Earnings Call: Q3 2020

Nov 27, 2020

Ladies and gentlemen, thank you for standing by. I'm Myrtle, your Chorus Call operator. Welcome and thank you for joining the Bank of Cyprus Conference Call to present and discuss the Group Financial Results for the 9 months ended 30th September 2020. 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. At this time, I would like to turn the conference over to Mr. Panikos Nicolaou, Chief Executive Officer Mr. Lizany Papiortu, Executive Director, Finance and Dimitris Dimitrio, Chief Risk Officer. Mr. Michelau, you may now proceed. Thank you, Mr. Don. Good morning, everyone. Thank you for joining us. As well as our regular quarterly results, importantly today, we are also updating our medium term strategy as the majority of our presentation will focus on that. As a result, our Executive Director of Finance, Ms. Elizabalio, will give a briefer than normal update on our 9 months financial results, after which I will update you on the middle term strategy and target. These are comments on the results will be briefer than normal, while disclosures are unchanged, and you will find all the usual information in our presentation part and associated material. I will now hand over to Elisa to take you through our performance for the 1st 3 months of 2020. Elisa? Thank you, Vanikos. Good morning from me, too. So I'll start from Page 5, Slide 5, which summarizes the key highlights for the quarter. I will briefly go over this. Signs of economic recovery to pre pandemic levels marked the Q3 of the year, with the Cypriot economy showing more resilience than initially anticipated, demonstrating its open, small and flexible characteristics. However, as we all know, a second wave of the pandemic is impacting all European countries, including Cyprus, resulting in partial lockdowns, which is likely to cause some loss of momentum in economic recovery in the Q4. During the Q3, we continued to support the recovery of the Cypriot economy and extended the further EUR 288,000,000 in new loans, up by 20% compared to the previous quarter as new demand increased post lockdown driven by retail housing. Overall, we have granted EUR 1,000,000,000 of new lending in the 1st 9 months of the year. At the same time, we continue to monitor the credit quality of loans under moratorium. In the Q3, we have generated total income of €137,000,000 and a positive operating result of €44,000,000 Cost of risk was maintained at below 100 basis points for Q3. Overall, the Q3 was profitable and the profit after tax was up €4,000,000 In the 9 months of the year, we reduced our total operating expenses by around €40,000,000 dollars or 13% on a yearly basis, reflecting our ongoing efforts to contain costs. The 4% increase from the Q2 levels reflect the lower cost base in the Q2 as a result of the restrictive measures for COVID-nineteen. The bank's capital position remains good and comfortably in excess of our regulatory requirements. As of 30 September, our capital ratios on a transitional basis were 18.2 percent for the total capital ratio and 14.7 percent for CET1, both from our Coperna for Helix II. Deposits remained broadly flat in this quarter at EUR 16,400,000,000 and we continue to operate with significant liquidity surplus of €4,100,000,000 During the Q3 of the year, we maintained our focus on dealing with legacy issues. The pace of organic NPE reduction returned to pre lockdown levels as we reduced NPEs by a further €230,000,000 Together with the phase of loans achieved earlier this year, that is Helix II and Velocity II, we have substantially reduced NPEs by EUR 1,500,000,000 in the 1st 9 months. On Slide 12, we have now reduced the stock of delinquent loans to $2,400,000,000 and our NPE ratio to 21%, both on a pro form a basis. NPE coverage was maintained at 59%, reducing the residual risk on our balance sheet to EUR 1,000,000,000 As Annika mentioned, today we will update you on our medium term strategy and targets. In summary, we have a clear path to reduce NPE ratio to single digit by end of 2022 and to 5% in the medium term. We will return to revenue growth in a more capital efficient way, capitalizing on our strong market position. We are planning to improve our operating efficiency through digitization and automation, navigating a clear path to sustainable profitability, delivering shareholder returns. We are committed to generating a return on tangible equity of around 7% in the medium term. Now focusing on the macro conditions, I'll take you to Slide 6. The pace of economic contraction has slowed considerably post lockdown to a minus 4.4% in the 3rd quarter compared to a minus 12.3% in the previous quarter, proving that the Cypriot economy is more resilient than anticipated earlier in the year. The comprehensive measures introduced by the Cypriot government and the EU have played a vital role in mitigating the impact of the pandemic. However, as the number of new COVID cases has increased in recent weeks and local restrictions have been reimposed to contain the speed, this is likely to lead to some loss of momentum in economic recovery in Q4. The contraction in Cyprus is now expected to be less severe than in the euro area, which is currently expected to be at minus 7.8%. Economic activity is expected to rebound during 2021, and GDP growth is estimated to range between 3.7% and 4.7%. Unemployment, which stood at 7.4% in Q3, was contained by the government's job protection schemes and business subsidies. As expected, the international tourism arrivals over December were also impacted by the lockdown. Now turning to Slide 9. Here, we provide an update on the loan moratorium. As of 30 September, €5,900,000,000 worth of gross loans were under the moratorium, out of which around $5,600,000,000 are performing loans. As you probably know, the moratorium launched in March 2020 was very generous and for many customers was considered as a benefit with no cost. Business loans under moratorium amounted to $3,800,000,000 or 76 percent of the non legacy loan book, and private individual loans amounted to 2,100,000,000 dollars or 52 percent of the non legacy book. As you know, the sectors mostly impacted by COVID are tourism and trade. Our total exposure to these sectors was at $1,100,000,000 $1,100,000,000 respectively. Both sectors continue to operate with considerable surplus liquidity that has increased in the 3rd quarter and amounted to €340,000,000 €930,000,000 respectively. More information about the sectors is provided on Slide 57. As shown on the bottom graph, around 31% of loans private individuals under moratorium have paid at least one installment as of October, giving us confidence that the generous moratorium hasn't negatively impacted the payment culture. We note that the payments of installments during 2020 are accounted for as prepayments towards 20 21 installment. In May, we have initiated a review campaign of all loans under moratorium, and by mid November, approximately 80% of the reviews have been completed with no significant change in the unlikely to pay status. However, given the increase in the number of COVID-nineteen cases in the last few weeks, along with the stricter measures being imposed, the monitoring and review of the credit quality of loans under moratorium remains ongoing and dynamic. Finally, we have now in place prepackaged solutions for the customers that may continue to face difficulties after the end of the moratorium. Now let's move to the income statement on Slide 12. Net interest income remained broadly flat on the prior quarter at EUR 82,000,000. Margins decreased to 1.79 percent, reflecting the increase in liquid assets resulting from the EUR 1,000,000,000 participation in the TLTRO in June. Noninterest income reduced to EUR 55,000,000, negatively impacted by lower insurance income and revaluation loss on financial instruments, partly offset by higher net income commission income as the transactional volumes gradually recovered post lockdown. Total expenses were at EUR 273,000,000 for the 9 months, down 11% year on year, reflecting our ongoing efforts to maintain costs. Total expenses for Q3 were at €93,000,000 up 7% Q on Q and were in line with our Q1 costs. The Q on Q increase reflects the 2nd semester contribution to the deposit guarantee fund of €3,000,000 and the normalization of staff costs post lockdown. Total loan credit losses, provisions and impairments were at €38,000,000 for the quarter compared to €50,000,000 in Q2, driven mainly by lower impairments on properties. Loan credit losses for Q3 were at €31,000,000 reflecting a cost of risk of 97 basis points. The overall result was a profit after tax of $4,000,000 for the quarter and a loss after tax of $122,000,000 for the 9 months. Now let's also turn to Slide 18. During the Q3, we generated around 40 basis points of organic capital through operating profits and around 10 basis points from the decrease of risk weighted assets. The recent amendments in capital regulations resulted in a benefit of around 10 basis points in the Q3, and a further 10 basis points benefit is expected to be recognized in the Q4 of the year. These were offset by loan credit losses and impairment of around 30 basis points. That completes my brief review of our 9 months performance. And as Panikos said, all our usual disclosures are there, and we would be happy to deal with any questions either at the end of this call or afterwards on separate calls. So with that, I hand back to Vanikos on medium term strategy and targets. Thank you, Eliza. I will today outline the position of Banos Cyprus, the progress that we have made is going to be seen you can expect from us over the next few years. I will start with some key remarks on Slide 28. The bank operates in a more open and flexible economy, which has proven in the past that we can quickly recover from economic crisis. We are the leading financial hub in Cyprus with strong franchise and customer base. Around 3 quarters of the population are customers of the bank. We have a leading market position in both loans and debotties with market shares of 42% and 35%, respectively, as of then of September 2020. Our team led by proactive and strategically minded Board has an excellent track record and is fully committed to deliver shareholder value. Our strategic priorities are clear: complete the restructuring and derisking of the bank as soon as possible, extend the bank on the path for sustainable profitability and of course, delivered on shareholder value. Slide 29 provides an overview of the journey the bank has been on the past few years and where we want to be in the medium term. We have been through a period of considerable change. We are now laying the foundations for delivering greater shareholder value. Today, our near term priorities include the completion of our balance sheet derisking as before through organic end production and production disposal as well as ensuring our cost base remain appropriate, whilst further investing in our digital capabilities. Over the medium term, our priorities will evolve. We will be increasingly focused on capitalizing on our strong market position across both banking and financial service products to enhance our revenue. At the same time, we are very focused on improving our operating efficiency and driving down costs. Combined with the expected normalization of the cost of risk, we have a clear path to generating sustainable profitability. Slide 30 to 33 contain information that you already know in order to address people that look at the bank from the first time. So I will not spend much time on this. Slide 30, the cyclical economy has outperformed the European Union over the past 5 years and growing market profit can be seen in the sharp fall in sovereign spreads. Despite the negative impact from the pandemic, Cyprus maintains an investment grade rating. Turning now to Slide 31 very briefly, our our market presence in Cyprus remains very strong with large market shares across all key products. Moving to Slide 32. As noted, we have been on a transformational journey since 2014. Today, we have a smaller, healthier balance sheet. We are well funded and enjoy capital ratio considerably in excess of regulatory minimums. But as shown on Slide 33, the balance sheet de risk has come at the expense of operating performance. Our loan book and revenues have down sharply over the past few years and although have managed to reduce our cost base to some extent, it hasn't been enough to protect profit. I will now outline how we expect these trends to reverse direction over the next few years. Moving to Slide 34, the starting point of our middle term strategy. We are the leading bank services with 655,000 private individual customers, a 50% market share in households and corporate loans. We are a diversified financial group with profitable subsidiary in affiliated business with high market shares in operations like insurer and credit card services. We are delivering digital banking cycles with 285,000 users of Internet and mobile banking and the widest range of Internet and mobile functionalities. Finally, we have an excellent track record on delivering Aker's strategic objectives. As a reminder, we have reduced our NPE by more than 84% in the last 6 years. Moving now to Slide 35. We have 4 key strategic pillars, all important building blocks for just enough to deliver shareholder value. Firstly, we will complete our balance sheet risk. Secondly, we will return to revenue growth and that growth will be in a more capital efficient way. Specifically, we will aim to enhance revenue generation via growth in less capital and test banking and financial services businesses. Thirdly, we are planning to improve our operating efficiency through digitalization and automation. And finally, we are building a forward looking organization with a clear strategy supported by effective corporate governance aligned with ESG priorities. Starting with the listing on Slide 35, We have a clear path to the turnaround period to single digits by 2022 to 5% over the medium term. Our track record here has been excellent, achieving an 84% reduction over the past 6 years, the vast majority organically. We have a highly experienced and highly effective team in place, and we expect NPE reductions to continue in 2021 through both organic and inorganic actions. We expect to have a tight coverage of over 50% in the near term, excluding every collateral. Moving now to revenue growth, and I will start with net interest income on Slide 37. The net interest income challenges are clear to us, and we have a plan of action in place to mitigate the pressure we face. Firstly, over the middle term, the performing book is expected to grow by 10% and broadly offset the foregoing interest income from the decline in legacy book as we successfully exited NPEs. We will address challenges from low rates and capital liquidity. We will intensify our efforts to price away or price correctly debottages through liquidity fees and improve credit spreads. Finally, the funding cost for MREL compliance is expected to reduce as we successfully complete the risk. We are looking to beat the bank with better quality net interest income and overall we expect revenues over total assets to improve from 2 60 basis points to 2 80 basis points over the medium term. Turning now to Slide 38. Our fee and commission income is expected to grow, driven by cross selling and pricing initiatives. Now I realize that we may well have had before banks promising to improve cross selling metrics. Let me explain why we are confident that Banco Circles can deliver. Firstly, as you know that we have spent the past half decade focusing on derisking and understandably improving revenues from existing customers, which most of them were RMPs was not a major strategic focus. Until now. Secondly, we have for the first time the system in place to deliver on our plans, in particular having made and continues to make considerable investment in our digital construction and analytical capabilities. There have some clear practical measures to help us deliver. For example, starting early next year, we will extend the liquidity fees to either group of customers introduce a new price list. Both actions are expected to increase our fees. We will also aim to increase the average product holding through cross tele to the underpenetrated customer base. And more widely, we are working to generate new revenue resources through the introduction of a digital electronic platform, leveraging the bank's market position, knowledge and digital infrastructure. These initiatives are expected to improve our peer commission income over total assets by 30 basis points in the middle term. Revenues per RWAs are expected to increase to around 6% from near a 5% category as many of the initiatives improve revenues in a more capital efficient way. Turning now to Slides 3940. Slide 39. One of the important sources of increased revenues will come from our insurance businesses. In the past, we had spoken about them in much detail, but over the last few years, our life and non life insurance subsidiaries have delivered sustainable healthy profitability. Our life insurance business, apparently under the UroLIFE brand, has a leading market share in Cyprus. However, we believe it can deliver more. We are aiming to grow total regular income by over 35% in the near term by expanding its products and customer base and further leveraging on the bank's strong franchise. On Slide 40, our general insurance business known as General Insurance of Cyprus, similarly has a strong market position and has delivered a rising profit. Here, we are making some important improvements. We are revamping our balance sheet channel while extracting more synergies with our life insurance sales network, and we are expecting to enhance digital sales. Overall, we expect our market share in general insurance to rise considerably over the next few years and our gross written premiums to grow by more than 50% in the middle term. Let's now move to Slide 41. A significant anchor for our revenue growth strategy is our digital transformation program, which continues to perform well. We are aiming to leverage on our leading digital capabilities to serve customers and the future economy, creating a shareholder value. We have around 285,000 active users of Internet and mobile banking and currently 74% of our customers are digitally engaged and 84% of their total transactions are performed through digital channels. These statistics will allow us to further improve our operating efficiency through further automation and broader rationalization and of course we support our efforts to improve cross selling through modeling customer needs and offer tailored products and services. Turning to Slide 42. We are revamping our operating model to further improve efficiency through specific initiatives, including excess solutions to release food tanker employees and further batch branch food penetration rationalization. These initiatives are expected to deliver a reduction of operating expenses by approximately 10% over the medium term. In addition, the restructuring expenses are expected to reduce to CECL GBS following the successful completion of our balance sheet derisking. Our cost recompression is expected to rise in the near term as revenues remain under near term pressure and operating expenses increased due to higher IP and digitalization investment costs. However, we then expect our cost to income to decline and normal daily return, which we expect to reduce to mid-fifty. Let's move on Slide 43 and Slide 44. Of course, delivery for our shareholders is important, but it's only one part of our responsibility to provide a group of stakeholders who are working to build a forward looking organization with a clear strategy supported by effective corporate governance aligned with ESG priorities. We will continue to evolve our ESG strategy and invest ESG priorities in our business target. You can see on Slide 44 some of our areas where we're already delivering. Turning now to Capital Flight forty 5. Net cash flow capital base has been a key tenant over the past few years and that remains a non negotiable for the bank going forward. Our business plan is based on us maintaining a CET1 of at least 30% over the immediate over the entire period of our plan. Power capital will be supported by organic capital generation, supported by focus on less capital intensive business, the first introduction of high risk weighted assets and the Helix II risk weighted asset benefit upon full repayment of the deferred consideration. At the same time, factors that could potentially impact our current ratios include deferred line saving in and any potential regulatory impacts and one off cost optimization charges. As a reminder, as of 30 September 2020, our CET1 ratio fully loaded pro form a for Helix II stood at 12.9%. Until the completion of the derisking and the restructuring of the business, there may be volatility in our capital ratios due to timing of potential future impacts from the gladiators and runoff restructuring costs. Slide 46. Bringing all of this together, we are pleased to share with you our medium term financial targets. We are in a strong position to take advantage of our many strengths over the next few years. However, we of course recognize that there are near term challenges posed by COVID-nineteen. Like all other banks, we have to manage through a hostile interest rate environment and a constantly changing regulatory environment. We recognize that our shareholders have suffered over the past few years as a result of the considerable cost and effort necessary to delete the bank. However, now is the time for us to raise our sight and therefore we felt it was very important to refuse a return on tangible equity target for the first time. The Board and the executive management team are committed to generating return on tangible equity of around 7% over the near term. The building blocks behind them included commitment to reduce total operating expenses and to complete the release of the business, demonstrated with an NPE ratio into single digits by 20 22 and to around 5% over the medium term. And we expect our normalized cost of risk to be between 70 80 basis points appropriate for a bank with our mix of businesses. As I mentioned earlier, netting a strong cadher base has been a key tenor for the past few years, a double made an only costable for the bank going forward. Our business plan is based on us maintaining a CET1 ratio of at least 13% over the entire period of our plan. Turning now to the last slide, 47. This is a new phase for bank of Cyprus. A bank that will complete the de risking becomes more than a failure, but also a bank that will return to revenue growth as we take advantage of our market leading position in most of our product areas. We have relationship with Fit Kotis of the future population. We have strong customer trust while developing powerful data knowledge and infrastructure, and we have a clear strategy in place to complete the turnaround and set the bank on a path for profitability and delivering value for our shareholders. This concludes our presentation, and we'll now open the floor for your questions. Thank you very much. Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer The first question comes from the line of Floriani Jonas with Axia Ventures. Please go ahead. Good morning, Tim. Thanks for the presentation and thanks for the detailed outlook and the targets. My first question is on asset quality and the expectation for 2021. I remember you had some comments that out of your exposures on the moratorium around a €1,000,000,000 or so would probably come into NPL flows in 2021. Do you to see that as a reasonable number. And I also remember that your idea was to offset those inflows with organic outflows to the same amount. So pretty much keeping up with the €200,000,000 to €250,000,000 per quarter and then adding to that a transaction as being the main factor of the increase in the NPE stock? Then my second question is on your costs and your cost outlook of rate expenses. I was just wondering if there's not more room for further reduction, especially when you talk about your medium term target. I mean, I acknowledge that you referred to less than 3 €50,000,000, so this could be many numbers. But the run rate of 2020 is already around that level, right, if you analyze it. So I mean, if you can just explain a bit more the rationale behind your cost cutting and also how that links to your cost income ratio because at the same time as you're expecting to grow revenues, your costincome ratio doesn't necessarily at mid-50s doesn't necessarily strike as a very, let's say, outstanding versus European average. So again, linking to costs, is there any figure you can share in terms of estimated IT or digital investments that you're probably also going to incur in the future? And I'll leave it at. Thanks, guys. Okay. Thank you, Jonas. Okay, I will take the questions. Starting from asset quality in 2020 2021, What we have disclosed is that and this is still in place is that any new NPE flows will be broadly offset by the organic delivery. And we do project to have a reduction on our NPE ratio 2021 through nonorganic actions. So 2021 will continue to be a year of reduction of RMP ratios. And the biggest question, and it's about more important because this is the main uncertainty for Mexico. And as you all know, we have the moratorium that expires in December. This is an area of focus for us. We have some cautiously, I would say, positive signs. We have 1 set of our retail clients start paying their loans. This is important. In business, As Elisa mentioned, we have 2 of our major sectors, tourist and trade, generally increasing their liquidity, including cash off costs at the peak COVID levels, and this is something that provides some comfort for next year. We have completed 80% of reviews of our clients in moratorium without triggering UTP. Of course, we all need to be very cautious because on the one hand, we have the registered increases in COVID-nineteen. And on the other half, we have we do not know yet the timing and the effect of the vaccine to the vaccine of the economy and also to the people. So but we already as a bank, we have specific products for our telecompany client that which are viable and will help them go through the short term financial difficulties. So overall, we expect a 2021 reduction in our NPs. And going to the cost question, Jonna, okay, I would like to remind you all that cost has been a priority for me for the Tanalite to go. In the 1st year, in 2020, we achieved greater results. This will remain a priority. I do not focus on specific actual cost or income numbers, but I mostly focus on the cost to income ratio. Which as you said is mid-50s. It's mid-50s, it's for this bank as a first step, I consider it to be positive. But of course, as you mentioned and I think you replied, during this middle term period, we need to continue investing in our IT expenses, which are material without being able to monetize on all these initiatives within this period of time. And this is important for everyone to understand. And this is something that affects the intangible equity as well. I mean, the investment in IT and some other corporate actions are not reflected fully on this period, on this midyear period. So this is something that we'll keep delivering to the bank ongoing in the years after the outlook. Okay. I don't know, I understand you answer on the team, a little bit. You want to add anything on this? Or can go to next question? Can I just add I have a follow-up there on back on the asset quality? In terms of your expectation for trade in 2021, is there any progress you can share on that? I mean, in terms of perimeter, in terms of dates, is this the first half or second half event, something like that? John, is this something that we are currently looking at it? It depends I mean, we are ready. We are progressing with let's say, we finalize the perimeter. They all depend on market conditions and market readiness, and this is something we are constantly reviewing. So I don't have anything specific to share with you right now. Clear. Thank you. The next question comes from the line of Brudolfo Alexandroz of Rudolfo. Please go ahead. Yes, good morning. Thank you for the update on the strategy and results. Maybe if you could provide a bit more clarity regarding the ReLU business unit on the strategy and what is your plan to reduce the Remu portfolio? And also regarding the on-site inspection on the 50 bps that you mentioned in the presentation as a potential charge in the future. Is there any more clarity on the timing of this? That is my first question. My second question is regarding your assumptions in the business plan. You mentioned that you assume a further inorganic an asset sale and NPL trade. And the new VRS, I mean, could we have a bit more clarity on the timing of this? Do you expect this to take place in 2021, so we can include them in our numbers for 2022 or it could be something a bit more longer term? And my third question is regarding cost of risk. You did mention the medium term target of 70, 80 bps. Thanks for this. This is in line with what we see now in the numbers. Do we have any more visibility on 2021 or where the cost of risk could stand? Thank you. Thank you. Thank you, Alex. Okay. For the revenue, I will pass the question to Elisa. As you know, the revenue is another force for the bank has been considerably successful in selling real estate assets over the last few years. Will you continue to be priority. We will continue to see the stock reducing because de risking means that we will not onboard any more real estate on our balance sheet. So Yes. And actually as you may remember, we were actually expecting this year to be the 1st year when stock would come down post Helixline and Helix2. Consequently, although sales continue at pace and then the larger sales, the larger transactions and maybe that we were impacted by both practical considerations, but also macro conditions. So as of next year, from 2021, we expect to have the stock the stock of property to start being materially reduced and expect us to have to go down to Okay. There's not that side on the timing. We have not yet been in discussions with the SSM on this. So it remains a pending point. And rest on projects, we will use as we sell properties in this Univert in hospital site inspection medicine. And we are already starting to focus on this population of properties. Some of them though will go away with resolve. We plan to be selling them in more in the medium term because they are larger. Some of the smaller ones, we may be able to successfully sell them relatively quickly. And the other thing to just remind everyone is that our real estate stock is held at 80% of open market value on the balance sheet. So we have running share and an INDIES 20% buffer on the open market value. Okay. So Clarissa, on the NP trade, Alex, I mean, if we move to Slide 56, you're going to see that during the short term, one of the drivers of NPE reduction is inorganic, and this is by that we mean trade, and the trade is our immediate priority. So it's an important key driver for the reduction of NPE. Regarding the question about the exit plan for the employees, this is, yes, part of our medium term strategy, but the timing yet has not been confirmed and decided on this. On the cost of this question, I will ask Lidriz, our Chief Risk Officer to transfer the question. Lidriz? Yes. Thank you, Vancoosh. Well, during the outlook period, we expect a gradual and steady decline in our cost of risk towards our medium term target. As you very well understand, currently there is the uncertainty of the resurgence of COVID-nineteen and we're working very hard to minimize inflows and offer solutions. Within financial years, you could see volatility which will depend on time of any NPE sale. And it is reasonable to assume that for 2021, it will be higher than the medium term target, but not significantly higher as it will be gradually gravitating towards the medium term guidance. The main message I want to give out is that we are prudent and we will continue to be prudent and despite the better macros, we are adding to provisions and we are going to be cautious about the impact of the second wave. Thank you. Appreciate it. Thanks. The next question comes from the line of Kanagam Kurian with Autonomous. Please go ahead. Good morning. Thanks for taking my question. A question is on the moratorium, please. You said that you've reviewed 80% of the book. I didn't quite understand the residual 20%. Is that that you haven't reviewed them or that they are not performing? And then if you could just give us a bit more color about the transition. So are all of the moratorium lifted in December? Or is there something that takes over when that happens? Thank you. Thank you, Corin. Starting with the last one, all more capital at least end of this year. So that's the result. The reason that we review 80% is that because of the remaining 50% is under review. The target was being concluded 100% by mid December. So while we are moving forward, we're going to have clarity on the whole book of the moratorium, of course, excluding those that are already NPE because part of the and around RMB 300,000,000 are already in the IP status. So very soon, we're going to have more view on the 100% of those in the market. But we started, as you know, with the higher risk one. So it's something that we constantly review. If I may just clarify the €300,000,000 Corinda's any convention, where NPEs at the beginning of the moratorium? These are not NPEs that were created during this period. They were NPEs at the beginning. This is what we call non current period because one of the only criteria of the moratorium was not to be in arrears, I mean, being current. And we have a number of MP clients that are current and were current before COVID. And that's why they were eligible for the monotherapy as well. So no moratorium going beyond December, nothing to At least so far, Corrine, there is no indication that this will continue now. Thank you very much. The next question comes from the line of Lukaszov Aleksey with Bank of America Merrill Lynch. Please go ahead. Hello. Thank you very much for the call. I have a fixed income question. Could you please comment on your funding plans for the next couple of years as well as MREL requirement? Okay. Thanks, Alex. Elinda, this is your area. Okay. So there's 2 components to this question, Amrel and our Tier 2. So our Tier 2 bond, the call option the first call option is on in January 2022, and we will look to refinance that at some point between now and then or on the call option date. So it is something that's on the cards and that's being planned. Of course, always subject to market conditions and these days, this is an important disclaimer. On MREL, we currently have a binding MREL target, which is for December 2025 and we have no interim target binding interim target. However, BRRB II comes into effect at the coming next round of MREL reset. This is an annual process that a single resolution board goes through. And we are working with them. We're in close contact with them to understand how and what they are planning vis a vis interim targets and whether there are interim targets that will be imposed on banks and how they will be impacting us. In depending on how this goes, we will in many cases, we intend to start EMRE issuance in the next 2 years. At the latest, it may be in 2021 or it may be later depending on where we get to with the target. So yes, there will be EMERISH 1, but the exact timing depends on where we are on the compliance path. As I'm sure it's obvious for us, the later the better because our NPEs are reduced and our tax salaries are reduced. And as we move away from the moratorium and the COVID times, we expect that funding cost will be reduced. Okay. And is that 2025 target for MRELP? Yes, yes. Yes, it's December 25. It's in the financial statement that can give you the percentage slightly. Okay. Thank you very much. And the 81, the bucket is still? It's also on Slide 18, the deck. 81 is outside our radar for the moment. It was issued in August 2018. And so I think the call option is actually, it was issued in January, literally the December, December 2018. Sorry, I'm trying to remember back. So it's not for now. It's not in the next 24 months, Bijo. Okay. Thank you very much. Thanks, Alex. We have a question from the line of Linney Nick with Sefton. Please go ahead. Hi. So just going back to the moratorium loans and the review that you've done again. I mean, do I understand correctly, you're saying despite the very large amount of loans in Moratoria, you think based on the review so far, there's no significant movement of loans into NPE status? Or you think there's no significant movement of loans likely to happen into NPE status of loans that were not in that status before? Is that a correct understanding of what you're saying? Yes. This is broadly correct understanding, but I would like our Chief Risk Officer to elaborate more on the moratorium because I understand this is a kind of one of the major assessment for next year. And as I said, we do feel cautiously optimistic because of what we mentioned earlier, reviews, clients start paying on our affected sectors. They currently have their pre COVID liquidity in place to enter the situation. So but Mitelika, any more comment on the reviews and the valactorio? Well, yes, Franco. Just to add that the review campaign entails the close communication with clients, receipt of updated information on their financials and their status. And this takes time and that is why you see that 80 percent of the campaign has been completed and we're still working on the remaining part. Now the review campaign, as you understand, given the change in environment due to the resurgence of the virus, it's going to be an ongoing and dynamic process. What is important to say is that having worked with these clients, we have in place now prepackaged solutions and processes and policies, which help us to address these clients in a quick and efficient manner. And we will continue doing so up until the virus situation goes away. So I'm telling the moratorium on Nick, after the moratorium, if and when any of the clients need assistance either through liquidity or through a short term restructuring, we can provide these solutions and we are ready to provide these solutions and this does not trigger RMP status from viable client. So it's important to mention this and clarify this because all these clients are performing, they are not for both most of them. So we have still the tool of restructuring without a client being marked as NPO as UTP. Okay. So do I understand correctly that the key to that is that you put in place NPE. It doesn't become an NPE. Whereas if the loan was technically nonperforming and you did the same restructuring, it would be an NPE. Is that a correct understanding? It's broadly, I would say that if the loan is for both, then if you do the restructuring, there is because an NP. If the majority the vast majority of our loans are pre outperforming, meaning not for both. And for those that they need restructuring, it doesn't mean that all the clients moratorium will need any distraction. For those that they need distraction to overcome any short term difficulties, doing, let's say, restructuring, what do we mean restructuring mean? Let's say, lower installments in 2021 or 2022, depending on each client. This does not trigger the NPE status. Of course, there is to provide a value viable, right? So and we do have confidence to this. And for the 80% of loans that you have reviewed, like roughly what portion would you expect will need some form of restructuring on exit from the Monitoria? Do you have a number? I don't recall the number. As we have said, because this is a developing situation, the review process will continue to be ongoing and dynamic. So it is not the numbers now and the numbers tomorrow, we will need to keep track of clients, be fully engaged with them in continuous communication with them and we assess as time goes and it's not a static situation. And we will not rush to provide this kind of solution unless they are needed. And this of course depend on how the economy will evolve in 2021. So it sounds like that we'll continue monitoring, and it doesn't mean that all these clients or all the significant parts of these clients will need them or at 30 plus will need a distraction because as I said, there is this kind of what I think was like a kind of benefit at no cost in a period of uncertainty. I would like to remind all of us, all of you that the countries doing better than projected at the time of the moratorium. And of course, this has a positive reflection of the unemployment, which is a major driver of, at least for retail, of any default. So it's something that will continue. Volicon, as we said, we are cautiously optimistic. But this is something that we continue to view as we are moving through a kind of more partial lockdown because of the new COVID-nineteen infection that are rising all over the world, including Cyprus. Okay. Thanks. Thanks, 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 participating in this call. I understand this is the kind of short notice and most of you have the time to review the Q3 results together with the new term guidance at a later stage. So next week, we'll participate in digital auctions. I hope to see many of you there. And of course, as always, myself and the executive team are available for bilateral discussions and provided more details both for our Q3 results, but most importantly, for our medium term guidance and outlook. Have a nice weekend. Thank you all, and stay healthy. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a pleasant evening. Thank you.