Ladies and gentlemen, thank you for standing by. I am Yota, your chorus call operator. Welcome, and thank you for joining the Bank of Cyprus conference call to present and discuss the first quarter 2023 financial results conference call. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Panicos Nicolaou, Chief Executive Officer. Mr. Nicolaou, you may now proceed.
Good morning, everyone. Thank you for joining our financial results conference call for the first quarter of 2023. I am joined by Eliza Livadiotou, Executive Director Finance, Demetris Demetriou, Chief Risk Officer, and Annita Pavlou, Manager IR and ESG. After my introductory remarks, Eliza will go into more detail on our financial performance, then we'll turn to Q&A. We would also like to invite you to the investor update event that will take place in London on the 8th of June 2023, where we will present and discuss an update of the group's outlook. Of course, we remain available for questions both during this call and afterwards. I will start by highlighting some of the key messages for the quarter on slide number four. We started the year strongly with the performance of the quarter being ahead of our 2023 targets.
Overall, we recorded a profit after tax of EUR 95 million versus EUR 17 million on prior year, corresponding to a return of 21.3%, driven mainly by the growth in net interest income, which has more than doubled on prior year, benefiting from rates higher than expected and anticipated increases in deposit costs not yet developing. We continue to focus on cost discipline, delivering a reduction in our cost base of 3% year-on-year, despite inflationary pressures. Our cost-to-income ratio, excluding special levies and other contributions, stood at 34% in the first quarter, compared to 60% in the prior year. Our cost of risk remained broadly flat at 44 basis points, evidenced by the resilience in our credit portfolio quality.
Asset quality is in line with our targets, reflected in an NPE ratio of 3.8% and an improved level of coverage of 73% as of quarter end. The bank's capital position remains robust and comfortably in excess of our regulatory requirements. As at the end of the quarter, our total capital ratio was 20.3% and our CET1 ratios 15.2%, unlocking 90 basis points of current capital generation. Our liquidity position remains robust, stemming from our growing retail funded deposit base and highly liquid balance sheets. As at the end of the month of March, our cash balances amounted to EUR 9.2 billion, while our deposits remained flat at the December level, but increased by 7% on the prior year to EUR 19 billion.
Finally, we are pleased to note that we have reinstated our dividend, as I will discuss on slide five. This year, we have achieved a significant milestone with the delivery of our long-standing intention to resume dividend payments after 12 years. This represents an important step in the group's journey of delivering sustainable profitability and shareholder returns. In April 2023, we proposed a dividend of EUR 0.05 per ordinary share with respect of 2022 earnings, equivalent to 14% payout ratio on adjusted carried profitability as reported in the 2022 annual report. The dividend is evidence that the group's period of restructuring is complete and of our transformation to a strong, diversified, well-capitalized organization successfully exceeded all of our financial 22 targets that had been set in prior year.
We continue to work hard on our business model in order to create value per shareholders. Going forward, dividends are expected to build prudently and progressively towards a payout ratio in the range of 30%-50% of our net profits before any non-recurring items adjusted for the year-end coupon. We note that for CRR compliance purposes, we have accrued a 30% dividend payout ratio in our capital in the first quarter, in line with our dividend policy. The final dividend decision will be taken by the board around the year-end results. Of course, as a reminder, dividend are subject to regulatory approval. Moving now to slide number six. I am pleased with the group's performance in the first quarter, surpassing its key milestones.
In summary, return on tangible equity of over 13%, cost-to-income ratio at mid-thirties, and an NPE ratio of sub 4%. Our positive set of financial results this quarter provides a foundation to help us deliver against our targets. Slide number seven provides an overview of microeconomic conditions. In spite of macroeconomic headwinds in the global and European economies, Cyprus continues to demonstrate its strength and its ability to withstand external shocks. The economy is at a different stage of the economic cycle, with GDP growing by 5.6% in 2022. Economic momentum is expected to continue in 2023, with recent projections by the Minister of Finance pointing to a growth rate of around 2.8% in 2023, ahead of the Eurozone average.
Touring, tourism was strong in the first quarter, despite the fact that it's off-season, with arrivals 10% higher than the corresponding arrivals in 2019, itself a record year for Cyprus. The unemployment rate decreased to 6.8% in 2022 and is expected to decrease further to 6.5% in 2023. As in many other countries, consumer inflation accelerated significantly impacted by supply chain disruptions, higher energy and other commodity prices. In Cyprus, inflation peaked in July 2022 and has been decelerating since, falling to 3.8% in April 2023. While Eurozone inflation has proved stickier. For 2023, inflation in Cyprus is expected roughly at approximately 3% according to the Ministry of Finance. I will now hand over to Eliza to take you through our financial results for the period.
Thank you, Panicos, and good morning from me, too. Starting on slide eight, to look at the financial performance for Q1. I will not go through every line, but highlight a few important figures in the first quarter. Total income for the quarter and the 31st March continued to improve to EUR 234 million, of which EUR 162 million relates to net interest income. This quarter saw an increase of 19% on a quarterly basis and 127% on a yearly basis in net interest income, benefiting from the current interest rate dynamics and the continued low deposit pass-through. Our non-NII remains an important contributor to revenue generation.
Non-interest income recorded an increase of 8% on the prior year, on a quarterly basis, non-interest income reduced by 11%, reflecting mainly the termination of liquidity fees and NPE sale related service increase in December 2022 and February 2023 respectively, as previously communicated. The cost base reflects the benefits of the efficiency actions we undertook last year, offsetting higher inflation. Total operating expenses of EUR 80 million were down by 5% on the previous quarter and down 3% on the previous year. Cost of risk remains flat at 44 basis points, tracking below the level we guided in February 2023, reflecting the resilient credit portfolio quality. The overall result was a profit after tax of EUR 95 million for Q1 2023, equivalent to Return on tangible equity of 21.3%. Moving to slide nine.
Let's now deep dive into the main drivers of NII. NII continued to expand in the first quarter, totaling EUR 162 million, with our margin improving to 2.91%. The margin is a multidimensional metric affected by the dynamics in its constituent parts. This includes, firstly, immediate repricing of liquid assets. During Q1, we have benefited from an increase in the effective yield on liquids by 125 basis points to 280 basis points. Secondly, the gradual repricing of the loan portfolio. As a reminder, over 95% of our loan book is variable rate, with around half of it linked to EURIBOR. The effective yield on the performing book grew by 65 basis points to 4.55% in Q1.
Thirdly, a better than expected deposit behavior and a well-managed deposit pass-through, facilitated by the very liquid Cypriot banking sector. This is evidenced by the evolution of our cost of deposits, which remained low at 10 basis points, corresponding to a 10% term deposit pass-through. As a reminder, in February, we have guided for a pass-through rate on term deposits of around 50% by year-end, with term deposits making up around 45% of our total deposits, as compared to 30% at the end of Q1. Our deposit trends are currently tracking better than expected compared to our assumptions set in February. Turning to slide 11.
Given recent banking turmoil and focus on liquidity, it's important to note that the group has a robust liquidity position stemming from a predominantly retail-funded deposit base and a highly liquid balance sheet. Deposits remain stable at EUR 19 billion, flat on the prior quarter and up 7% on the prior year. Close to 60% of our deposits are protected by a deposit insurance scheme. Our deposit base is granular, with the average retail ticket size at EUR 27,000. There are no particular deposit concentrations. As of 31st March, 78% of total liquid assets were in cash, of which EUR 9.2 billion were in cash and balances with central banks.
The remaining 22% of liquids relate to our fixed income portfolio, comprising mainly of highly rated fixed income assets with low average duration, giving the group the flexibility to take advantage of rising rates. That remains the case today. As of 31st March, the group LCR ratios stood at total of 300%, resulting in a significant LCR surplus of EUR 7.4 billion. When disregarding the effect of the TLTRO, the group's liquidity position remains very strong, with an LCR of 248% and a liquidity surplus of EUR 5.4 billion. On slide 12 now, we show a further breakdown of our EUR 19 billion deposit base.
As you can see on the bottom left, almost 90% of our deposits are from Cypriot residents and only 1% is from Russian or Belarusian residents. Slide 13 on new lending now. The group extended EUR 624 million of new loans in Q1, which is usually a strong quarter, representing an increase of 41% on the prior quarter and is similar to prior year levels, whilst maintaining strict lending criteria. As a result, the gross performing loan book grew by 1% both Q on Q and year-on-year at EUR 9.9 billion.
We have high quality loan origination supported by prudent underwriting standards and the seeking assessment of the repayment capability of our customers, evidenced by the fact that 99% of new loans extended in Cyprus since 2016 are performing. Turning now to slide 14 on the fixed income portfolio. As of 31st March, the fixed income portfolio amounted to EUR 2.7 billion, up by 48% year-on-year and 10% on the prior quarter, representing 11% of total assets. We have been cautious in building our securities book in recent years, seeing an attractive risk return. More recently, improved market opportunities in the group's comfortable liquidity position facilitated a prudent expansion of the fixed income portfolio, subject of course to market conditions. The majority of the fixed income portfolio is measured at amortized cost and is held up to maturity.
No fair value gains or losses are recognized in the group's income statement or equity. The mark to market impact of the amortized cost portfolio amounted to EUR 87 million as of 31st March, equivalent to around 85 basis points of CET1 ratio. Slide 15 provides a summary of non-interest income. As a reminder, liquidity fees and NPE sale related servicing fees were terminated in December 2022 and February 2023 respectively. Net fee and commission income reflecting those factors for Q1 was up 16% year-on-year. Down 3% on the prior quarter due to seasonally lower transactional fees. Net foreign exchange gains and net gains on financial instruments decreased by 3% Q-on-Q, reflecting lower FX incomes to FX swaps, partly offset by higher valuation gains in financial instruments.
On this note, I would like to remind you that this source of income is volatile, is a volatile contributor to revenue generation. Overall, non-interest income in the first quarter of the year increased by 8% on the prior year to EUR 72 million, mainly driven by higher net fee and commission income on a like-to-like basis and higher net FX gains and net gains on financial instruments. The year-on-year increase in net fee and commission income reflects the introduction of price adjustments in February, the higher non-transactional fees, and higher credit card commissions. Now on slide 16 on a slightly different topic, the new accounting standard that impacts our insurance business. On January 1st this year, the group adopted a new accounting standard for insurance contracts, IFRS 17, which replaced the previous IFRS 4.
Given the retrospective application of the new standard, we would like to spend some time on slide 16 to provide an overview of IFRS 17 and take you through the main changes that impact the group's results. In substance, IFRS 17 impacts the phasing of profit recognition for insurance contracts, as the profit is spread over the lifetime of the contract rather than substantially at inception, as was the case under IFRS 4. Therefore, this new accounting standard does not change the lifetime economics of the insurance contract, but it does decrease the volatility of earnings. With the adoption of IFRS 17, the present value of in-force life insurance contract assets was eliminated, insurance assets and liabilities were remeasured, and the contractual service margin was recognized.
The overall result was a reduction in the group's total equity by EUR 52 million and an increase in the group's tangible equity by EUR 64 million. With the restatement, the group's 2022 profit after tax was reduced by EUR 14 million, mainly reflecting the deferral of new business profit and the assumption changes on the valuation of insurance contract assets and liabilities. On slide 17 and 18, these focus on the performance of our insurance business in Q1 of this year. The group's insurance companies are leading players in the life and general insurance business in Cyprus and have been providing a recurring and improving income, further diversifying the group's income stream.
The net insurance results for Q1 amounted to EUR 10 million, down 15% year-on-year, impacted mainly by higher claims and higher insurance expenses, as well as higher attributable expenses driven by higher new business in Q1. Overall, the insurance businesses remain a valuable revenue stream for the group, as net insurance results constitute 13% of the group's non-NII. Moving to operating expenses on slide 20. Total OpEx amounted EUR 30 million in Q1, down 3% year-on-year as efficiency actions partially offset wage and inflationary pressures. Staff costs for Q1 were down by 4% year-on-year as a result of staff reductions that took place in July 2022, partially offset by inflationary pressures.
On a quarterly basis, staff costs were up by 9%, driven by cost of living adjustments linked to inflation, salary increments, and accrued staff cost rewards of around EUR 2 million following the introduction of a short term incentive plan. The plan involves variable remuneration to selected employees and will be driven by both delivery of the group strategy as well as individual performance. Other operating expenses were flat year-on-year and down 19% on the quarter to EUR 34 million, mainly as a result of seasonally higher professional and marketing expenses in Q4 last year. Overall, our Q1 cost-to-income ratio, excluding the special levy on deposits and other such levies, was at 34%, down five percentage points on the prior quarter, mainly driven by higher total income. Turning to slide 23 on capital.
As of February, 31st March, our CET1 ratio stood at 16.2% and our total capital ratio at 20.3% after an accrual of dividend representing a 30% payout ratio on adjusted recurring profitability within the range of the group's approved dividend policy, demonstrating our commitment to deliver sustainable shareholder returns. We note that this accrual does not constitute an approval by the regulators for a dividend payment. The final dividend decision will be taken by the board at the year-end in accordance with the regulatory process. Our organic capital generation of around 90 basis points, together with the 50 basis points dividend received from our insurance business, relating to the day one implementation of IFRS 17, have supported our capital base. The final phasing in of IFRS 9 impacted capital by around 70 basis points.
Note also that our capital ratios as at 31st December have been restated in order to reflect the depletion of dividends out of 2022 earnings. Following EC, declaration, apologies. The declaration of dividend out of 2022 earnings. Following ECB approval, the board has resolved to propose a final dividend of EUR 0.05 per share in respect of full year 2022 earnings, subject to approval at the AGM. This proposed dividend amounts to EUR 22.3 million and has reduced the year-end capital ratio by around 20 basis points. Moving now to slide 25, which provides an overview of asset quality. Our NPE ratio was reduced by 20 basis points in the quarter to 3.8% or 1.1% on a net basis, reflecting low organic formation.
The bank's NPE coverage ratio further improved to 73%, and when including tangible collateral, NPEs are fully covered. With the legacy asset quality issue firmly behind us, our focus remains on monitoring and limiting NPE inflows. Despite microeconomic uncertainties, there are no signs of asset quality deterioration to date, as evidenced by the modest gross inflows during 2023. Continuing to cost of risk on slide 26. In Q1, the cost of risk remained roughly flat at 44 basis points on a quarterly and yearly basis. The cost of risk included the release of management overlay for the performing loan book on the back of strong loan performance in specific sectors and expected improved sector performance, as well as charges on Stage 2 and Stage 3 exposure following post-model adjustments to capture conservative assumptions and uncertain macroeconomic conditions. Now, let me hand back to Panikos for his closing remarks.
Thank you, Eliza. Let's now turn to slide 31. We are a well-capitalized, sustainably profitable organization with a diversified business model across banking, insurance, payments, with focus on technology. The resumption of dividend payments after 12 years is a significant milestone and represents a new chapter for the group capable of delivering sustainable shareholder returns. The dividend decision was supported by a strong start of the year with the performance in the quarter ahead of our 2022 targets. On the 8th of June, we will host an investor update event in London, where we will present and discuss an update of the group's outlook. We look forward to seeing you all there. This concludes our presentation, and we're now available for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. Please use your handset when asking a question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Alevizos Alevizakos with AXIA Ventures. Please go ahead.
Hi. Thank you for taking my questions. Congratulations on this set of results. It's really amazing, more than 20% return on the equity. A couple of questions from my side. The first one is regarding the investment securities. The book still looks quite small, I wanted to know, like, what are the plans going forward? Are you planning to continue to grow it? Looking compared to other banks in Europe, you seem to be having, like, one of the lowest modified durations. You're actually having the exact opposite problem compared to everybody else. Are you thinking about taking more risk and perhaps reducing the LCR ratio, which is still the leading in Europe? That's question number one. Question number two is regarding the payout.
I wanted to know how you are thinking about it on dividend versus buyback. What are the options perhaps of doing some targeted buybacks, especially for some shareholders that may be dormant? I think that 30% sounds a bit conservative. I was wondering, what do you think that the SSM could actually use in order not to allow you to do more? Thank you.
Okay. Thank you, Al. The first question on the fixed income. You all know that historically, we had a conservative approach because we felt that it didn't make too much sense in terms of re-risk and dynamics. As rates started going up, we could see more attractive risk and dynamics, that is why we increased the portfolio 10% quarter-on-quarter and 48% year-on-year. Other things being equal, we expect to carefully expand the careful expansion to continue on the portfolio. This is very important to mention. Of course, we'll still be prudent. You already mentioned that of the short duration of our portfolio and the limited market heat.
In a nutshell, you should expect a careful expansion of the fixed income portfolio in the future. In terms of dividend questions, and about talking about the buybacks, I have to remind us all that, we have just resumed payment of dividends after 12 years. The board of directors took the decision that, the appropriate way to start returning capital to shareholders is by dividends. However, and it's very important to mention that we don't rule out anything, including, buybacks. Everything is on the table and are under constant review.
Regarding the payout ratio, as we already mentioned in our announcement for payment of dividends, and dividends are expected to build prudently and progressively over time towards a payout ratio, which you already know is between 30% and 50%. It's important to mention that the 30%, the accrual, was set in to be in line with our requirements for CRR, and we choose to be at the lower end of the payout ratio. Final dividend decision, as Eliza mentioned in his earlier remarks, will be taken by the board as the annual results. By no means, this 30% accrual is not a signaling of any dividend payment ratio.
Understood. Thank you very much, and congratulations again.
The next question comes from the line of Hamilton James with Numis Securities. Please go ahead.
Good morning. Couple if I may. Firstly, looking at sort of guidance, you've obviously mentioned that's very strong quarter for new lending in Q1. I appreciate the seasonal bias towards it, but if you could provide some sort of outlook as to how has that momentum been continuing to Q2, that'd be helpful. Also on guidance, looking at provisions, I mean, just a little bit of clarity around your thinking, because on the one hand, you're saying there's no signs of deterioration, then I noticed that Stage 3 loans are declining quite rapidly, suggesting that the book quality is improving, yet the provisions against those continues to go up.
I believe you cited some macro there, so a little bit of clarity about what you're actually thinking there. Finally, on the sort of digital strategy, if you could, if you could comment on, you know, how you're seeing the new sort of products like Quick Loans evolve, you know, are customers using it? What's the sort of penetration there and what are you hoping for?
Okay. Thank you, James. Starting with the first question on the new loan. I mean, you all seen that we have a seasonally good quarter and 1% quarter-on-quarter. Numbers are good, given macro uncertainty, we are more cautious on new lending growth. In the near term, we expect the growth on NII to be mostly coming from yields and rates rather than growth. Of course, in the medium term, prospects remain good for the security economy and we expect to have growth on the loan book. Where we are seeing demand, we are seeing demand across all the sectors of the economy. Priority checklists for portfolio growth are in line with the RRF for Cyprus.
I remind you that RRF for Cyprus, it's all in, it's EUR 4.4 billion, and it's mostly focused on green transition and digital transition, which is very important. I will add to these sectors, the health and education. Of course, tourism and leisure is always a sector of growth in Cyprus. Regarding the cost of risk, I will ask Dimitris, our Chief Risk Officer, to answer the question.
Yes. Hello, James. Now, as far as cost of risk in Q1, it's important to point out an agreement by post-model adjustment due to, as already explained by Eliza, because we feel that model cannot capture fully the continuing volatility in the economic environment.
It's important to say that we budget the higher rates will hit with delay. We, although up until now, we have seen no evidence from that. We charged with these adjustments, we did manage with overlays to take into account the information. For example, we introduced a new overlay to decrease vulnerability in our Stage 2 and Stage 3 portfolio in anticipation of delays in higher interest rates hitting our credit portfolio. We have introduced higher haircuts to more sensitive exposures on primary residencies. On the other hand, we have done reversals as well on part of the portfolio that was in Stage 2, for example, the tourist portfolio that we've been performing well, and will continue to be performing well.
On digital, if I take that question, the progress is continuing. Our digital roadmap is very busy. In fact, earlier this month, this is a Q2 development, we did launch what we call Quick Loans, which I think referred to James earlier. These are the first fully digitalized lending product in the island. It's an unsecured personal loan, consumer loan. It was launched on the fifth of May. We actually got 11,000 of applications to date, which to us was a big achievement because it was a totally new introduction, new type of service into the island. EUR 31 million worth of these loans are already on the balance sheet as we speak today. There are many other examples.
We launched the other day, what we call Quick Cup, which is a mobile portal for new products, both deposit and loan products, and the roadmap is continuing. We aim to give a bit more color on this and bring it to life a bit more on the 8th of June on our investor update event.
Thank you very much, congratulations on a very strong result.
The next question comes from the line of King with the [unintelligible] Securities. Please go ahead.
Oh, sorry, that's me. Just a follow-up from James's question. Well, maybe, it's an entirely additional question. You mentioned that the average size of retail deposits is EUR 27,000. That's so obviously a very strong number. Could you give us a little bit of additional information around that? What's sort of the trend and the distribution around that? Also, if you could touch a little bit upon how we should see that in terms of households having that as liquidity versus savings and what the evolution could be there. I appreciate maybe that's more one for the investor event in June. If you could touch a little bit upon how we should see that going forward. Thanks.
Thank you, King. First of all, on the EUR 27,000 average balance, this has been broadly similar over the last few years, actually. The trend has been the same and the same on the 60%. I also mentioned on the target, the 60% deposit guarantee, you know, deposit below the deposit guarantee is in the threshold of EUR 100K. These trends have been similar. We haven't seen any changes in the recent years, and we haven't also noticed any changes since the March turmoil in the market internationally. The same on the distribution, 60%, as I said, is distributed below the EUR 100K threshold. Obviously, there are higher amounts of depositors out there, but we don't have any noticeable concentrations of depositors or depositor groups.
Now, on your savings question, there is a slide which shows our term deposits, which I guess is the only proxy we can have. The term deposit mix is currently at 30% with term, I mean, notice and time deposits. This is the one, again, we haven't seen a change, but we are aiming to move it to 45% by year-end. As part of through the asset liability management and through the deposit fee cap, which as I also mentioned, we are building in for our guidance, the 50% time deposit fees have by year-end.
Great. Thank you. Just also like to just add my congratulations, a very strong result. Thanks.
Thank you.
The next question comes from the line of Corinne Cunningham with Autonomous Research. Please go ahead.
Good morning, everyone, and again, congratulate you on a great set of results. Turning to capital maybe, with capital position as it is, could you actually consider redeeming outright the Tier 1, or would you like to maintain that for capital efficiency? And then maybe I couldn't quite hear the question, or the reply on the asset quality. I'm just wondering what type of macro deterioration would you need to see to get up to that 80 basis points cost of risk? Thank you.
Okay. Thank you, Corinne. On, I will start by answering the question on the cost of risk. I will start by reminding you all that we have introduced a range of 50, 20 basis points last year to reflect the unusual level of uncertainty. We c ontinue to believe being prudent, as you know, that certainly remains today as well, and we consider premature to change the guidance, in our cost of risk. However, and it's important to mention that we do not see anything, to suggest any meaningful deterioration. I don't know, Dimitris, if you want to add anything.
Well, in terms of macro deterioration, Corinne, we have said this in the past, an 80 basis points cost of risk means a mild recession in Cyprus.
Thank you.
Okay. On the question about capital and Tier 1, Corinne, of course, you know that everything is on the table. We continue to monitor the market. We evaluate opportunities to optimize our capital structure, including of course the Tier 1 that we all know how the cost data at the end of 2023.
Just in principle, would you rather have Tier 1 in your capital stack? Do you see it as an efficient, as part of an efficient capital base?
In principle, we do want to keep the AT1 because we want to continue on the stream of increasing our payout ratio and the distribution to shareholders. Yes, in principle, we do consider the AT1 as a valuable tool, as a valuable asset, liability, equity class.
It's part of our capital structure.
Thank you.
The next question comes from the line of Hugo Cruz with KBW. Please go ahead.
Hi. Hello. Thank you for the time. Just a few questions for me. First, on the deposit pass-through of, for time deposits of 10% in Q1, how did that compare to your initial guide, expectations for the quarter? Was it higher or lower? Are you seeing any increase in political pressure, maybe should translate that? Second question around levies and contribution, in OpEx. I wonder if you can give guidance for the figures for this year. Finally, a question on the Turkish elections, if you think that could have any impact, in the Cyprus economy. Thank you.
Okay, I will start with the last question about Turkish elections. I think based on our experience over these years and quoting what the president of the republic said, Turkey's approach to Cyprus problem is expected and it is proved to remain the same regardless of who is the president and what the election results are. We don't expect any impact on Cypriot economy.
Just to add, if I may also, there are no trading ties between or flows between Cyprus and Turkey in light of the political situation. On an economic, actual financial transactions basis, we don't expect any impact either.
On the first question about the deposit pass-through rate of 10%, of course, it's our current expectation for time deposits was for higher pass-through rate, significantly higher. I mean, I quote the full year pass rate, which we said is 50% at least international rate, with a mix of 45% of current tenure deposits, which currently increased from 29% to 30%. So far we are moving to better than expected pass-through rate. Of course, we are seeing some early signs after the most recent ECB hikes. We are seeing some deposit beta gradually increasing. It is still better than our expectation, but of course, we'll need to watch and how things will develop. We'll be in a position to update you in more detail in June about this.
On the levies, the bank levy, what we call bank levy in the financial is actually formulated. It's 15 basis points on deposits. That's how you should calculate the formula, the basis. We don't expect a material. We don't expect a change in the basis of calculation. That should be quite a simple formula.
Going back to the political pressure, Hugo, we, I forgot to provide a specific answer. Being a 42% market living in the country, politics are always there, but I don't consider political affairs to be something that influence our decision.
Okay, thank you very much.
As a reminder, if you would like to ask a question, please press star and one on your telephone. As a final reminder, to register for a question, please press star and one on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Nicolaou for any closing comments. Thank you.
Thank you all for your participation and of course your questions. As always, myself and the team are available for follow-up questions and one-to-one meetings if needed. As a reminder, hope to see you all in our investor update in June. Thank you very much.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a good day.