Earnings Call: H2 2019

Apr 29, 2020

Welcome to the quarterly data playback of Bank of Cyprus Group Financial Results for the Year Ended 31 December 2019 Conference Call. Please state your name and the company you're calling from. Your name and your company are important to us. Please speak slowly and clearly. Thank you. Ladies and gentlemen, thank you for standing by. I'm Myrtle, your Chorus Call operator. Welcome and thank you for joining the Back Home Cyprus conference call to present and discuss the group financial results for the year ended 31 December 2019. At this time, I would like to turn the conference over to Mr. Panikos Nicolaou, Chief Executive Officer Mr. Lizando Bagliotu, Executive Director, Finance Mr. Dimitri Dimitriou, Chief Risk Officer Mr. Panikos Mozzuris, Executive Director, RRD Ms. Anand Sofronio, Executive Director, Real Estate Management Unit Mr. Nick Smith, Executive Director, Corporate Finance Solutions, Management Unit Mr. Nick Smith, Executive Director, Corporate Finance Solutions and Mr. Anita Pablo, Manager, Investor Relations. Mr. Nicolaou, you may now proceed. Thank you, Luca. Good morning, everyone. Thank you and welcome to the 2019 Banco Cyprus full year results. I hope everyone is safe and healthy. Under normal safety standards, our team and I are presenting you the results of what have been and in first half year for the bank, with cyclical reduction in NPE, active cost management, increased staff reduction, branch closures and increase due to digital engagement of our clients. However, coronavirus has changed the economic and social landscape in an unprecedented way and in a very short time span. As a result, this morning, we will be focusing mainly on our role in addressing the crisis, focusing on a few topics as we navigate these environments. So while Glenn and Lisa will briefly review our 2019 results. And of course, both of us, along with the team, we will be happy to answer your questions. On Slide 3, the market's priorities under these unprecedented times are clear: to protect the health of our customers and colleagues, to support them in the wider security economy and to provide liquidity to businesses and households affecting the crisis to help alleviate their short term cash flow deficits. We are determined to help all our stakeholders confront this challenge. As a management team, we have considerable experience in managing challenging circumstances. We have a robust pandemic plan in place, which ensures that all our operations and service coverage remains uninterrupted. Our investment in our digital transformation program has not only strengthened our operational resilience, but more importantly, has enabled us to quickly respond to the changing landscape and fully deploy our digital service channels to our customers. Increased digital engagement level of our customers during this period is impressive and now stands at 70% as of April March 2020, and we expect further increases in the near future. The bank enters these uncertain times with good capital, strong liquidity and funding position. We have a capital well in excess of other delevering requirements as of 31st December 2019, total capital ratios stood at 18% and our situation up 14.8 percent with a situation buffer of 3 80 points. The debt budget was above the flat at $16,700,000,000 and we continue to operate with over $3,000,000,000 of certain liquidity. As at the end of December, our loan to debit duration was 2.64%. Turning to Slide 4 now. We are pleased to see the Secret Government taking all the necessary measures early in the pandemic has successfully managed to continue the spread of the pandemic in our country. Statistics are very challenging. The sample testing per 100,000 population is among the highest within EU. At the same time, the confirmed cases are amongst the lowest. The daily reported cases have stabilized and remained consistently low, enabling the government to consider the gradual appeal of the restrictions, which are expected to be phased out as from early May. Of course, for a full open of our economy and to this industry, we recognize that we need to see international progress as well. Let me now move to Slide 5. We and Banco Cyprus have, as our proprietary, the health of our staff and of our customers while ensuring the operational resilience of the bank. We are actively managing the situation and we have undertaken a set of measures and are posted with the guidance and recommendations from the Ministry of Health to protect the health of our employees, a committee established to monitor new developments, trade potential achievements within the bank and provide regular assets and guidance to our staff. We have fully deployed our pandemic plan and we're now more than 30% of our people excluding branches working from the safety of their homes, taking advantage of our technology infrastructure and video solutions. Our branch network continues to operate on a recession basis atefficosional in areas. The staff of the critical functions have leaked in separate locations. Our digital channels provide a dynamic solution for our customers to perform their daily banking transactions online. As I mentioned earlier, 70% of our customers are digital engaged. Slide 9, go to Slide 6, which provides a summary of the measures taken by the regulators for mitigating the COVID-nineteen impacts. These measures are unprecedented and have already been put in place. The purpose of these measures is to help banks as well as possible provide the necessary support for their customers. Specifically, the measures announced provide flexibility with regards to capital and liquidity requirements as well as providing guidance on the applications of IFRS nine. Starting with the relaxation of the tariff requirements, the regulators and lower banks to temporarily dig into the P2G and carrier conservation and countercyclical buffers. Note that the countercyclical buffers for Cyprus is currently set at 0. Moreover, the ECB front loaded the ability to use lower quality owned funds to meet pillar fuel projects. Finally, in April 2020, the Central Bank of Cyprus decided to delay by 12 months to January 2020 2, the phase of the 50 basis points of our OIBDA buffer. With regards to liquidity, ACV is allowing banks to temporarily operate below the LCR requirement. Although, note that we are at double double level. In addition, we've launched a new pandemic emergency purchase program, which entails net asset purchases of $750,000,000,000 until the year end. Moving to asset quality measures, the ECB will exercise temporarily flexibility, inducting the unlikely to pay assessment. In addition, the regulator will exercise full flexibility when discussing with banks the implementation of their NPE reduction strategies. Finally, Residue is encouraging financial institutions to avoid prosuchicality in models to determine expected credit losses. Basically, Laxial provides central macroeconomic scenarios to support banks in applying IFRS nine provision policies, while banks should also give a greater rate to their long term outlook when estimating expected credit losses. In addition to the ECB measures, we have the ADA management guidelines, which cover the following key points. The Combi banking moratorium does not dramatically trigger increased credit risk. Banks are expected to distinguish between border and truck which the credit family will not be significantly affected by the current situation in the long term from those that would be unlikely to return to credit worthiness. This restriction will help institutions to mitigate any potential cliff effect from capture between stages. When general COVID-nineteen mortality does not trigger automatic reclassification due to forbearance, The COVID-nineteen monitoring expense 90 days from the deadline via the modified payment schedule. And finally, the EU stress test has been postponed to 2021 to allow banks to prioritize operational continuity. All the above are indicative of the capacity built for royalty and battery system to proceed with all the necessary actions in order to help borrowers. Moving now to Slide 7. I will spend some time on discussing the measures taken by the Ethiopian government, which are also important in addressing the constraints of the crisis. In response to the outbreak of COVID-nineteen in Cyprus, the government quickly produced fiscal mail jobs, which accounted for 5.4% of stockholders' EBITDA and are providing liquidity to businesses and simultaneously preventing a sharp rise in unemployment. The package announced by the government's proceeds to be one of the most generous among EU members. During April, the government has successfully raised $3,000,000,000 of funding from the international level markets, which is to cover the measures undertaken to control the economic impact of the COVID-nineteen outbreak and to spread excess credit reserves, which gives us a strong mode of confidence in the future economy. Turning to an address in detail. 1st, the parallel and mortgage for the transportation of more repayments of interest and capital for 9 months remaining until the end of the year for all eligible borrowers in the real areas less than 30 days as of the end of February 2020. In addition, the government is promoting and governing our active program of $2,000,000,000 for the provision of low priced loans to companies and self employed. Dollars 250,000,000 has been set aside to be used for the subsidy of rainkillers. The program has been approved by the capture of the minister and is pending parallelized approval. According to the terms of the program as of today and not approved by the custody of minister, the government will guarantee 70% of the loan amount. Furthermore, the government refused additional liquidity for profit measures such as the suspension of VAT and delayed and visual interference of contributions from the National CLT. Finally, when government has introduced income support schemes for companies impacted by COVID-nineteen to protect jobs and avoid layoffs, It's estimated that over 50% of private sector employees and approximately 40,000 self employed will benefit from the wage compensation schemes. Factors will also benefit from the measures taken by the Eurogroup in early April. More specifically, Fartus have access to $400,000,000 funded for companies with a focus on SMEs through the European Investment Bank, a loan facility of $160,000,000 with favorable terms for the production of layers during crisis, And finally, pre ASM's pandemic crisis support further fast conditions curve line of 440,000,000 dollars Moving now to Slide 8. In 2019, the future of the economy grew by 3.2% and whilst clearly COVID-nineteen has caused a deterioration of the short term prospects of the difficult economy, it is an open and more flexible economy, which has demonstrated historically that recovery from the current crisis can be quick. The spread of COVID-nineteen is expected to have a significant impact both on the global and secular economy, at least from the first half of twenty twenty. The impact of the cyclical economy will largely depend on the invasion and the intensity of the pandemic. The effect of most adversely affected initially by COVID are expected to be tourism, trains and construction. As the pandemic is still upfront, it is not possible to assess the full likely impact. The decisive actions announced by the government along with the cost of monetary fiscal and a global measures announced by the European authorities are expected to mitigate the impact of this external shock. However, there will clearly still be an impact. Moving to Slide 9 now. We are cautiously optimistic for the resilience and the recovery capacity of the economy. The government measures provide a liquidity injection accounting to almost a quarter of the country GDP for the support of the $23,600,000,000 of personal loans in the market system. More specifically, the government guarantees approved by the cash flow of ministers will provide approximately 2.5 bw credit to affected business and share employees. Furthermore, additional amount of $400,000,000 is available for the funding of business through the European Investment Bank with a focus on SMEs. Support will also be provided through the loan moratorium as the estimated that we will provide cash relief to business and individual lines of approximately $2,300,000,000 In Envision, it is important to note that the banking industry and other sectors particularly as expected to offset their liquidity in a timely and effective way to affect the business. This is very important and very high in our priorities. To summarize, the measures taken by the authorities in the government are comprehensive and far reaching for the support of the customer business and the economy to withstand the cost savings of the pandemic. Turning now to Slide 10. On Slide 10 to 13, we will discuss our exposure to a more effective sectors of the economy and are struggling to mitigate the impact on our customers and effectively advance. The group has a well diversified performing loan portfolio amounting to $9,200,000,000 as of December 31, 2019. We will continue to closely monitor the book and set up strategies to prevent asset quality deterioration. The expensive tariff bans, the slowdown in production as well as the exchange in demand and effectively the consumption, turning from the fleet last time, have an upward impact on touring, trade and construction sector in the economy. The exposure of our performing book to tools and trade, each amount to $1,000,000,000 while the exposure to construction is lower than 500,000,000 dollars As of the year end, the bank has no exposure to aviation. Of course, any prolonged outbreak of COVID-nineteen will eventually impact all sectors to a certain extent with a few exceptions. We are setting up targeted and efficient strategies for each client segment and industry, While a close contact will impact the customers in order to primarily to assess the full extent of the COVID-nineteen economic side effects and secondly, provide relief in the fall of payment deferrals and the production is as appropriate. We will provide liquidity to affected customers to help alleviate their short term cash flow better through the government guaranty facilities and other lending products on the bank. And it's well remembered that the government granting facilities have been approved by the capital of leases that are still pending through the Parliament. On Slide 11, we provide information about the loan moratorium included in the government of Naples. The loan moratorium was started on March 13, 2020, and also the expansion of both collateral and interest for loans, overdrafts and credit cards for the period until the end of the year. Fee behavior is available to our customers, both private individuals and business, but less than 50 days per year as of February 2020. The long term will be extended so that the loan repayments will continue as per the existing stages, given the moratorium interest will continue to accrue. It is important to note that after Venezia and now by the regulators, the COVID-nineteen motorbodies does not trigger automatic reclassification 20 studies due to forbearance. As of 25th April 2020, we have received approximately 20 1 further applications for $5,200,000,000 of gross loans accounted for 56% of the performing loan book. Applications from business amount to $3,400,000,000 or 66 percent of the performing book. Higher warehouse applications received from 5 individuals amount to 1.77000000000 dollars or 45 percent of the personnel book. I would like once again to emphasize that during the moratorium period, we'll continue to closely monitor the credit riskiness of our customers who apply for these fields and support them on the day after in order to effectively and timely address any potential worsening of their credit quality following then on the moratorium. Moving on to Slide 12. As of the end of 2019, performing loans to private individuals amounted to 3,900,000,000. It is expected that over 35% of total employment in Cyprus will remain unaffected from the COVID-nineteen crisis as the workforce is employed in government, selling government and other financial sectors. In addition, measures announced by the government include an employment compensation scheme for big units impacted by COVID-nineteen to protect jobs and avoid layoffs until mid June 2020. Resqueen provides for the conversation for 50% of the wage costs for up to 60% to 90% of the workforce depending on the extent of lost turnover and number of employees. It is important to note that a requirement of the scheme is that no employees will be fired since 1st March 2020. The government expects that all the staff of players are still in place and around 40,000 foot employed will benefit from deployment on the previous team. As previously mentioned, the moratorium applications received from prior year individual amounted to €1,770,000,000 from the €2,94,000,000 we currently have in our booth that are driven by mortgages and personal loans. Moving now to Slide 13. Let me go through a deep dive through our exposure to the most affected sectors, Turin and Carriage. As of September 31, 2019, actual exposure to tourists amounted to 1,000,000,000. 6% of these related services are embedded positioned to manage social distancing to take out and drive through facilities. The accommodation sector is expected to be under the most significant pressure, as customers in this sector enter the crisis though with significant liquidity following strong performance in recent years. Specifically, the unutilized liquidity of the sector as of the end of March 2020 amounted to $350,000,000 most of them being double digit in the account of the client. 80% 8 ks percent of our Tumi exposure already applied for 10 MBs. Our exposure to trade is similar as of the end of December. 28% of this is in lower risk and central retail services not particularly impacted by COVID-nineteen target supermarket farmers. The nuclear equivalent sector amounted $1240,000,000 as of the end of March 2020. For this sector, 53% applies for $700. Slide 14, during this and period of time, the bank continues to operate mostly supported by its digital transformation program. Supported by the digital transformation program. In fact, digital infrastructure initiatives provide a friendly solution to our customers to carry out their early market transactions. Today, 70% of our customers are newly engaged, up 6 percentage points since December 2018. It's a shame again that followed the outbreak of COVID-nineteen, the ratio of online banking transactions to total transactions increased by 15 percentage points to 35%. The bank has launched various initiatives aiming to provide better, faster and safer service to customers. Such initiatives include, amongst others, the issuance of daily cash, free of charge until the end of May 2020. Additionally, new customers started with subscription to payment banking, new customers that are open on account via the market website, which is in debit card, field charts and other mergers. I will now hand over to Elisa to take you through the highlights for the full year 2019 of Slide 15. Elisa, the floor is yours. Thank you, Manikos. Hi, from me. I only intend to take you through the headline slides for free. We are previous reporting on the timing of the issuance of our fleet numbers. So if we start with Slide 16, our capital provision remains good. Total capital and CET1 ratios stood at 18% and 14.8%, respectively, well in excess of our regulatory requirements. The de risking of our balance sheet continued in 2019. The organic gross NPE reduction in the 4th quarter amounted to €205,000,000 bringing total organic reduction for the year to €889,000,000 ahead of our guidance of around €800,000,000 reduction for the year. In the peak in 2014, our gross and PE declined by 74 percent to EUR 3,900,000,000 or EUR 1,800,000,000 on a net basis. Our gross NPE ratio was reduced to 30% and exposures were 54% covered by expected loan credit losses. Due to the prevailing muscular and operational conditions arising from the outbreak of COVID-nineteen, the NPE sale currently delayed and will take longer than anticipated to complete. During the quarter, our deposits increased marginally Q on Q by 1% at €16,700,000,000 whereas the loan to deposit ratio stood at 64%. In March 2020, liquidity fees were introduced to strategic customer groups. In Q4 of 2019, we also successfully completed our voluntary tax expense, resulting in an annual growth saving in staff costs of 13% or €28,000,000 and a reduction of the full time employees by 11%. The one off cost of the VRS scheme was €81,000,000 and was recognized during the Q4. Also, the number of branches were reduced by 18%, has contributed by the ongoing digital transformation. As Anikos mentioned earlier, the percentage of digitally engaged customers increased to 70% as at the end of March 2020. New lending for the Q4 amounted to €443,000,000 €2,000,000,000 for the year, up 9% compared to the prior year. New lending for the full year 2019 is at its highest level since 2015. In the Q4, we generated total income of €166,000,000 and a positive operating result of €53,000,000 Our cost of risk was at 0.9% for the 4th quarter, remaining broadly flat Q on Q. Underlying results for the quarter was a loss after tax from organic operations of €6,000,000 and a profit of €36,000,000 for the full year. During the Q4, there was a provision to net loss of NTE sales of €86,000,000 which included as previously announced loan credit losses within the context of IFRS 9 €75,000,000 for the anticipated balance sheet derisking to NPE sales. Following the one off cost of the VEP of €81,000,000 as well as the net loss of the NPE sales of €86,000,000 the loss after tax was at €186,000,000 for the quarter and €70,000,000 for the full year. Now turning to Slide 16, a few key points on our liquidity metrics. Our deposits are stable year on year at €16,700,000,000 and we continue to operate with significant excess liquidity of €3,200,000,000 as at 31st December 2019. Our loan to deposit ratio at the end of the year stood at 64%. And finally, our cash balances increased to €5,100,000,000 We also note that the ECB allows banks to temporarily operate below the LCR requirement of 100 percent in order to allow the deployment of readily available liquidity during this period of market stress. In addition, the updated TLTRO terms are significantly more generous and the June 2020 subscription has now been breached with weekly tenders of LCRO facilities. Finally, the ECB launched a new pandemic emergency purchase program for an amount of EUR 760,000,000,000 and purchases will be conducted until the end of this year. Now moving to Slide 17 on capital. We have a good capital position when we set our regulatory requirements. As at 31 December 2019, our total capital stood at 18.0% and our CET1 at 14.8% with a CET1 buffer of 3 80 basis points. In front loading, the ability to use AT1 and Tier 2 to meet Pillar 2 requirements, we will have an additional fee of Tier 1 buffer of 131 basis points. The temporary relaxation of the capital conservation buffer also provides another additional CET1 buffer of 2 50 basis points. Coming it all up, Japan's CET1 buffer increases to 7.61 basis points. Finally, I mentioned earlier, in April 2020, the central bank of ISIS decided to delay by a year the phasing in by 50 basis points of the OFII buffer until January 2022. Slides 20 to 42 provide a lot more detail of our performance in the Q4, and we can discuss both at the Q and A session and in bilateral calls with all of you across English. So with that, I hand back to Panikos for closing remarks on Slide 18. Thanks, Hazel. Covered by PME's social crisis, presenting an unprecedented external economic shock, The current economy uncertainty means that we cannot at this stage have clearly the view of the future impacts of COVID-nineteen on the group operations and financial results as these particular principal depend on the rate and extent of the spread of the virus, the direct and indirect impact on customers and the effectiveness of the regulatory and fiscal measures take catch up from the economy and mitigate the impact of the virus. We have good capital and strong liquidity position as we enter the crisis. The government has taken organized measures to contain the virus and provide superior injection liquidity to businesses and higher individual. However, we acknowledge the deterioration of the short term prospects of the cyclical economy. As a consequence, we will update the macroeconomic assumptions underlying the IFRS net calculation of loan credit losses for Q1 2020 in line with the relevant leverage guidance and we anticipate that this may result in increased organic provisions in Q1, although the exact funding of any such increase is as yet unknown. While we are currently seeing lower tax on income and lower demand for loans, the ongoing economic assessment we need that we do not have sufficiently agreed about the life not in a position to provide guidance for the current financial year. However, we are confident that the bank's good capital base and strong liquidity position us to be able to support our clients through this period of extreme volatility, playing our part in limiting the impact of the pandemic crisis. Our medium term strategic priorities remain clear with a sustained focus on strengthening our balance sheet and improving asset quality and efficiency in order to continue to play a vital role with our positive equity of the economy. This concludes our presentation and we are now open for questions. Thank you. Thank you very much. Thank you. The first question comes from the line of Floriani Jonas with Axia Ventures. Please go ahead. Good morning, guys. Thanks for the call. I have a few questions. So starting on the NPE side of things, I was looking at Slide 25. And I was just wondering if you could share some color on how do you see your tools and ability to deliver outflows of NPEs in 2020. I understand that what's going to happen on the upper part of this slide in terms of inflows, re defaults, etcetera, it's a big unknown. But how confident you are that you're able to deliver the actions you deliver in 2019 as similar to the bottom part of the slide. So this is question number 1. And then the question 2 relates to that. I think we've heard some earlier comments from Cyprus regarding a potential bad bank. So just wondering if there's any later discussion on that, if there's anything you can share. And then finally, I will end with new lending expectation for 2020. You had a very good volume of new disbursements in 2019. I was just wondering now that you have all of this support and ability to support viable customers. If you see a major change in the volume of disbursements in 2020 versus 2019, right, You closed 2019 with €2,000,000,000 So I was looking if you could share like a volume expectation for 2020. I'll leave it there. And if there's anything else, I'll join in. Okay. I will thank you, Florian. I will provide some short answers and then I will give the floor to Bannekosh. I need to comment on the NPE. On Slide 25, I just want to mention that for 2020 and because of the moratorium, the moratorium does not trigger any automatic NP inflow, but irrespective of that will be, as we said, continued assessment of the portfolio. And once we will consider that there is a statement of unlikely to pay in the long term, there will be triggering RMP. So the moratorium is kind of providing time and comfort so that we avoid NPM trips. So this is my, let's say, the answer on this, but I'm sure that medium money cost cost much more on this. On the production bank, yes, we we have seen this in the news brought on the European level and also on the level first. It's something that is on the very, very early stages. And so we don't know if we don't know any tales about this. So I cannot comment further. On the new lending for 2020, Yes, I mean, the new lending in this year is probably in deal with providing liquidity support in to our economy clients. I do expect lower volume in 2019, but I also do expect because of the amount of funding lower repayments to our performing book And as you may have noticed in the previous years, despite the significant re ending, we haven't seen our performing book growing too much because of the significant repairs we had in the previous years of this book as well. So there will be lower volume at the 2019, but at the same time, there will be a little bit of impairment on this goodwill. Nick, can you be more specific on the NPEs? On the NPEs on Slide 25 or panic Inverdoni, we have a very strong pipeline. We are expecting NPE reduction to continue at a slower pace in 2020, mainly because most of the government services are not fully operational at this point of time. But as soon as economic conditions normalize, we expect to resume our efforts to improve asset quality position, I think it's solutions for the organic and the organic. But if you look into our current NPE book, and we put on one side the portfolio that is for freight. The remaining NPEs are totally separated into 4 categories. And there is a separate strategy for each one of these categories. I will continue by saying that the remaining NPs are separate for categories. I will give you some more color on the categories that we are working on. We've got the idea that we are working on any strategy depending on whether the client have applied for the scheme or it's a strategy to foster or we are speaking about sensitive cases. So we've got a plan there how to resolve the SBI portfolio. We are still having some large groups in the portfolio, but we have a clear leverage plan for each of them. Then we've got a restructured portfolio that we are monitoring closing to close so that it will exit empty status in the near future. And then we've got a core portfolio, which with a mix strategy will be applied depending on the category of the client. That means that whether there is a client that you have a cash flow there, if we are speaking about clients which are 30% or clients for which the restructuring is planned in center its way. So I will say that we have for our existing people an actual plant that we are committed to deliver. And we have shown the last 5 years that we have delivered 11,000,000,000 NPE reduction, 75% of that was organically. So we have the knowledge and the experience to continue delivering sufficient NPE reductions for 2020 as well. Nick, can you comment on the trade, please? Sure. Look, I've spoken about this before. As you know, it's part of our thinking and part of our focus and has been for some time now. We've talked about it on probably the last 2 or 3 quarterly calls. We've made good progress in developing that solution. It's an area we've got a strong track record in. We've delivered 3 previous trades and all have been value enhancing to the bank and our shareholders. I think naturally you'd expect given the current circumstances, both practical and financial people are taking a short pause to be frank, sort out their own issues. And I'm fully expecting beyond that short pause to pick up that story. I think we've previously guided you into our hope. We weren't promising it, but I hope that we would deliver transactions through the 1st part of 20 20 20. That's clearly been delayed by the current pandemic. And I'm focusing now more on the tentatively on the second half of the year. But obviously, we'll have to keep that under review because there are many, many uncertainties outside of our control right now on that issue. But it's still there and it's still being actively developed. Thank you, Nick. Okay. Thanks guys. Just a quick follow-up. Do you have any update both on the NPE flows, but also on lending as of Q1 already? For R and P we do, but I don't think we don't think this is the right time to discuss this. We will shortly reaching Q1 results. Just to your question, Jonas, on new lending, we are guiding to lower demand for new loans from here from Q2 to Q4. And but the volume of loans actually will probably not vary that much from where it was at year end because of the moratorium. Given the significant levels of moratorium take up, as you've seen here, this means that the loan book will actually remain broadly flattish, the performing loan book. Thank you. The next question comes from the line of Novakikandran with HSBC. Please go ahead. Thank you for the call. Can you provide an update on state guarantees, please? When do you expect the law to be approved? And what impact do you think this will have on not just the lending environment, but also profitability of those new loans events and over what time period? And my second question is, what is the latest on the relaxation of lockdown restrictions? In particular, what are the scenarios here for hotels reopening and when? Thank you. Okay. I will take this and then there's some, Gavin. Okay. On spread guarantees, I mean, actually, we said that this has been approved by the Council of Ministers, but not yet passed through the Parliament. Our information is that this will happen next week, but as you know, probably you will never be sure. So as of today, the percentage of each land that I think that state is 70%. I don't know if this will change. It would be because there is discussion that this may go higher to certain sectors of the economy, maybe up to 80% or 90%. And actually, the rates are lower, as you may imagine. But given the cost or given the same guarantee, which requires no capital from the bank, I think the returns depending at which rate we'll end up in then will be sufficient enough. So we believe that we've seen it, let's say, within the next maximum to which we're going to see this going through the pipeline because it's something that both the Minister of Finance over there is discussing with Santo Leopaptivo so that he can secure the majority that's needed. In terms of relaxation, actually, today, we expect an announcement from the Treasury about the relaxation in phases. We expect the first phase to begin on Monday and set the capital light construction or set the retail sector. But I would not I don't want to go and let's say roughly get what is presented in the press. But it certainly is that, let's say hotels are on the last phase of the luxury of which is positioned in June or early July. On the relaxations, Scott, I may add, there is the government is talking to the press over the last few days about their plans to push hard to make sure that hotel occupancy within the restrictions of the the remaining restrictions that would be in place at the time will start heating up from late June early July at 20 percent, and they're talking about forming a pact with other countries that had similar low COVID incident ratios like Greece and Israel in order to promote these destinations as safe and good options for touring. So this is a plan that's currently out being developed. And I think with Q1 numbers in the next few weeks, we'll see if we can talk more about it more specifically about it as the government unveiled it to the market. And also, I will extend the 2 season. I mean, for let's say, for the remaining of the year, I mean, to November to November and December, I mean, because as you know, Cyprus has a relative amount. So but and then good weather even in December. So another 2 teams extending the 3 season for constant tender to tender in November and maybe then during December and January. But as Alisa said, we probably have not to say later in May when we land on the Q1 results. Also on profit, the current time period of the government guarantees, although we haven't seen the final version of the law or the latest available, we understand that the intention is that they have up to 6 year loans. The headline NII profitability net of the state currency fee will be lower than a normal commercial loan, But the ROE remains reasonable. So because of the government guarantee and the zero risk weight from the portion of the loans as guaranteed. So we are supportive of this team. It's also, we think, a very good tool, which will enable customers it will set against default in the future. It will provide good and low value liquidity. The one thing I do want to mention is that the crisis is actually from an NII perspective, it's actually an opportunity to review and revise where possible the pricing of the existing portfolio as customers require further assistance from the bank on a liquidity level. So this is one of the strategies we want to pursue as soon as some sort of normality comes back to the market. And further on the tariff scheme because as per the existing, let's interrupt the law, this is allocated it's an allocated amount per bank. So we estimate to be allocated the 50% around 50% of this amount over €2,000,000,000 So Okay, that's clear. Thank you very much. The next question comes from the line of Cunningham Corrine with Autonomous Research. Please go ahead. Good morning. Can you hear me okay? Yes. Perfect. A couple of questions. Have you actually given a date for your Q1 reporting yet? No, we haven't, but we will confirm it closer to the time. It's all contingent on operational ability as well. We should be able in the next few weeks to reach an announcement on the date. Okay. And my next question was on liquidity. So your liquidity position currently looks very favorable. But if you start to factor in non receipt of interest, non receipt of loan repayments and possible drawdowns under the government guaranteed loan scheme. What's your tolerance for the liquidity position? What do you think that would look like going towards the end of the year? Okay. We've actually Yes. Sorry. Multiple scenarios, Corinne, on this, including 100% or near 100% except tons of the moratorium in the extreme. And we don't we are nowhere near the 100% LCR ratio, actually no surprise. The moratorium in whole we all inform as a 100% pay gap of the moratorium. It's roughly a $1,000,000,000 of inflows that will not come in. And our surplus liquidity from a regulatory perspective is at €2,200,000,000 euros This will be partly offset by lower new lending, as I said before, in any case. So we don't we're not worried about it. Could it be it's not some I mean, we are clearly monitoring it and managing it, but it's not at the level where we need to take actions. The other point to say was the obviously the realizations are there in terms of the CROs, the collateral rules, our covered bond remains available if we need to use it tomorrow. So we have a lot of backup liquidity as well if we need it. Thank you. The next question comes from the line of Stuart Robb, Ustoska Sands Asset Management. Please go ahead. Hi, good morning guys. Thanks for the opportunity. Just quickly, can I just follow-up on the cost point? So I appreciate the movement given the DEP that happened in Q4. I was just wondering if you kind of think about that $28,000,000 run rate, I think, savings on cost. I was wondering if there was a bit of a better way of looking at it in terms of the net saving when you consider the renegotiations, etcetera. How should we think about that going forward, please? Okay. Rob, as we've mentioned before, we did plan for another round of cost reductions, sub cost reductions down the road. I mean, the timing of these now needs to be discussed again. It may or may not change. It depends on how things evolve. It is worth, but it wasn't an immediate next phase. It was planned a few quarters down the road. Having said that, we are also rethinking about everything else, all the non FAS costs and back at the joint board to identify more savings to the ones that we have planned in any case for especially for 2020 and then, of course, for the full year. So we'll we are this is work in progress because COVID is only not there for a short number of weeks. So we will be able to give more color on this, I think, as I think it is a number probably the necessary is 20, 20,000,000 after accounting for the collective and renewed the union. But we had sorry, it's 23. We have a 3 year co production plan, which is there. I mean, it's becoming even more important given the crisis and the reduction in our, let's say, revenues at least for 2020. So yes, it's becoming more important and will be more aggressive versus our original plan. Okay. Thank you. But just if I think about 2020, the cost base compared to roughly €400,000,000 underlying last year, The cost base, can you keep that flat? So can that still come down by an amount of the decline of actions after the VAT? Let's see, the €23,000,000 that Anikov mentioned, you should assume costs. And as I said, on the non staff costs, we are trying to find more savings to even our plants. What I do, I should mention a lot of these 2 things. One is that we started incurring deposit and shipping costs. And the other is that we do expect to have to incur incremental fees for the deferred tax credit law that went through last year. There were $12,500,000 charge in 2019, and we expect roughly $6,000,000 or thereabout annual charge going forward as an increased fee for this benefit. Okay. But net net, net of lease, we should even we should assume we should expect or you should expect savings compared to 2019. Yes. Both is that. Of course, both is the remaining payment expenses, which actually gives you the amount. Okay. Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Nicolas for any closing comments. Thank you. No. As I said, this is a period that is of affected times and going through this period of Baja, as we said, in good color as to all the previous product clients, we'll be in a better position to provide more visibility on the 2020 numbers together with our Q1 results, another Q1 results later in the year for the same period. So thank you all for your time. And of course, we will be willing to take any questions or questions from anyone and that was to see a bit better on our accounting and on our, let's say, presentations. And I'm sure that both myself, Olivia and the remaining on the XLII team will be willing to have a call with everyone that wants to have more visibility and more clarification or questions in our 2019 accounts and also in how we see things moving forward in Cyprus and in the portfolio of the bank going forward due to the COVID-nineteen crisis. So nothing much from us. I thank you for your time and I hope you will stay healthy for the remaining of the season. Thank you. Press.