Bank Of Cyprus (BOCHGR) Investor update summary

Strategic Priorities and Financial Targets

• Focus on sustainable and resilient profitability, targeting mid-teens ROTCE/ROTE and over 20% return on tangible equity with CET1 at 15% for 2026-2028.

• Distribution policy targets up to 90% payout in 2026 and up to 100% for 2027-2028, with ordinary payout at 70% and top-up dividends, subject to market conditions and capital planning.

• Continued investment in technology, including AI, automation, and cloud migration, to drive operational simplification and efficiency.

• Diversification of revenue base by type and geography, with non-interest income, especially from insurance and digital platforms, contributing over 40% to revenue growth.

• Selective bolt-on M&A focused on fee-generating businesses, maintaining distribution policy and strategic fit.

Macroeconomic and Sector Outlook

• Cyprus economy projected to grow at 3-3.8% p.a. through 2025, outpacing the Euro area, with strong sector contributions and low unemployment.

• Fiscal position remains strong, with public debt to GDP at 57% in 2025 and below 60% medium term, plus sustained budget surpluses.

• Tech and tourism sectors are key growth drivers, with IT sector GVA share doubling since 2019 and housing market recovery supporting business relocations.

• Banking sector is highly liquid, with loan-to-deposit ratio at 43%, low NPE ratios (1.2%), and robust capital positions.

• Cyprus holds investment grade ratings, three notches above investment grade, with stable or positive outlooks from major agencies.

Operational Performance and Growth Drivers

• Loan growth expected at 4% CAGR, with selective international expansion and international portfolio rising to 16% of total by 2028.

• Deposit base assumed broadly flat, with prudent cost management and AI-driven personalization initiatives.

• Recurring non-interest income to grow at ~4% CAGR, led by insurance, digital platforms, and payment solutions.

• Cost-to-income ratio to remain around 40% for 2026-2028, despite increased IT investment; cost of risk guided at 40-50bps, likely at lower end.

• Organic capital generation expected at 350-400bps per annum, supporting high distributions and optionality for M&A.