Ladies and gentlemen, thank you for standing by. I am Kelly, your conference call operator. Welcome, and thank you for joining the Bank of Cyprus conference call to present and discuss the group financial results for the six months ended 30th June 2022. All participants will be in 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, Ms. Eliza Livadiotou, Executive Director of Finance, Mr. Demetris Demetriou, Chief Risk Officer. Mr. Nicolaou, you may now proceed.
Thank you. Good morning, everyone. Thank you for joining our first half of 2022 financial results conference call. I am joined by Eliza Livadiotou, Executive Director of Finance and Legacy, Demetris Demetriou, Chief Risk Officer, and Annita Pavlou, Manager IR and ESG. Before commencing introductory remarks on the financial performance of the group for the first half of 2022, I would like to comment on the announcement that was published on the nineteenth of August 2022.
Bank of Cyprus has received three unsolicited conditional non-binding proposals from Lone Star over the past three months, which the board has unequivocally rejected. The potential offer is governed by the Irish Takeover Rules and the Cyprus takeover bid laws administered by the Cyprus Securities and Exchange Commission.
Under the Irish Takeover Rules, Bank of Cyprus management is prohibited from discussing any material or new information or significant new opinion which has not been publicly announced, and we are also subject to restrictions regarding statements which may constitute a profit forecast, asset valuation, or quantified financial benefit statement. We may therefore be limited in responses that we may provide to some of your questions during the call.
Any person interested in shares in Bank of Cyprus is encouraged to consult his or her professional advisor. In accordance with the requirements of the Irish Takeover Rules, the presentation, including any Q&A, is being recorded, and the recording and presentation slides will be made available on the investor relations section of Bank of Cyprus website. I will start now by highlighting some of the key messages of the first half on slide 6.
First, we see healthy loan growth momentum and extended a record EUR 1.2 billion of new loans. Our net performing book grew by 4% during the first six months of 2022, reached EUR 9.7 billion, up 8% from EUR 9 billion eighteen months ago. Second, we delivered a healthy profit after tax before non-recurring items of EUR 59 million, with an underlying return on tangible equity of 7.3, converging to our mid-term target of over 10%.
An important driver of this performance is our non-interest income that amounted to EUR 154 million in the first half, representing over 51% of total income, driven by higher fees and commissions and higher insurance-related income. Our insurance business recorded a 6% increase year-on-year and is a key contributor to income growth.
Equally important, we are seeing that net interest income have now bottomed, and we expect a steady improvement from here. Third, in July, we successfully completed a voluntary exit plan through which around 550 applicants were approved to leave at a total one-off cost of around EUR 99 million to be recorded in the third quarter. The estimated annual saving of EUR 37 million represents 19% of total staff costs.
Simultaneously, we have reduced the number of branches by 20 year-to-date to 60, a reduction of 25%. Four, our capital position remains robust and comfortably in excess of our regulatory requirements after absorbing in full the cost of the voluntary exit plan. As at 30 June 2022, our capital ratios on a traditional basis were 19.3% for total capital and 14.2% for CET1.
Both pro forma CET1 and MREL have remained well above our target of maintaining a capital at the range of 13.5%-14.5% for the period 2022 to 2025. The process of balancing risk is now largely complete. During the first 6 months of 2022, we reduced our pro forma NPE ratio to 5.5% and to 2.4% on a net basis. We remain well on track to achieve our target of NPE ratio of 5% by the end of this year and to less than 3% by 2025.
Our cost of risk at 43 basis points in the first 6 months of 2022 remains well within our normalized target range. Our transformation plan is already in progress and aims to enable the shift to a modern banking organization.
Our digital users continue to increase. Since the beginning of the year, active digital users have increased 8% to almost 400,000, while our active mobile banking users have increased by 8% to 344,000. Moving now to slide 7, which provides further details for our performance in the first six months of 2022. I will briefly go over this.
Despite concerns regarding the outlook for global and European economic growth, the Cypriot economy continued to grow strongly in the second quarter, with GDP increasing by 6.9%, significantly outperforming the Euro area. The strong tourism season is expected to support growth this year, with GDP surplus projected to exceed 5% in real terms in 2022, according to the Ministry of Finance.
During the first six months of the year, profit after tax before non-recurring items reached EUR 59 million, up 30% year-on-year, driven mainly by 12% year-on-year increase in net fee and commission income and lower impairments. The reported results from the six-month period was a net profit of EUR 50 million compared to EUR 1 million a year earlier. The cost-to-income ratio stood at 58% for the first half 2022, broadly flat year-on-year.
Deposits increased in the second quarter by 4% to EUR 18.5 billion, and we continue to operate with a significant liquidity surplus that now total to EUR 6.7 billion. We are well positioned to benefit from further interest rate increases. Turning now to slide eight, which shows the drivers of our upgraded near-term guidance.
We operate in an environment of increased geopolitical risk that results in high macro uncertainty, with high inflation and central banks embarking on a sustained interest rate tightening cycle. We now expect a faster normalization in interest rates, and this is providing a big boost to the banking sector.
We are one of the most geared banks toward rising rates, and we are therefore upgrading our near-term performance to reflect a strong recovery in net interest income and group profitability. Group NII has bottomed, and we expect for full year 2022 NII to reach roughly EUR 320 million, an increase of 8% compared to last year. NII is expected to increase further in 2023 by between EUR 100 million to EUR 120 million on a yearly basis, an increase of 30%-35% from the expected 2022 level.
This improvement in NII will demonstrate faster repricing of loans and liabilities than funding costs. Net fee and commission income for the first half of 2022 remains strong. However, it is likely to be under pressure in the near term, mainly due to the phasing out of liquidity fees in 2023. We have made considerable progress in delivering a lean operating model through the efficiency plan that was completed in July 2022, ahead of schedule.
The reduction in the number of employees and branch network unlocks meaningful savings from 2023, allowing us to absorb inflationary pressures on total operating costs. Our efficiency actions and improved revenue outlook lead us to review our cost-income guidance. We now expect cost-income ratio for full year at around current levels compared to mid-60s% previously expected.
Our cost-income to converge to roughly 50% already in 2023, confirming the near-term guidance of 50% cost-income ratio. The cost of risk remains under control, mainly reflecting the strong and resilient loan portfolio performance in the first half. Thus, we expect cost of risk to reach 15 basis points in 2022.
The cost of risk expected to rise between 50 and 80 basis points in 2023, a wider range than normal, reflecting a considerable overlay for the prevailing uncertainty on the macroeconomic outlook. We expect to maintain healthy capital buffers, and we remind you that the implementation of IFRS 17 on January 1, 2023 is expected to have a positive impact of around EUR 50 million on the group's tangible equity, enhancing Group CET1 ratio by around 50 basis points.
As a result of this update, we now expect to reach ROTE a year earlier, already in 2023, laying the foundation for an increase in dividend distributions, which we expect to resume in 2023, subject of course to regulatory approval and market conditions. Slides 9 and 10 provide an overview of macroeconomic conditions.
The escalating geopolitical risks following the Russian-Ukrainian war and the sanctions imposed on Russia have profoundly changed the global macroeconomic outlook and increased uncertainty. GDP in Cyprus grew by 6.9% in the second quarter of 2022, facilitated mainly by the faster-than-expected recovery of tourism and the continued expansion of exports of other services.
Economic growth is further supported by the reduced unemployment rate in the second quarter of 2022, increased wages, and continued deposit inflows.
The strong tourism season is expected to support the growth this year, with GDP surplus projected to exceed 5% in real terms in 2022, outperforming the Euro area. Tourist arrivals in the first seven months of 2022 reached 77% of the corresponding 2019 levels. Likewise, tourist revenue in the first half of 2022 reached EUR 836 million, representing 83% of the corresponding 2019 levels, despite sizable loss of tourists from Russia.
Cyprus has no energy dependence on Russia, as it imports all of its oil from Greece, Italy and the Netherlands. However, it is indirectly affected by pricing pressures in the international energy market. It is important to note that Cyprus does not use gas for its energy needs. It has milder winter compared to other European countries, and whose energy consumption typically peaks in the summer.
As in many other countries, consumer inflation in Cyprus has accelerated significantly as a result of supply chain disruptions and higher energy and other commodity prices. In July 2022, inflation accelerated to 10.6%. Currently, households and corporates are able to absorb these higher costs, supported in part by government fiscal measures of EUR 350 million. Moving now to slide 11 of new lending.
As mentioned earlier, new lending granted in Cyprus reached a record of EUR 1.2 billion for the first half, up by 30% year-on-year, reaching higher levels than the pre-pandemic. The six-month increase was driven by increased activity in all sectors. New lending continues to be carefully considered against our policy criteria, and 99% of new exposures in Cyprus since 2018 are performing.
We have high quality originations supported by prudent underwriting standards, and we make a meticulous assessment of the repayment capability of our customers. As at the 13th of June 2022, the outstanding performing loan book grew by 13% in the six months to EUR 9.72 billion. Only 11% of this loan book is in arrears. I will now hand over to Eliza to take you through our financial results for the year.
Thank you, Panicos, and good morning from me, too. Starting on my part from slide 13 on the income statement. NII was up 4% Q on Q, driven by growth in the performing loan book, loan yield improvement in line with rising interest rate environment, and the effect of 2 additional calendar days in the second quarter.
NII for the first half was down 4% year-on-year, reflecting the foregone NII on the Helix 2 portfolio, around EUR 15 million in the first half of 2021. Non-interest income was up 6% Q on Q, driven mainly by higher net fee and commission income.
Non-interest income for the first half of the year was up by 13% year-on-year, mainly due to higher net fee and commission income following the introduction of revised price lists and extension of liquidity fees to a wider customer group in the first quarter of 2022. Loan credit losses and impairment were up 14% Q-on-Q, mainly due to higher impairment on net legacy overseas exposure.
Loan credit losses and impairment were down 27% year-on-year due to higher COVID-19 related charges in the equivalent period of 2021. Profit after tax and before non-recurring items amounted to EUR 32 million for the second quarter, with an underlying ROTE of 7.8%. Profit after tax and before non-recurring items for the first half of the year amounted to EUR 59 million, with an underlying return on tangible equity of 7.3%.
The overall result was a profit after tax of EUR 29 million for the second quarter, and EUR 50 million for the first half of the year. Moving to slide 14. The quarterly NII bottomed in Q1 2022, and is now reversing to growth, reflecting increased lending and faster repricing of loans and liquid assets compared to funding costs. The quality of NII is also significantly improved with low contribution from legacy interest income. Net interest margin for the second quarter remains flat Q on Q at 1.33%.
The increase of 4% in deposits had a diluting effect on the yields of liquid assets as they were placed in cash balances with ECB. This yield is expected to improve in the event of further ECB rate hikes.
We're encouraged by income evolution within our performing loans, which is increasing, with yields of 301 basis points improving over the past two quarters and volumes growing over recent quarters. Our TLTRO three borrowings stands at EUR 3 billion as at 30 June, and participation is expected to remain paying to maturity, subject to no change in terms and conditions. The NII benefit of EUR 15 million was recognized in the income statement over the period June 2021 to June 2022.
Let's now turn to slide 15, where we will discuss in more detail our liquid balance sheet composition. As at 30 June, cash balances with ECB amounted to EUR 9.9 billion, including TLTRO of EUR 3 billion and exempt Tier of EUR 1 billion.
Following the uplift of 50 basis points of ECB deposit rates in July 2022, the group will have an immediate NII benefit of around EUR 12 million in the second half of this year. Securities, including debt securities, treasury bills, and equity investments amounted to EUR 2.1 billion as at 30 June. We expect conducive conditions going forward to expand the fixed income portfolio. Net loans amounted to EUR 10.1 billion as of June, of which EUR 9.7 billion is the performing book.
Around 50% of the loan book is repriced on Euribor, and repricing on the reference rate will gradually benefit the interest income on loans. Customer deposits amounted to EUR 18.5 billion as of June, and liquidity fees charged from March 2021 contributed around EUR 8 million to net fee and commission income in the first half of this year.
These are expected to phase out as interest rates pick up. Wholesale funding of EUR 0.6 billion as of June is expected to increase gradually in order to comply with MREL requirement. Now turning to slide 16, where we discuss in more detail our gearing to higher interest rates. As shown on the graph, forward curves have moved more steeply in the short term since May 2022. Using these latest curves, we now expect full year 2022 NII to reach EUR 320 million.
NII is expected to increase further in 2023 by between EUR 100 million to EUR 120 million on a yearly basis. These projections incorporate assumptions on partial pass-through to deposits, gradual change in deposit mix and higher wholesale funding costs from 2023.
Slide 17 provides an update on the group sensitivity to rising interest rates. We estimate that a further 50 basis points and a 100 basis points parallel increase in rates versus the current forward curve would add EUR 56 million and EUR 103 million to annualized NII respectively, assuming no other changes. On slide 18, we highlight the strong liquidity surplus in our bank, which makes us one of the most highly geared EU banks to ECB rising rates.
The Cyprus banking system has one of the lowest net loan to deposit ratios among EU countries at below 55%. Turning now to the bond portfolio on slide 19. As of 30 June, the bond portfolio of the group amounted to EUR 1.9 billion, representing 7% of total assets.
The portfolio comprises of highly rated holdings with low average durations, providing flexibility and enabling the bank to benefit from the rising interest rate environment. Going forward, there's an appetite to expand this portfolio in order to take advantage of increased yields. This proportion is lower than where we believe it should be and is lower than many peers, and we expect to increase it gradually going forward.
Income. Net fee and commission income for the second quarter was up 14% QOQ, higher due to higher volumes of transaction fees, higher credit card commissions due to seasonality. Net insurance income and net FX and other income were broadly flat QOQ. Now moving to our insurance businesses on slide 21 and 22. The underlying operating performance of our insurance companies continued growing into the second quarter.
Net insurance income for our life insurance company, Eurolife, amounted to EUR 19.6 million for the first half of 2022, up 7% year-on-year. For our general insurance business, net insurance income amounted to EUR 13.2 million for the first half, up 4% year-on-year. Both increases were driven by higher gross written premium, partially offset by increased costs and claims.
Overall, the insurance business is a valuable and growing revenue stream for the group, as net insurance income contributes more than 20% of the group's non-NII. The profitability of the insurance businesses contributes 27% to the group's profit before tax. However, we believe it can deliver more, and we have set ambitious medium-term targets for both Eurolife and GIC.
We are aiming to enhance their value by growing the businesses even further, supported by digitization and our lean operating model. Based on current estimations, the IFRS 17 implementation on the first of January 2023 is expected to have a positive impact of around EUR 50 million on the group's tangible equity, enhancing the group's CET1 ratio by around 50 basis points. Slide 23 is an introduction to our subsidiaries JCC.
The group's net fee and commission income is also enhanced by transaction fees from this subsidiary, JCC Payment Systems Limited, a limited player in the card processing business, which is 75% owned by the bank. JCC's net fee and commission income contributed 9% of non-interest income and amounted to EUR 12 million in the first half of the year, up 26% year-on-year, backed by strong transaction volume.
Moving now to expenses on slide 24. Total operating expenses for 2Q were at EUR 87 million, up 2% QOQ. The cost-to-income ratio, excluding special levy on deposits and other levies and contributions for the quarter, was at 57%, down 2 percentage points, driven by the QOQ increase in total income. As discussed earlier, in July, the group completed a voluntary staff exit plan.
Following the completion of the plan, the overall number of employees is reduced by around 16%, with an estimated annual saving of around EUR 37 million or 19% of staff costs. Branch footprint rationalization continues, facilitated by the ongoing digital transformation of the bank. 15 branches closed down in July, resulting in a 38% reduction of branch network since June 2019. Our efficiency actions and improved revenue outlook lead us to review our cost-to-income ratio guidance.
We now expect the cost-to-income ratio for the full year 2022 at around current levels compared to mid-60s% previously expected. Our cost-to-income ratio is expected to converge to around 50% already in 2023, confirming the medium-term 2025 guidance of 50% cost-to-income ratio.
Now turning to capital on slide 27. Our CET1 and total capital ratios as at 30 June stood at 14.2% and 19.3% respectively, both pro forma for held-for-sale assets and the charge arising from our VTP, the cost of which will be included in Q3.
During the second quarter, we generated around 60 basis points of organic capital to operating profit, which was largely offset by expected loan credit losses and impairment of around 30 basis points, and other movements were further 20 basis points, including the payment of AT1 interest and the movement in the FVOCI reserves. Our CET1 ratio on a fully loaded basis was at 13.9% as of June and 13.4% pro forma for held-for-sale and the VTP.
The completion of our NPE phase is expected to be capital accretive by a further 60 basis points, whereas the VTP is expected to reduce capital by 95 basis points in the third quarter. The group continues to monitor opportunities for the optimization of its capital position, including AT1 capital. Now moving to asset quality on slide 29.
The NPE ratio was reduced to 5.7% pro forma for held-for-sale and 2.4% on a net basis, and is on track to reach around 5% by the end of the year. The bank's NPE coverage ratio was stable at 59% pro forma for Stage 3. The coverage of risk performing NPEs is relatively low at 32%, reflecting the lower risk associated with this stock of NPEs, where our coverage of core NPEs stands at 66%.
On slide 30, we see very strong organic NPE trends in the first half of the year. A very modest increase in gross inflows and relatively sustained outflows occurred in the second quarter, being translated into EUR 74 million net organic NPE reduction.
Moving on slide 31, we observe steadily declining Stage 2 exposures, relatively stable Stage 2 exposures, and a steady increase in Stage 1 exposures. On slide 32, we share more details on our Stage 2 loans. These are well collateralized, show very modest migration, and around EUR 520 million of these reflect post-moratorium restructurings expected to be eligible for exit to Stage 1 in 2023.
Let's now turn to slide 33, cost of risk. Cost of risk for H1 was at 43 basis points, compared to a cost of risk of 61 basis points in the first half of 2021, down by 18 basis points, compared to the first half of 2021 cost of risk, which included 21 basis point loan impairment related to COVID-19.
Cost of risk for 2Q amounted to 41 basis points, roughly flat QoQ, and includes 18 basis points or around EUR 5 million, reflecting management overlay on sectors that may be impacted by the ongoing geopolitical uncertainty and soaring energy prices, resulting in pressure on the domestic economy and the release of 5 basis points due to improved macroeconomic outlook in 2022 for the Cyprus economy as compared to our projections in the previous quarter.
While H1 cost of risk levels have been better than expected, we guide for a conservative increase in 2022 cost of risk to around 50 basis points, as we allow for management overlay for the volatile macro environment. With that, I hand back to Panicos for his closing remarks.
Thank you, Eliza. Let's now turn to slide 36, where our progress on our priorities set in 2020 is summarized. In November 2020, the group, after a considerable period of change, reintroduced medium-term targets and set the group priorities to achieving sustainable profitability.
This included completion of balance sheet de-risking, delivery of sustainable profitability, enhancement of operating efficiency, modernization of the BOC franchise, including IT and digital investment, addressing challenges from low rates and surplus liquidity, initiation of embedded issuance and Tier 2 refinancing, and optimization of capital management.
Since then, the group's progress has been remarkable, delivering on all fronts. In summary, the key achievements have been an 81% NPE reduction through organic and inorganic action. NPE ratio is approaching 5% and is on track with our 2022 target. The completion of several voluntary staff exit plan and branch footprint rationalization.
A 36% increase in active digital users. Net interest income that has now bottomed out and is growing again. An inaugural MREL issuance and Tier 3 financing in gaining market access. The original medium-term recurring ROTE target of 7%, set in November 2020, was achieved in the first half of 2022, two years ahead of schedule. The group is on a clear path to achieve a double-digit ROTE in 2023.
The CET1 ratio since September 2020 has remained broadly flat, absorbing in full the completed restructuring, and is now positioned for dividend resumptions. Moving now to slide 37. As a result, medium-term strategic targets have evolved, reflecting a dynamic strategy capitalizing on the changed macroeconomic outlook and the group's strong performance.
We are today updating and raising our profitability target to over 10% ROTE in 2023, while expecting to be sustained for the following years, 2024 and 2025. This is underpinned by a cost-income ratio excluding special level and other contributions of roughly 50% and a normalized cost of risk of 40-50 basis points by 2025, reflecting a less than 3% NPE ratio.
Over the period of the plan, we expect to maintain a CET1 ratio of between 13.5 and 14.5. This increases our confidence in resuming meaningful dividends from 2023 onward, subject of course to regulatory approvals and market conditions. This concludes our presentation, and we now open the floor for your questions. Thank you.
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, then you may press star and two. Please mute your handset when asking your 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 is from the line of Alexandros Boulougouris with Wood & Company. Please go ahead.
Good morning. Congratulations on the results and the updated guidance. A few questions on my end regarding the liquidity fees that you mentioned. On a full year basis, the amount is about EUR 15 million, and we should assume that this would basically be on the fee line, this will be excluded. Will be phased out in 2023, correct? That is the first bit technical question.
The second is regarding MREL issuance. What are the expectations for MREL issuance until the end of the year and maybe 2023, 2024? Also on the TLTRO phase out of the EUR 3 billion, if you could tell us a bit the maturities, what is the planned phase out?
A third and last question on my end: Regarding the security book of about EUR 2 billion at the moment, where you mentioned in the presentation that you're looking to expand this. What levels do you think we should be seeing, do you think? Because the security book is quite as a % of assets well below the peer group. And should we assume, you know, getting closer to peer averages in a two- or three-year period? Is that your assumption in the medium-term target? Thank you.
Thanks, Alexandros. I will start with the last one, with the security book, and then, I'll ask Eliza to answer the technical on liquidity fees and the MREL issuance. You know, in the past, the low return was not conducive for significant bond investment. At least this is how we see things. We saw things at that time. As a result of considerable portfolio expansion, the bank is in a weak position, given the recent market volatility and increase in interest rates.
At that time frame, the raising of capital was important to facilitate the execution of our restructuring plans, NP trades and exit plan. Going forward, portfolio is reasonably to be expanded, taking advantage of the increased yields.
We have available room in terms of risk-adjusted lending for an increased exposure in the short to medium term. You should expect an expansion of the book. It's important to flag out that our business plan assumes a conservative increase in the bond portfolio. The improvement in net interest income is expected to mainly come from rate increases in the loan book rather than the increase in the bond portfolio. Eliza, on the MREL and the liquidity?
Yes. Thank you. On liquidity fees, the amount included in fee and commission income in the first half of this year was at EUR 8 million, so you can do the math on the annualization of this number. We expect to raise them out as rate hikes start to happen, but no decisions have been taken yet as regards timing, amount, and so on.
On MREL, we are currently compliant with the only interim final milestone for MREL, which was a January 2022 milestone. There is a slide in the deck that shows the gap to compliance. Of course, you have to project that in line with capital and risk-based evolution.
We are currently not under pressure to issue in the current market conditions, which are obviously not conducive to issuance. We will continue monitoring the market and proceed with issuance when market conditions are, I don't dare say favorable, but at least are more conducive to issuance for issuers of our rating and of our credit profile. On the EUR 3 billion of TLTRO, EUR 1 billion of that matures contractually in June 2023, and most of the rest matures in March 2024.
Thank you.
The next question is from the line of Daniel David with Autonomous Research. Please go ahead. Mr. David, can you hear us?
Sorry, stuck on me as usual. Thanks for taking my questions. The first one is just on with regard to Lone Star. I realize you can't say too much, but if you could outline the timelines from here, just so what we can look out for, that would be really helpful. My second one is on cost to risk. I guess noting that you've taken over 18 basis points for management overlays, just interested to hear what's kind of driven that.
Is that driven by what you're seeing on the ground in Cyprus, or is that kind of just a model and being more conservative? And do you expect to take further charges of a similar magnitude in coming quarters?
Finally, I hear what you're saying on MREL. I guess, looking further ahead to 2023, you've got an AT1 that's coming up for call. Should we think, should we consider that you might potentially refinance that maybe in H2 2023? Or, I guess in the past, you've been proactive with your Tier 2 calls and exchanges. Just anything you can say on how you see that issuance would be helpful also. Thanks.
Okay, thank you, David. On the AT1, you know that the group continues to monitor opportunities for the optimization of its risk coverage position, including the AT1, so no decision yet. Continue to monitor any opportunity. On the Lone Star, you know that we cannot answer any question about it. As you know, the timetable is public.
Based on the announcement, there is the ability to file a public offer until 30 September. But I would prefer to avoid giving more details because of the restrictions. Everything is public. On the cost of risk, I will ask our chief risk officer, Demetris, to explain the 2022 and 2023 cost of risk of the bank.
Thank you, Nico.
Yes, please.
Thank you, Nico. Hello, Dave. Well, the management overlays that you've seen for quarter two are driven by our assessment of our model assessment of how specific sectors may be impacted because of the rising inflation and expected increases in interest rates. Now, regarding future overlays, well, there are management buffers in our projections, as you see in our 2023 guidance for cost of risk. These are general buffers, which again, are to cater for the uncertainty in the current environment.
Okay, thank you.
As a reminder, if you would like to ask a question, please press star and one on your telephone. Once again, to register for 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. Panicos Nicolaou for any closing comments. Thank you.
Thank you. Thank you all for your time listening to us explain our results. As always, myself and the team are much more willing to accommodate one-to-one meetings to explain in more detail our results, guidance, and of course, answer all of your questions. Thank you very much.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephones. Thank you for calling, and have a good day.