Ladies and gentlemen, thank you for standing by. I am Gail, your Chorus Call operator. Welcome, and thank you for joining the Bank of Cyprus conference call to present and discuss the group's financial results for the nine months ended 30th September 2019. 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, Acting Chief Risk Officer; Mr. Panicos Mouzouris, Acting Executive Director, RRD; Ms. Anna Sofroniou, Executive Director, Real Estate Management Unit; Mr. Nick Smith, Executive Director, Corporate Finance Solutions; and Ms. Annita Pavlou, Manager in Investor Relations.
Mr. Nicolaou, you may now proceed.
Thank you. Good morning, everyone. Thank you, welcome to the 2019 Bank of Cyprus nine-month results. Our results this quarter reflect continued progress against our core objective of balance sheet repair and normalization of our bank. Let's take a quick look at the highlights of the third quarter of 2019 before Eliza and Panicos Mouzouris take you through the figures in detail. Our capital position remains good. Pro forma from the sale of our investment in CNP and the charges related to our voluntary exit staff plan, our core capital and CET1 ratios stood at 17.9% and 14.9%, respectively, well in excess of our regulatory requirements. The de-risking of our balance sheet continues at pace. Since the peak in 2014, our gross NPE declined by 33% to EUR 4.1 billion, EUR 4.0 billion on a net basis.
Our gross NPE ratio was reduced to 31%, and exposures are 51 covered by loan credit losses. The organic gross NPE reduction in the third quarter amounted to EUR 227 million, bringing total organic reduction for the nine months to EUR 654 million, ahead of our guidance of EUR 200 million reduction per quarter. Loan sales for the nine-month period ended 30th September 2019 amounted to EUR 355 million. We have a clear strategy for continuing the improvement in the asset quality position of the bank, and today, there is a good momentum in our effort to accelerate balance sheet de-risking through structured solutions. During the quarter, our deposits remained broadly flat at EUR 16.5 billion and the cost of deposits reduced by 105 basis points. Overall, the cost of deposits has now been reduced by 57 basis points since January 2018.
In September, given our comfortable liquidity position, we decided to repay early our ECB funding in the form of TLTRO of EUR 330 million, reducing the total liquidity position to EUR 3 billion. We continued to actively manage our liquidity position, and we expect to shortly substitute liquidity fees for specific customer groups. New lending was at EUR 491 million for the third quarter and EUR 1.6 billion for the nine months, up 10% versus the same period 2018. In the third quarter, we generated total income of EUR 162 million and a positive operating result of EUR 63 million. Following the disposal of our 49% investment in CNP, the bank generated recurring fees from the insurer business of EUR 12 million for the quarter and EUR 42 million for the nine months. Our cost of risk was at 0.09% for the third quarter, down from prior quarter levels.
The underlying profit for the quarter was at EUR 18 million, and EUR 65 million for the nine months. We released the profit after taxes, EUR 19 million for the quarter and EUR 116 million for the nine months. In the current quarter, we have successfully completed the voluntary staff exit plan, incurring a one-off cost of EUR 79 million, facilitated by the ongoing digital transformation program. The targeted cuts were achieved, and the number of full-time employees was reduced by 11%, which will result in annual gross savings in staff cost of 13% or EUR 28 million. We have also continued our branch footprint rationalization program, and by the year-end, we will have achieved a 48% branch reduction. We remain focused on further improvement in efficiency, supported by the digital transformation program.
Overall, 75% of transactions involving deposits, cash withdrawals, and transfers take place through digital channels, and since 2017, there was a 54% increase in active mobile banking users. With that, I hand over to Eliza to take you through the capital slide.
Hi from me, too. Turning to capital on slide three, the bank's capital position remains good. During the third quarter, we generated 50 basis points of organic capital in operating profit and 20 basis points of capital from the decrease of risk-weighted assets.
These were partly offset by loan credit losses, impairment and other adjustments totaling 40 basis points. The disposal of CNP added 30 basis points to capital, whereas the restructuring costs related to the completion of the voluntary staff exit plan will decrease capital ratios by around 60 basis points. Pro forma for CNP and the voluntary staff exit plan, we finished the quarter with a CET1 ratio of 14.9% and total capital ratio of 17.9%, well above the regulatory requirements. Our risk-weighted assets intensity stood at 65%, following the repayment of the TLTRO. We expect that risk-weighted assets will continue to decrease in the upcoming quarters, in line with the reduction of NPEs. I'll hand over now to Panicos Mouzouris to take you through asset quality before the Q&A phase.
Good morning. I will start by discussing on slide four. In the first quarter of the year, the Bank continued to deliver organic NPE reductions, with NPEs reducing by EUR 227 million, ahead of our guidance of around EUR 200 million per quarter. Around two-thirds of the NPE reduction in the third quarter was from cash collections. Overall, since 2014, gross NPEs reduced by EUR 3.9 billion, of which EUR 8.2 billion has seen organic actions. The gross NPE ratio reduced by two percentage points from the previous quarter to 31% as compared to 33% the last period. Write-offs amounted to EUR 364 million in nine months of 2019, representing 39% of organic gross NPE reduction. As we have previously explained, we continue to expect that the proportion of write-offs will be volatile in any given quarter.
Turning to slide five, where we present the bank's view on what we describe as core and non-core NPEs, using a prescription approach in line with previous results presentations. Non-core NPEs totaled EUR 530 million as at 30th September, representing around 4% of gross loans and 15% of total NPE stock. Coverage on these loans remains relatively lower at 19%, reflecting the lower risk associated with this stock of NPEs. Our core NPEs totaled to EUR 3.65 billion as at 30th September, representing 27% of gross loans with 56% coverage. The contractual balance of core NPEs amounted to EUR 5.35 billion and are 71% covered by credit losses. Slide six, clear strategy for further NPE reduction. Tackling the bank's loan portfolio is of utmost importance to the group and our stakeholders.
We have been successfully developing restructuring solutions across the loan book, and we expect this to continue in the coming quarters in line with our guidance of around EUR 200 million per quarter. At the same time, there is good momentum in our efforts to accelerate balance sheet de-risking through structural solutions. Today, the bank's EUR 4.08 billion of gross NPEs falls into three principal buckets. Firstly, non-core NPEs totaling EUR 0.15 billion. As a reminder, non-core NPEs are loans that have been restructured, have no arrears, and are expected to exit NPE definition. As shown on the slide, around three-quarters of these are available for exit by the end of 2020, subject to continued to meet all relevant exit criteria. Secondly, Estia-eligible NPEs of EUR 0.83 billion. Estia is a government scheme to help address NPEs collateralized by lower value primary residences.
The application period for the government scheme launched in September has been extended until the end of December. As at 22nd November, we have received 487 applications totaling around EUR 120 million. Despite the lower participation than originally expected, Estia remains important in allowing non-Estia eligible customers to be defined and addressed primarily through consensual and non-consensual foreclosures. In addition to Estia, we are identifying the non-viable customers for which alternative restructuring solutions are currently in concept. Our third category relates to core NPEs, excluding Estia eligible, which is EUR 2.22 billion. Our plan for this portfolio prioritize realizing collateral, use the write-offs to incentivize quick hit cash or deeper solutions or via foreclosures or other enforcement routes where borrowers are not willing to cooperate. This will continue to be facilitated by loan portfolios in (inaudible), at a conservative haircut 25%-30% discounts to open market value.
We continue to assess the potential to accelerate reducing NPEs through additional sales of NPEs. Currently, we are in an advanced preparation phase where we're reviewing NPE reduction structures. We expect this preparation phase to be finalized by the first half of 2020. A range of potential outcomes of this preparation phase is possible, including outright sales. Any potential transactions are expected to involve internal portfolio of NPEs in excess of EUR 2 billion gross book value. Let's now move to slide seven, Estia. This should be a familiar slide from previous quarters. I will not go through the details of Estia scheme, as just covered with everyone. Mentioned earlier, the application period has been extended from 15 November 2019 until the end of the year. At 27 November, we have received 487 applications totaling around EUR 150 million.
The pace of application is accelerating in the fourth quarter of 2019. Slide eight, coverage. The bank's NPL coverage ratio increased to 51% at the quarter end. The bank stands today above the European average coverage ratio of 44%, and the total coverage, including tangible collateral, is about 120%. During the third quarter, the cost dropped to 0.9% compared to 1.33% from the same quarter, which was affected by IFRS9 model volatility. Moving to slide nine, foreclosures. During the third quarter, foreclosure was initiated on 456 assets, while over 1,300 properties are today awaiting repossession, having failed to sell at auction. Foreclosures are becoming an important tool in NPL resolution, and therefore having a robust legal framework around foreclosures is very important. The foreclosure law amendments that were approved in July 2018 have expedited the process and limited options to frustrate execution.
In July 2019, the parliament has voted through certain changes to that law, which in the most part seeks to prioritize, to provide additional checks and balances when banks are seeking to foreclose small loans less than EUR 350,000, secured by a principal, private residence, and extended foreclosure timetable by extending certain notice periods. These amendments have not yet passed into law, as the President of the Republic has referred this to the Supreme Court, pending on legal advice from the Attorney General. The Supreme Court has not reached a decision yet. Discussions are ongoing, including, inter alia, with the Minister of Finance, the Central Bank of Cyprus, and the Financial Ombudsman, aiming to produce amendments to the foreclosure and loan restructuring framework that are acceptable to all stakeholders. With that, I hand back to Eliza.
Thank you, Panicos. Moving to revenue on slide 10. Overall, over EUR 1 billion worth of sales covering 1,459 properties were achieved since the set up of REMU in January 2016, demonstrating that REMU strategy tackles both value and volume of assets. EUR 195 million of property sales covering 433 properties were achieved in the nine months of this year, generating a profit of EUR 26 million, confirming our conservative policy for onboarding assets at a 25%-30% discount to open market value. Since REMU was set up, over 46% of legacy assets and 34% of the 2016 onboarded assets were sold. REMU sales are achieved across all property types. Land sales continue to be the largest component, representing 41% of total sales. Market statistics remain encouraging.
Residential property prices rose by 2.7% year-on-year, and sales contracts deposited at the land registry, excluding those that are bank foreclosure-related, increased by 15% year-on-year by volume. Moving to slide 11, the near-term sales pipeline remains good. As at 30th September, SPAs relating to EUR 65 million of property sales were signed awaiting execution. At the same time, EUR 14 million worth of SPAs were under preparation, having agreed commercial terms with the buyers. As seen in the previous quarters, REMU properties are promoted to the market at open market value, and for the nine months, the group sold at a blended average of 16% above book value. Moving to another topic on new lending on slide 12.
Our new lending for the third quarter amounted to EUR 491 million, overall, for the first nine months of the year, we lent EUR 1.6 billion to customers in Cyprus, 10% up versus the prior year. Corporate customers, including shipping and syndicated loans, continue to be a strong component of new lending, representing over 60% of total loan originations for the quarter. We're currently exploring ways to grow our new lending, including careful, modestly lending and shipping, syndicated loans, and some other initiatives. The year on our performing book improved by 50 basis points to 338 basis points, positively affected by the increased interest collections not previously recognized. However, lending rates remain under pressure due to the sustained low interest rate environment and the activity within the market.
New lending continues to be carefully considered against robust assessment criteria, and 98% of new exposures in Cyprus since the beginning of 2016 are performing. The bank is the single largest credit provider in the island, with a market share of 40.8% as at 30th September. Now moving to slide 13. As explained previously, the continuing balance sheet de-risking is resulting in a smaller but lower rate loan book. Overall, net loans have reduced by 36% since 2015, driven by the legacy book deleveraging, the sale of the U.K. bank in 2018, and the completion of the Helix trade in June this year. Today, the performing book represents 82% of net loans, compared to 58% in 2015. Q on Q, the performing book increased by EUR 100 million and amounted to EUR 9 billion.
Interest income on loans increased quarter on quarter by EUR 4 million to EUR 105 million. Within the performing book, interest income increased by EUR 2 million, despite the continued low interest rate environment and the sustained competitive environment. Interest income in the legacy portfolio also increased by EUR 2 million quarter on quarter, mainly due to higher interest collections not previously recognized. Going forward, the continued de-risking of the legacy book will result in further pressure on interest income, but this should have little impact on the bottom line as all of this interest income is provided for. Now moving to a familiar slide, number 14, and starting first with our legacy loan book. As previously mentioned, you consider the interest recognized on this book was lower than incurred credit losses, and hence, was negative to the bottom line this quarter.
It's important to note that interest income on the net NPEs that is not received in cash, which amounted to EUR 59 million in the first nine months, is fully provided for. The risk-adjusted yield on the legacy book was actually negative compared to the risk-adjusted yield on the performing book, which was at 365 basis points. In the third quarter, there was a release of 15 million of loan credit losses in the performing book, mainly due to loan migration from stage 2 to stage 1. Now turning to funding and liquidity on slide 15. Local deposits remained broadly flat quarter-on-quarter at EUR 16.5 billion. Around two-thirds of these deposits represent those whose ultimate beneficial owners are Cypriot, whilst only 4% are Russian. As you can see, the cost of deposits fell by five basis points in the quarter.
Overall, the cost of deposits has been reduced by 57 basis points since January 2018, as the bank is actively pricing down deposits to respond to the intensifying pressure from low interest rates. As Panicos mentioned earlier, we do expect to shortly introduce liquidity fees for specific customer groups. We continue to operate with significant surplus liquidity. As part of our effort to manage this excess liquidity, in September, we decided to repay early EUR 830 million of TLTRO funding, reducing our surplus liquidity to EUR 3 billion. These levels of liquidity continue to put pressure on NIM as excess liquidity is placed with the ECB at negative rates. Moving to slide 16, where I analyze the drivers of NIM. To bring these asset and liability trends together, I think we should now turn to margins.
Our NIM in the quarter improved at 199 basis points, mainly due to the increased interest collections not previously recognized and the reduced cost of funding. Our margin dynamics are complicated. There are several important underlying components that I'd like to analyze. Firstly, liquidity built up in a very challenging interest rate environment. Liquid assets increased to €6.65 billion, around 10% Q on Q, reflecting the repayment of the TLTRO. Liquid assets now account for 39% of interest-bearing assets. The pressure on the effective yield of liquid assets is expected to continue. Secondly, the yield on the performing book, which increased from 3.35% in the second quarter to 3.38% due to, as I mentioned earlier, increased interest collections. Thirdly, the higher yielding, higher-risk legacy loans are reducing as we capture CX and fees.
Finally, the cost of funding continues to decrease, and the impact is increasingly visible. We continue to aggressively price our deposit book down, and the cost of our deposits in Cyprus declined by another five basis points this quarter and by 57 basis points year-to-date. Apologies, since January 2018. Continuing to slide seventeen on non-interest income. For the third quarter, this amounted to EUR 72 million compared to EUR 92 million in the previous quarter. The carrying income was at EUR 48 million in the quarter, down 14% Q on Q, mainly due to higher one-off insurance income in the second quarter. Net gains on financial instruments amounted to EUR 14 million for the quarter, compared to EUR 24 million in Q2, affected by one-off revaluation gains on financial instruments in the previous quarter.
Revenue net gains amounted to EUR 10 million for the third quarter, compared to EUR 12 million in the second quarter, but revenue profits have remained volatile. As regards our insurance business, this remains well positioned for growth over the medium term. Now moving to costs on slide 18. Our cost-income ratio, excluding Helix and bank levy, stood at 58% for the first nine months, compared to 59% for the first half of 2019 on the same basis. Costs are a key area of focus for the bank. During the third quarter of 2019, other operating expenses increased to EUR 58 million from EUR 43 million in the second quarter due to seasonality and lower marketing costs. Staff costs for the quarter amounted to EUR 55 million, broadly flat on a Q on Q basis.
Going forward, the digital transformation program is beginning to clearly deliver an improved level of customer experience. The digital transformation program is a priority for the Bank as it is a key lever for enabling the Bank to achieve operating efficiency, cost reduction, and revenue generation. Let's turn to slide 19, completing the discussion for cost containments. During the fourth quarter, we successfully completed the voluntary staff exit plan at a cost of EUR 79 million. Number of employees was reduced by around 11%, as around 470 applicants were approved to leave the Bank. Following the completion of the plan, the annual gross saving is estimated at EUR 28 million or around 13% of staff costs. The renewal of the collective agreement for 2019 remains under discussion.
Additionally, around 100 full-time employees relating to Helix are expected to be transferred to the buyer upon full migration, expected to conclude soon after the year end. In addition, we continue our branch footprint rationalization as we expect to reduce the number of branches by 8% by the year end, further improving our operating model. We remain focused on further improvement of efficiency. On slide 20, which is the income statement. In a nutshell, net interest income increased to EUR 90 million in the third quarter, mainly assisted by the further decrease of the cost of deposits and the increased interest collections not previously recognized. Total income decreased to EUR 162 million from EUR 177 in the second quarter. Total expenses for the quarter decreased to EUR 99 million from EUR 105 in the second quarter, due to lower operating expenses and staff costs.
Loan credit losses decreased to EUR 30 million. Cost of risk was at 0.9%. Restructuring costs for the quarter increased to EUR 9 million, reflecting the continued effort to accelerate de-risking. Profit after tax from organic operations for the third quarter was at EUR 18 million, and the overall profit after tax amounted to EUR 19 million. With that, I send back to Panicos for his closing remarks.
Thank you, Eliza. Our results this quarter reflect continued progress against our core objective of balancing repair and normalization of our bank. Good progress has been made throughout the year. However, there remains more to do. The management priorities going forward are to continue to deliver balance sheet de-risking at pace, while maintaining a strong capital position. At the same time, we remain focused on further improving efficiency to reflect our smaller revenue base, supported by ongoing digital transformation. I'm looking forward to sharing my perspective and vision for the future of our bank with the release of the full year financial results. This concludes our presentation, and we will now open for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your headset 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 comes from the line of Floriani, Jonas with Axia Ventures. Please go ahead.
Morning, guys. I have three questions. First one on the Estia parameter, having in mind that the pace of applications has not been as expected by the market. Just wondering, what is your strategy there given the low amount of participation, and if you have a plan B? I assume that you're expecting to have most of the eligible clients applying for the scheme. Now, I think that we are like a month into the end of the application period. It's very unlikely we're going to achieve that. Do you have any sense of volume that you're planning to achieve, and what is going to be the strategy on the remaining clients? My second question is on your portfolio sale. Any progress in regards to I've seen the update on slide six. Was there any comment in regards to potential impact?
As far as I remember, you're planning to have a capital neutral transaction. I was just wondering if you still stick to that kind of broad guidance for the time being. My final question here is regarding the reversion of provisions on the performing book from stage 1 into stage 2 into stage 1. Just wondering if you can give some guidance on what kind of exposures are those, and if you think that there is more to come as well in a similar fashion. Thank you.
Okay. Thank you, Floriani. I'll hand over to Panicos, who will answer the Estia question. Panicos?
Right. Estia, we see it as an enabler for the portfolio in a way that, firstly, the scheme is less costly. We have open discussions with more than 1,500 borrowers. We have received up to today 487 applications, and we are seeing an increased pace moving towards the end of the year. Through that scheme, we are able to identify the non-viable borrowers. There is a percentage on that book that is not viable, meaning they cannot support restructuring. We are in
Trying there to identify a better portfolio and put a strategy on resolving that book. There is also a percentage of people that still want really to share their information through the scheme. In any way, our results and our plan, it does not have any amount incorporated in the 2020 NPE plan. My opinion is that the clear portfolio that will not take up the scheme, it's only around less than 15% of our NPE problem. We consider that to be manageable moving into 2020, 2021 NPE strategy.
If I may add, I'd like to emphasize that those from the Estia portfolio that choose not to participate, it's a small amount of our, let's say, NP portfolio, and it was not discounted toward our NP 2020 reduction target, mostly 2021 and 2022. As a bank, as you all know, over the past years, we have managed to reduce our NPs dramatically. During this period, there have been many challenges in the economic environment that we have managed to go through and find alternate solutions. We are confident that for the portfolio that at the end will opt not to participate in Estia, we're going to have a clear solution going forward. On the topic of the portfolio sales, I will hand over to Nick. Nick, are you there?
Yeah, I'm here, Panicos. On the trades, I didn't quite catch the full question. I got the gist that you were asking for guidance on the outcome trades. I think, as you will have picked up from the comments already made on the call, there's a lot of work going on behind the scenes in preparation and progression of a number of different potential trades. I think none of them are at a point at the moment where I would be confident, and the bank would be confident, issuing any guidance. Unfortunately, in line with the way we treated things in respect to the 2018 trades, I think you're just going to have to wait and see. At a point in time that we do have confidence in the guidance, we'll give you a full update on progress at that point.
Okay. Thank you, Nick. On the reversion of provisions for the performing book, Demetris?
Yes. Good day to all. On the cost of risk for the performing book for the third quarter, well, it was actually negative, -21 basis points, and that was positively affected by one-off release in provisions, mainly due to loan migration from stage 2 to stage 1, as was mentioned. The expectation is that the cost of risk of the performing book is to remain low, and this, of course, is supported by the performance of new lending, whereby 98% of new lending we have done since 2016 is performing.
Okay, thank you. Next question, please.
The next question is on the line of (inaudible) with HSBC. Please go ahead.
Hi. Just focusing on the core business for the time being. Can you please comment on loan yields? We've seen some stability for a change in this quarter, so it would be interesting to hear your thoughts about how you expect them to behave going forward. Then also, if you can add some color on what you expect to see in terms of new production in the fourth quarter and onwards. I appreciate that you're only going to give us meaningful disclosure with the full-year results, so it's a bit premature to ask about that. Maybe you can give us some color on what you think are the main pillars that the bank should be looking at in terms of its strategy in the medium and longer term. Thank you.
Eliza will comment on the loan yield stability.
As you've seen, loan yields for the performing book are 30 basis points higher than the previous quarter. This increase, as you described, that comes from higher collections, previously not recognized interest, so that should not be seen at a run rate. We do feel that reference rate pressure seems to be abating, although competitive pressure remains relatively strong, especially in the retail and smaller SME side of the book. We feel that forward, lending yields may come under small or modest pressure, but not a big drop like we've seen in previous quarters, which were also driven by reference rate reductions in both Euribor and LIBOR rates, but also the bank base rates. On new loan generation, Demetris?
Okay, new loan generation, I expect a similar performance as of Q3. We expect to be at.
Approximately EUR 2 billion plus run rate a year of new loan generation. The last question about the main pillars going forward, 2020. As you all know, a number of priorities is complete the de-risk of the bank and achieve significant reduction of our NPAs pool within 2020. Secondly, we want to stabilize our revenue base and find new revenue streams like the smaller, let's say, participation in syndicated loans, in entering carefully into the GP market. At the same time, and most importantly, we need to rationalize our cost base. By talking about cost base, I mean staff cost, operating cost, liquidity cost, which is also an important element, and cost of provisions. This is the main strategy going forward, and I would be happy to share it with you probably in March 2020.
Okay, thank you.
The next question is from the line of Dylan Goudis, Alexandros with Morgan Stanley. Please go ahead.
Yes. Good morning. Just a clarification regarding the Estia program and the discussion you had with my colleague before. For the clients that do not participate in the Estia, eventually, which are strategic defaulters or do not want to share the data, you will have the ability to foreclose, I assume, because that was the purpose of the plan. Thank you.
Yes. The simple answer is yes. This was the purpose of the scheme from the beginning. We provide a chance to the borrower to participate in the Estia so that they avoid foreclosure. If they opt not to, the foreclosure option is on the table.
Do you think there will be political pressure not to do so in the end?
There will be political pressures. There were political pressure for the last five years, and I expect that political pressure will be there. The bank will proceed irrespective of any pressure.
Okay, thank you.
The next question is from the line of Cunningham, Careen with Autonomous Research. Please go ahead.
Good morning. Thank you very much for the call. Just wanted to explore a little bit more on the law changes on foreclosures and whether or not that's actually slowing down some of the big projects. Because I think we were hoping for some progress on larger scale disposals before year-end. Just the whole combination of lower take-up on Estia, foreclosure laws weakening potentially. Is that having a material impact on the ability to get some of these block trades done? If it's not, if you can give us some color on what's taking the time. Thank you.
Thank you. Nick, can you take this question, please?
I think my comment on that is the trades are all progressing in line with the expectations we set ourselves at the commencement of each of those processes. No, there's no delays on any of them. You'll obviously be aware that any potential repeat of a Helix-style trade, which is a jumbo trade by any measure and certainly relative to Cyprus as a bank, takes time and preparation and should not be rushed. It's not. It's been carefully managed.
In terms of foreclosure law, again, as we've seen in the parliament during August, there is potential legislation in place which currently sits at the Supreme Court, which could have some, what I would describe as relatively minor implications for a very small sub-section of the NPL portfolio, where slightly more checks and balances are put in place around banks' compliance with the Arrears Management Directive, which we have been operating under consistently and carefully for the last four or five years. That's not something that is troubling for the bank. Clearly we would like the matter of foreclosure resolved once and for all. I expect it will be resolved once and for all. No, it is not at this point having an impact on the timetable for any of the potential trades we're progressing.
Thank you.
Okay. Next question, please.
The next question comes from the line of Queen Dara with KBW. Please go ahead.
Hi, good morning. Thank you for the presentation. Just a question on the employee reduction, if you could give us a timeline on the exit of those employees and when the cost reduction will be fully crystallized in the P&L. That the exits as part of the Helix program would be an additional cost save on top of that. A second question just on the portfolio sale or potential portfolio sale of NPEs that you're working on. If you could just give us maybe an idea of where you are in terms of timeline. The portfolios are being reviewed by bidders, et cetera, and what kind of milestones or timelines could you give us on progress you expect to see on last during 2020? Thank you.
Okay. Thank you. The first 170 people that we elected in Bank, this will be in Q4, so it will be this year, all of them. The cost reduction will be evident from 2020 going forward. On the Helix 2 path, I will hand over to Eliza to explain the mechanics.
On Helix, when this staff actually legally exits the bank, there will be a saving in the staff cost line. We do get compensated with our part of the agreement from the buyer, from Apollo, so there will be also a parallel reduction in the service fee. In the press release, we do report this net in the Helix line. When you see the statutory P&L, you will notice that going forward, a reduction in the service fee or in the fee income and also a parallel reduction in staff costs.
Any further portfolio sales will automatically lead to a further staff reduction in 2020. The last point, I will hand over to Nick, if he can provide more color on the timing of the portfolio sales.
I sense the desire from many of the participants on call for more clarity on what might happen in future trades. I fully understand why you're asking the questions. I can't really go any further than the comments already made on the call, which is targeting a finalization of those initiatives during the first half of 2020. That is my expectation on the timeline, but with the caveat, as always, that we are clearly attempting to execute certain trades, but we are not commenting them at this point in exactly the same way as we were using language prior to the 2018 trades.
Mr. Goddard, are you finished with your questions?
Yes. Thank you.
As a reminder, if you would like to ask a question, please press star and one on your telephone. We have a follow-up question from Mr. Jonas Floriani with AXIA Ventures. Please go ahead.
Hi, guys. Just a few more questions from my side. On fees, could you please update us on what is the latest, in regards to the discussions in Cyprus on the aggressive banks to increase the fees going forward? Any update there would be helpful. Secondly, on deposit rates, on the chart you showed slide 15, with the 19 basis points cost of deposit. Just for me, if you can share the number, what is the level of the front book that you're running now on deposit costs compared to the 19? Finally, if you can expand a bit more on the NII component of the interest collection that have not been previously recognized. If you can give us more details on that then on the likelihood of this happening in the coming quarters. Thanks.
Okay, on the first question, there is no restriction on the ability of the bank to charge any fees. We will proceed with a new fee catalog on our IDU clients starting January 2020. We're exploring ways to revise our catalogs within the first half of 2020 to the remain of our clients. As I mentioned in my initial statement, we are also expect to charge liquidity fees in certain categories of clients, this will be probably being effective early next year. On the remaining two questions, I'll hand over to Eliza.
On the deposit book, our deposit book, the maximum duration we have is 12 months. Actually, given where the rates are, the average duration of the deposit book is below six months at the moment, actually, significantly, closer to three months. The difference between front and back book, Jonas, is not material. There is a bit more of repricing to come, but we've seen the majority of it from the back book. What you should expect to see from here on is, on the non-retail side of the book, a bit more repricing from the legal entity and institutional investor side, a bit more repricing on the EUR deposits, and incrementally, the liquidity fees that Panicos just read now. On the liquidity fees, we do plan to go through a phased approach.
We will start with a sub-population, the least sensitive and the least volatile portfolio, and the portfolio that doesn't affect our LCR ratios. Test the water, make sure that it doesn't cause undue noise and instability, and then roll it forward depending on decision. Finally, on NII, there was this quarter, similarly to actually previous quarters, especially in the pre-Helix period, we had interest collections, so cash received, interest income received in cash on loans, where this income was not previously recognized through the P&L. This is a phenomenon we used to have in significantly higher amounts when NIIs were higher. It has abated. We view this more as just a private case, specific income that came this quarter, and not a very carrying P&L profit stream going forward, especially after the trades, if and when they happen.
Thank you.
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. Nicolaou for any closing comments. Thank you.
Thank you all for participating. As I said in my initial statement, we have more clarity on the strategy of the bank with the announcement of the full year results. Thank you all.
Well, ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a pleasant evening and morning.