's adjusted recurring profitability, including cash dividends and buybacks. Group adjusted recurring profitability is defined as the Group's profit after tax before non-recurring items (attributable to the owners of the Company) taking into account distributions under other equity instruments such as the annual AT1 coupon. The distribution policy takes into consideration market conditions as well as the outcome of capital and liquidity planning.

The distribution level will reflect, amongst other things, the strength of the Group's capital and capital generation, the Board of Directors' assessment of the capital required to implement the Group Strategy and any capital the Group retains to cover uncertainties (e.g. related to the economic outlook) and any impact from the evolving regulatory and accounting environments.

8

A. Group Financial Results - Underlying Basis (continued)

A.2 Balance Sheet Analysis (continued)

A.2.1 Capital Base (continued)

Other equity instruments

At 31 March 2024, the Group's other equity instruments relate to Additional Tier 1 Capital Securities (the "AT1 securities") and amounted to €220 mn, flat on prior quarter.

In June 2023, the Company successfully launched and priced an issue of €220 mn Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities (the 'New Capital Securities'). The New Capital Securities constitute unsecured and subordinated obligations of the Company, are perpetual and are issued at par. They carry an initial coupon of 11.875% per annum, payable semi-annually and resettable on 21 December 2028 and every 5 years thereafter. The Company will have the option to redeem the New Capital Securities from, and including, 21 June 2028 to, and including, 21 December 2028 and on each interest payment date thereafter, subject to applicable regulatory consents and the relevant conditions to redemption.

At the same time, the Company invited the holders of its outstanding €220 mn Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities callable in December 2023 to tender their Existing Capital Securities at a purchase price of 103% of the principal amount, after which c.€16 mn Existing Capital Securities remained outstanding. As a result, a cost of c.€7 mn was recorded directly in the Company's equity in 2Q2023, forfeiting the relevant future coupon payments. Transaction costs of €3.5 mn in relation to the transactions were recorded directly in equity in June 2023.

In July 2023, the Company purchased and cancelled a further c.€7 mn Existing Capital Securities in the open market. In November 2023, the Board of Directors resolved to exercise the Company's option to redeem the remaining c.€8 mn in aggregate principal amount outstanding of the Existing AT1 Capital Securities on 19 December 2023.

Legislative amendments for the conversion of DTA to DTC

Legislative amendments allowing for the conversion of specific deferred tax assets (DTA) into deferred tax credits (DTC) became effective in March 2019. The legislative amendments cover the utilisation of income tax losses transferred from Laiki Bank to the Bank in March 2013. The introduction of the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD) IV in January 2014 and its subsequent phasing-in led to a more capital-intensive treatment of this DTA for the Bank. With this legislation, institutions are allowed to treat such DTAs as 'not relying on future profitability', according to CRR/CRD IV and as a result not deducted from CET1, hence improving a credit institution's capital position. The Law provides that a guarantee fee on annual tax credit is payable annually by the credit institution to the Government.

Following certain modifications to the Law in May 2022, the annual guarantee fee is to be determined by the Cyprus Government on an annual basis, providing however that such fee to be charged is set at a minimum fee of 1.5% of the annual instalment and can range up to a maximum amount of €10 mn per year, and also allowing for a higher amount to be charged in the year the amendments are effective (i.e. in 2022).

The Group estimates that such fees could range up to c.€5 mn per year (for each tax year in scope i.e. since 2018) although the Group understands that such fee may fluctuate annually as to be determined by the Ministry of Finance. An amount of €5 mn was recorded in FY2023.

A.2.2 Regulations and Directives

A.2.2.1 The 2021 Banking Package (CRR III and CRD VI and BRRD)

In October 2021, the European Commission adopted legislative proposals for further amendments to the Capital Requirements Regulation (CRR), CRD and the BRRD (the "2021 Banking Package"). Amongst other things, the 2021 Banking Package would implement certain elements of Basel III that have not yet been transposed into EU law. In the case of the proposed amendments to CRD and the BRRD, their terms and effect will depend, in part, on how they are transposed in each member state. The European Council's proposal on CRR and CRD was published on 8 November 2022. During February 2023, the European Parliament's ECON Committee voted to adopt Parliament's proposed amendments to the Commission's proposal. In June 2023, negotiators from the Council presidency and the European Parliament reached a provisional agreement on amendments to the Capital Requirements Regulation and the Capital Requirements Directive. In December 2023, the preparatory bodies of the Council and European Parliament have endorsed the amendments to the Capital Requirements Regulation and the Capital Requirements Directive. With the decisions taken by the Council and European Parliament preparatory bodies, the legal texts have now been published on the Council and the Parliament websites. In April 2024, the European Parliament has voted to adopt the amendments to the Capital Requirements Regulation and the Capital Requirements Directive and the texts must now also be confirmed by the Council, after which they will be published in the EU's official journal. It is expected that they will enter into force on 1 January 2025; and certain measures are expected to be subject to transitional arrangements or to be phased in over time.

9

A. Group Financial Results - Underlying Basis (continued)

A.2 Balance Sheet Analysis (continued)

A.2.2 Regulations and Directives (continued)

A.2.2.2 Bank Recovery and Resolution Directive (BRRD)

Minimum Requirement for Own Funds and Eligible Liabilities (MREL)

The Bank Recovery and Resolution Directive (BRRD) requires that from January 2016, EU member states shall apply the BRRD's provisions requiring EU credit institutions and certain investment firms to maintain a minimum requirement for own funds and eligible liabilities (MREL), subject to the provisions of the Commission Delegated Regulation (EU) 2016/1450. On 27 June 2019, as part of the reform package for strengthening the resilience and resolvability of European banks, the BRRD ΙΙ came into effect and was required to be transposed into national law. BRRD II was transposed and implemented in Cyprus law in May 2021. In addition, certain provisions on MREL have been introduced in CRR ΙΙ which also came into force on 27 June 2019 as part of the reform package and were immediately effective.

In January 2024, the Bank received final notification from the SRB regarding the 2024 MREL decision, by which the final MREL requirement is now set at 25.0% of risk weighted assets (or 30.4% of risk weighted assets taking into account the expected prevailing CBR as at 31 December 2024 which needs to be met with own funds on top of the MREL) and 5.91% of Leverage Ratio Exposure (as defined in the CRR) and must be met by 31 December 2024.

The Bank must comply with the MREL requirement at the consolidated level, comprising the Bank and its subsidiaries.

In April 2024 the Bank proceeded with an issue of €300 million green senior preferred notes (the 'Green Notes'). The Green Notes comply with the MREL criteria and contribute towards the Bank's MREL requirement.

The MREL ratio as at 31 March 2024, calculated according to the SRB's eligibility criteria currently in effect and based on internal estimate, stood at 29.3% of RWAs (including capital used to meet the CBR) and at 12.5% of LRE (based on the regulatory Total Capital as at 31 March 2024). The CBR stood at 4.86% as at 31 March 2024 (compared to 4.48% as at 31 December 2023), reflecting the increase of the O-SII buffer from 1.50% to 1.875% on 1 January 2024. The CBR is expected to increase further in June 2024 as a result of the increase of CcyB to approximately 1.00% and the phasing in of O-SII buffer from 1.875% to 1.9375% on 1 January 2025 and to 2.00% on 1 January 2026.

The MREL ratio expressed as a percentage of RWAs (including capital used to meet the CBR) and the MREL ratio expressed as a percentage of LRE as at 31 March 2024 stand at 29.8% and 12.7% respectively when including the profits for the quarter ended 31 March 2024 and an accrual for a distribution at the top end of the Group's approved distribution policy in line with Commission Delegated Regulation (EU) No 241/2014 principles. When accounting for the Notes issued in April 2024, the MREL ratio expressed as a percentage of RWAs (including capital used to meet the CBR) and the MREL ratio expressed as a percentage of LRE improves to 32.7% and 14.0% respectively.

A.2.3 Funding and Liquidity

Funding

Funding from Central Banks

At 31 March 2024, the Bank's funding from central banks amounts to €310 mn and relates to ECB funding, comprising solely of funding through the Targeted Longer-Term Refinancing Operations (TLTRO) III, compared to €2,044 mn as at 31 December 2023. The reduction on prior quarter by 85% is due to the repayment of €1.7 bn under the seventh TLTRO III operation in March 2024. The maturity date of the remaining €0.3 bn under the eighth TLTRO III operation is in June 2024.

Deposits

Customer deposits totalled €19,260 mn at 31 March 2024 (compared to €19,337 mn at 31 December 2023 and €18,974 mn as at 31 March 2023) flat since the beginning of the year and up by 2% on prior year. Customer deposits are mainly retail-funded and 58% of deposits are protected under the deposit guarantee scheme as at 31 March 2024.

The Bank's deposit market share in Cyprus reached 37.5% as at 31 March 2024, compared to 37.7% as at 31 December 2023. Customer deposits accounted for 77% of total assets and 86% of total liabilities at 31 March 2024 (compared to 73% of total assets and 80% of total liabilities as at 31 December 2023). The increase year on year relates mainly to the repayment of €1.7 bn TLTRO.

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