Earnings Call: Q1 2019

May 13, 2019

Ladies and gentlemen, thank you for standing by. I am Gary, 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 Quarter Ended 31st March 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. At this time, I would like to turn the conference over to Mr. John Patrick Huracan, Group Chief Executive Officer Mr. Izalu Fabrioto, Group Finance Director Mr. Nick Smith, Director, Restructuring and Recoveries Mr. Michalis Sanacio, Group Chief Risk Officer Ms. Ana Sofronio, Director, Real Estate Management Unit and Ms. Anita Pavlo, Manager, Investor Relations. Mr. Harkin, you may now proceed. Thank you very much, operator. Good afternoon, everyone, and thank you for your time. I recognize that you have not had a lot of time with these numbers. So and as always, Anita and the team will be available for any one to one questions you may have in due course. I'll start with in the last few minutes, we have announced the appointment of Canikos Nicolaou as the CEO designate to succeed me at the bank. Canikos' appointment is subject to ECB's approval. Canikos has been the Director of our Corporate Unit since 2016 and has an extensive experience in the local banking sector here in Cyprus. Our nominations committee ran a thorough and intense process under which international and internal candidates were assessed. It is pleasing that Panagol, a member of our executive team, was chosen from this process. I will, of course, work closely with him over the coming months to help ensure a smooth transition. Now turning to the results. As an overarching statement, for the 1st 3 months of 2019, I would say that our results reflect continuing progress against our core objective of balance sheet repair. Slide 2 summarizes the key highlights for the 3 months ended 31 March 2019, and I'll briefly touch on each of these points. The bank's capital position remains good. Our CET ratio CET1 ratio and our total capital ratios stood at 14.9% 17.9%, respectively, pro form a for the Helix trade at the quarter end. In March this year, we finally received approval from the ECB for the significant risk transfer for Helix, and the legal completion process is now underway. The completion is expected this quarter. We continue to make progress in repairing our balance sheet. This was the 16th quarter of organic NPE reduction. Since the peak in December 2014, we have reduced the stock of NPEs at the bank by about 70%. During the Q1 of the year, we reduced the NPEs by $157,000,000 to 4,600,000,000 or $2,400,000,000 net of operations. These exposures are covered 48%, and our NPE ratio is now reduced to 35% no formal periods. We have a clear strategy for continuing the improvement in asset quality of the bank, and we are actively exploring strategies to further accelerate derisking, including contemplation of further portfolio sales. Alnyk has significant services of $3,800,000,000 pro form a for Helix as of March. And March 2019 deposits were 3% lower than they were at the end of last year at $16,300,000,000 and our loan to deposit ratio is a very healthy 67% pro form a for Helix. Performance in the Q1 was in line with Flam. Total income was $176,000,000 generating $71,000,000 The underlying profit before restructuring for the quarter amounted to $23,000,000 Cost of risk stood at 1.2%, reflecting continued derisking. Completion and timing adjustments relating to Helix resulted in a P and L charge of $21,000,000 for the first quarter. A positive impact of $109,000,000 arose from tax legislative amendments in March this year. The combined result of all of these moving parts was a profit after tax for the Q1 of 2019 of €95,000,000 And with that, I'll hand over to Alisa, who will begin on capital. Hi, Fermi, too. So starting from capital on Slide 3. As you see and as you've seen from last quarter, the bank continues to be well capitalized. During the Q1 of 2019, we generated 50 basis points of organic capital in operating profit, while the deferred tax credit conversion had a positive impact of 190 basis points. These were partly offset by provisions, impairments and other adjustments totaling 110 basis points. Pro form a for Helix, the CET1 ratio stands at 14.9% and the total capital ratio at 17.9%. As John mentioned, the bank has received approval from ACV from the technical risk transfer benefit from Phoenix and the project remains subject to other outstanding conditions precedent and is expected to be configured in the Q2 of 2019. Our average risk weighted average intensity remained relatively stable during the quarter at 64% on a pro form a basis. Overall, the average risk weighted asset intensity has reduced by 21 percentage points since 2016, reflecting the de risking and change in balance sheet mix. With that, I'll hand over to Rick for asset quality. Good afternoon, everyone. I'll start in my usual place on Slide 4. In the 1st 3 months of 2019, the bank continued to deliver organic NPE reductions with NPEs reducing by €157,000,000 or 3%. Since 2014, organic NPE reduction totaled EUR 7,700,000,000 or 51%. Pro form a for Helix and Velocity NPEs reduced by a further €2,700,000,000 and the NPE ratio improved by 11 percentage points to €35,000,000 I'm going to turn now to Slide 5. The pace of NPE outflows presented in the top chart remains reasonable, totaling EUR 281,000,000 in Q1, and on average, is running at EUR 320,000,000 for the quarter since Helix was announced. Inflows in the 4th quarter amounted to EUR 130,000,000. Overall, for Q1, the net organic NPE reduction, as John mentioned, on the residual portfolio is EUR 157,000,000 dollars We continue to expect organic NPE reduction of around $800,000,000 for the whole of 2019, in line with our target. Variances quarter on quarter are to be expected though. Let's move now to Slide 6. Here, we present the bank's view on what we describe as core and noncore NPEs using a consistent approach in line with previous results presentations. Pro form a for Helix non core NPEs totaled $870,000,000 as of 31 March, representing 7% of gross loans and around 19% of total MP stock. Coverage on these loans, pro form a for Helix, is relatively modest at 19%, reflecting the lower risk associated with this stock of NPEs. Around 51% of these are available for NPE exit by the end of 2019, subject to continuing to meet all relevant exit criteria. Again, pro form a for Helix core NPEs totaled around $3,700,000,000 as of 31 March, representing 28% of gross loans and with 55% provision coverage. Let's now turn to Slide 7. Continuing to tackle the bank's NPE loan portfolio is of utmost importance for the group and our stakeholders. We have been successful in developing restructuring solutions across the book, and we expect this to continue in the coming quarters at a pace of around EUR 200,000,000 per quarter. Today, the bank's EUR 3,700,000,000 of core NPEs falls into 3 principal buckets. Firstly, Astea. It is frustrating that the scheme launch continues to be delayed for reasons that are outside of our control. We continue to push for an immediate conclusion and launch of the scheme. Based on the bank's available data, the scheme is expected to positively impact up to $900,000,000 of stickier retail core NPEs, which represent around 1 quarter of our remaining core NPEs, subject as usual to eligibility criteria and participation rates. Astea also remains indirectly important to other NPEs as it provides a clear definition of socially protected borrowers, discouraging strategic defaults. Secondly, retail with non austere eligible loans of around $1,500,000,000 These will continue to receive clear focus from management, which continues to be aided by refocused servicing support from Peppa and enhanced new products. Options to accelerate NPE resolution through structured solutions will focus heavily on this book. Thirdly and lastly, SMEs and Corporate Lines of around GBP 1,350,000,000. Our plan is to prioritize realizing collateral using write offs to incentivize quicker cash or DFAB solutions or via foreclosures or other enforcement routes where borrowers are not willing to cooperate. This will continue to be facilitated by onboarding assets into revenue at conservative 25% to 30% discounts to open market value. In parallel, the bank will continue to actively explore alternative avenues to further accelerate this reduction via those structured solutions. Turning to Slide 8 to steer. I will not recover the terms of the scheme as I think things are generally well understood. I would like to remind people that while the scheme will help resolve the stickier component of NPEs, it will not produce immediate results as restructured credits will be subject to usual curing rules and timetables. Despite delays to its launch, the bank continues to hope to be in a position to execute restructurings for eligible borrowers during 2019. Assuming this can be achieved, the NPE benefit will not materially occur until late 2020 or more realistically 2021. Even though Astera is not officially launched, we have undertaken certain actions in order to assess eligibility and build a book prior to the launch. We have identified the perimeter based on the information available to us today, and we have developed an industrialized process to handle large volumes in short time frames. The progress so far is encouraging, and there is a generally positive response for the scheme from the market. Indeed, 98% of potentially eligible borrowers contacted have expressed interest to participate. Moving on to foreclosures on Slide 9. The bank has taken actions to significantly boost foreclosure volumes over the last 2 years. It remains a key priority and further actions have been taken in Q1 to boost pace and allow higher volumes of retail foreclosures to be handled. This is including reaching agreement with an external law firm to boost capacity alongside our experienced internal engine. Overall, between January 16 December 2018, foreclosures have commenced on 3,011 properties, including Helix assets. During Q1, foreclosures have commenced on 330 non Helix assets, and just over half of these borrowers have engaged in active negotiations with the bank following the commencement of the process. More than 3.50 auctions were held in the Q1 of 2019, mainly relating to Helix assets, as the Helix portfolio consists of larger corporate exposures for which the foreclosure process commenced earlier. Our non Helix retained portfolio, 82 properties were auctioned during the 3 months, while around 650 non Helix properties are already set for auction during the remainder of 2019. In addition, around 250 non Helix properties are today awaiting repossession, having failed to sell the 1st auction. We again expect further improvements in pace of foreclosures during 2019. Turning to Slide 10 and revenue. Dollars 37,000,000 of property sales covering 119 properties were achieved in Q1. The bank recorded a $4,000,000 profit on these sales, testament to our conservative policy for onboarding assets at a 25% to 30% discount to OMV. The near term sales pipeline remains strong. As at 31 March, SPAs relating to $103,000,000 of property sales were signed awaiting execution. At the same time and in addition, EUR 46,000,000 of SPAs were under preparation, having agreed commercial terms with buyers. And lastly, the completion of SIREIT is well underway and is subject to the approval of the buyer by the Securities and Exchange Commission. Cyreak will deliver a further EUR 160,000,000 of property sales. As seen in previous quarters, land sales continue to be the largest component by volume, representing around 41% of Q1 sales. Market statistics also remain encouraging. Residential property prices rose by 1.6% year on year, and sales contracts deposited at the land registry, excluding those that relate to bank foreclosure activity, increased by 11% year on year by volume. Lastly from me, Slide 11, provision coverage. The bank NPE coverage ratio remained at 53% at the end at the quarter end, in line with our previously disclosed expectations and 48% based on pro form a results for Helix. The bank stands today above the European average coverage ratio of 44%, and total club coverage, including tangible collateral, at 123% or 118% on pro form a results. As Alisa will explain in a moment, there has been a small change accounting, which impacts our cost of risk calculation. On both the old and this new basis, the cost of risk in the Q1 was around 1.2%. This is a little above our guidance of circa 1% for the whole year, largely reflecting volatility in the IFRS 9 calculation. Of note, our Stage 3 assets, those that are in default, actually declined in the quarter, which you can see in the appendix slides. We continue to expect cost of risk to be around 1% for the year for the full year. And with that, I will hand back to Alisa. Thank you, Nick. So let's now move on to revenue trends for the quarter on Slide 12, where we present total income. And as Nick mentioned, there was, as a result of implementing of a new IFRS interpretation, a small change in how we recognize interest income and provisions. And while it has zero impact on our bottom line, it does impact some of our ratios. To help you, we have included a slide in the appendix that fully marks out the impact. And on Slide 12, we show the revenue numbers on both the old and the new basis. So under the new basis, our total income was €176,000,000 and was 6% lower than the previous quarter. Net interest income remained at similar levels with the previous quarter at €102,000,000 as the lower interest income on loans was offset by a lower funding cost and the active management of surplus liquidity. Our margins have widened to 6 basis points, positively impacted by the reduction in the volume and cost of deposits. On our non interest income, this declined mainly to lower disposal gains. Now if I turn now to explore individually the drivers of revenues in more detail, Let's start from volumes and volume trends on Slide 13. New lending reached EUR 563,000,000 in the first quarter, and we provided over EUR 4,000,000,000 of new lending to the digital economy since 2016. Corporate continues to be a strong component of new lending, representing percent of overall loan originations. The yield on our performing book fell in the quarter as a result of both lower base rates and competitive factors. New lending continues to be carefully considered against robust assessment criteria, and 97% of new exposures in Cyprus since the beginning of 2016 is performing. So moving to balance sheet de risking on Slide 14. As explained in the past, the continuing balance sheet derisking is resulting in a smaller but lower risk loan book. Overall, net loans have reduced by around 29 percent since 2015, driven by the legacy book deleveraging and the sale of the UK ban in 2018. The performing book experienced a moderate increase of around €100,000,000 quarter on quarter. And on the new basis, total interest income on loans fell from €131,000,000 to €118,000,000 in the quarter, excluding Helix. And Apologies, excluding Helix, the decline was from €109,000,000 to €101,000,000 Within the performing book, interest income fell by €10,000,000 as a result of the lower yield I discussed in the previous slide, driven mainly by lower base rate and sustained competitive environment as well as the transfer of portfolio of loans from performing to legacy. Interest income in the legacy portfolio was largely unchanged in the quarter. 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 profit as all of this interest income is provided for. Moving to Slide 15 now. This should be a familiar slide from previous quarters. Starting first with legacy. As previously mentioned, you can see that interest recognized on this book is negative to the bottom line this quarter especially due to higher provisions. The risk adjusted yield of this book was actually negative compared to nearly 4% of the performing book. Now moving to Slide 16 on funding and liquidity. Local deposits decreased by 3% in the quarter and are up 1% year on year. Other deposits in Cyprus around twothree represent deposits whose ultimate beneficial owners are Cypriot, while only 4% of these are Russian. As you can see on the slide, the cost of deposits fell further in the quarter, which have offset some of the yield pressures that we have already discussed. On liquidity ratio compliance, the Alciallatum requirement was abolished on the 1st January 2019, resulting in a significant liquidity surplus of EUR 2,900,000,000. This surplus will increase by a further EUR 1,200,000,000 to the conclusion of Helix, bringing the total liquidity surplus to EUR 3,800,000,000 These levels of liquidity continue to take pressure on me as excess liquidity is placed with ACV at negative rates. Moving to Slide 17 on the drivers of NIM. So to bring these asset and liability trends together, I want to now turn to margins. As explained on previous results calls, net interest margins have come under pressure as a result of a number of actions we have taken, which had a positive impact on capital and liquidity. Our NIM in the Q1 had widened slightly to 2 27 basis points compared to 2 21 basis points in the Q4 of last year. The largest driver was the reduction in the cost and the volume of deposits. But our margin dynamics are much more complicated than this, there are several important underlying components that must be analyzed. 1st, liquidity built up in this interest rate environment. Liquid assets decreased to €5,900,000,000 down 8% on a quarterly basis and now account for 34% of interest bearing assets. The increase in the yield of liquid on a quarterly basis was driven by liquidity management actions, including the impact of the decrease of the euro deposits and diverting dollar liquidity from FX swaps to bonds. Secondly, there is the higher yielding, higher risk legacy loans are reducing as we successfully exited lease. The third component is the yield on the performing book, which dropped from 3.78% in the 4th Q to 3.46 basis points in this quarter due to lower base rate and continued market pressure. And finally, the cost of funding is decreasing and the impact is increasingly visible. We continue to aggressively reprice our deposit book down, and the cost of our deposits in Cyprus declined by 9 basis points this quarter and by 37 basis points year on year. Our overall blended average funding cost came down by 9 basis points. Now moving to Slide 18 on noninterest income. During the Q1, this decreased to €74,000,000 compared to €85,000,000 in the previous quarter. Net gains on financial instruments amounted €20,000,000 which is in line with prior quarters. Q4 2018 was positively affected by nonrecurring FX head in position closing. Recurring income was €52,000,000 for the quarter, down 12% Q on Q when it stood at €58,000,000 due to elevated insurance claims and seasonality. Net fee and commission income for the quarter stood at 22% of total income. Now turning to expenses on Slide 19. Our cost to income ratio, excluding levies, stood at 56% for the Q3 compared to 50% for the full year 2018 on the same basis. Our operating expenses are a key focus area for the balance. During the Q1 of 2019, our operating expenses amounted to EUR 42,000,000, slightly lower than the 4th quarter. Staff costs for the quarter amounted to €57,000,000 compared to €59,000,000 in the previous quarter, but this €59,000,000 included an amount of €4,000,000 relating to previous quarter and one off transactional costs. The remaining increase relates to higher social insurance and NHS contributions to the National Health Service in Cyprus, which started earlier in 2019. Going forward, as John noted at the beginning, the digital transformation program is beginning to clearly deliver an improved customer experience. Our branch network is now half the size it was in 2013, and considerable work is going on to identify areas with further reduced costs. Cost reduction is a key focus area for management this year. Now turning to the income statement on Slide 20. Net interest income remains broadly flat at EUR 102,000,000 on a quarterly basis, while total income decreased to EUR 176,000,000 for the quarter. Total expenses for the 1st quarter reached €105,000,000 compared to €110,000,000 in the previous quarter, and provisions amounted to €47,000,000 while cost of risk was at 1.2%, and this excludes the impact of Helix and Velotibi. Operating results from organic operations were €16,000,000 corresponding to a quarterly EPS of 0.0 $0.036 To help you better understand the table, the group called Helix, Slide 2627 in the appendix provide indicative numbers of key balance sheet and profit and loss items. Project Helix had a P and L charge of EUR 21,000,000 this quarter, mainly relating to completion and timing adjustments. The P and L positive impact of the deferred tax asset conversion amounted to €109,000,000 and the overall profit after tax reached €95,000,000 for the quarter. This concludes our presentation. I'll hand back to John and the operator. Sure. I'll hand back to you to take any questions that people have. I recognize that this is a large dump of information on people who've only had this set of information for a short period of time. So again, we'll take any questions you have now, and happily, the team will take each of individual calls thereafter. The first question is from the line of Floriani Jonas with Axia Ventures. Please go ahead. Hi, Timna. Good afternoon, everyone. I've got a question first on Entyce, mostly basically kind of related to Slide 5. And following on what Nick said about the organic NPE reduction in 2019 to be around $800,000,000 I was just wondering what will be the dynamics of both the outflows and the inflows going forward? It looks like now looking at the slides, especially from Q3 2018 onwards, the amount of outflows is kind of stable, but a bit lower whilst the amount of inflows has been quite consistent as well. So just wondering how you see the dynamics of both sides going forward. And then finally, if you can give any more guidance for 2019, I think you already mentioned the expectation for cost of risk to be around 100 basis points. Just wondering now what will be your expectations for NII, PPI and OpEx as well? That will be very helpful. Thanks. Well, in terms of the last question, I don't think we're going to be able to guidance on this call. But let me deal with the first question because I can't talk about that. I think the what you've seen what you see in that top chart on Slide 5 is the impact of Helix. So when we were reporting Helix prior to the announcement within run rate numbers, we were running at NPE exits of the order of $600,000,000 to $700,000,000 on a gross basis. Post the execution of Helix, a large part of the corporate book and a large part of the SME book fell into the assets awaiting sale and we're no longer accounted for in terms of NPE reduction because the benefit of tax recoveries and asset recoveries from that transaction, assuming legal closing of the deal, will fall into the lockbox for the benefit of the buyer. So as we guided to the point at that point in time, we said there will be a drop in ongoing run rate for that reason. And what you're seeing there is if I think now sort of 3 quarters post Helix, a fairly sensible average kind of run rate per quarter, which is in the zone of where we guided. We guided on a net basis rather than a gross basis. And to the bottom, you see the run rate of inflows, as you've said. I think it's fair to say that the level of inflows is more heavily biased towards the smaller ticket retail book and the smaller ticket SME book. Both of those areas were outside of the Helix transaction, which, as I said earlier, was largely corporate and top half SME. So what you're seeing is an impact on the outflows from Helix, and you're not seeing anywhere near as great an impact on the inflows. Hence, the reenergization on the focus on small ticket and exploring alternative potential structured solutions to do something similar with that part of the book that you've seen us do with the corporate and asset legal. On guidance, we're continuing to be guiding at this stage because of the changing shape of the balance sheet and therefore, the P and L. However, we are we have given some numbers so that you can pro form a out clicks 1 in the appendix, €500,000,000 The next question is from the line of Canute Mohammed with Citibank. Please go ahead. Yes. Hi, everyone, and thanks for having us on the call. I won't take too much time. I'm just got 3 questions. For starters, you were just talking about the NPEs on the retail segment. I'm just wondering, you've seen $120,000,000 of well, increase Q on Q. Is that inflows of restructured loans? Or is that new loans that have gone bad? What's happening on the retail side for starters? And then on your CET1 capital, we've seen a 50 bps hit from provisions and other impairments. Think we saw something similar last year. So could you maybe explain to us what that is? And is that something we're going to see frequently? And lastly, anything about Helix and SGL? I mean, what's delaying them really and when can we expect them? Thank you. First 1 and 3 and Felicia for 2. No, I'll probably hand back to Carlos to deal with the first question on the retail delinquencies. So thank you. He can give you the best color around it. Let me deal with so I think with question 3 first while I'm talking. I think look, Helix, as you know, is a complicated transaction. It's a very, very large portfolio relative to the bank, relative to the market and required a very, very careful and well managed carve out of the servicing solution to accompany the sale of the assets. That's been progressing very, very well with the buyer. But quite rightly, they are cautious over timing and want to make sure that operational servicing of the loans can continue uninterrupted, both post legal closing and post full migration of the assets onto their own externalized platform. So that process, I think, has taken longer, if I'm being honest with you, than I had perhaps hoped. I think if I was being realistic at the time, it could quite easily take it as long given the complexity of the of what was going on. But look, I'm fully confident in the closing steps. We're very closely aligned now with Apollo on those closing steps. And as John made reference to in his first, the appropriate legal steps are now underway in terms of executing the SPA, and I'm confident of delivering in during this quarter. So in that Helix, Astia, you mentioned, look, I'm not sure I can say a lot more than what I said in my speech, but it's it is outside of our hands. I think there is clearly documented and well publicized government support for the scheme. I think in terms of the scheme, the government has been quite clear and transparent about what those are and how they work. But it's in the process of final approvals through various ministries in the government. And until that's done, it won't come live. I can't really comment on how quickly that will occur other than the fact that are obviously seeking to encourage that as soon as possible because it's quite frankly having done all of the prep work and got well ahead of the curve. We want to start executing the solutions. Okay. I'll take the question on the NPEs. It is true that the highest percentage of inflows do come from the retail side. As you can see on Slide 5, you try to understand the reasons for the inflow, as you will see on the slide, it comes from 3 main categories, which is pre default new inflows and what we call unlikely to pay. If you adjust the unlikely to the unlikely to pay, it could be coming from your so called hefty book, I. E. The new inflow or from re default. Most of them are obviously from the re default. So if you adjust that category into the other 2, I think one can say that the inflows that we have seen in Q1 is more or less fifty-fifty from re defaults and new inflows. And what would your cost of risk be on the retail book if you were to exclude the re defaults? I mean, on the new healthy book, what would the cost of risk for retail be? We can I don't remember the numbers of my head? So we can examine that and get back to you, if that's okay? That's fine. Yes, sure. And on CET1 ratio, there was no peak change like last time. So there was no on-site inspection or anything. There were some just over 10 basis points between 10 basis points and 20 basis points of SREP related movement that went through that 50 basis points bar or item on the Waterfall, but it's not material and it's a number of small factors. The major movements in CET1 from the end of last year to the beginning of last year were the same thing in the DTA and And that goes now. So they're the 2 things you would naturally see are damaging your capital in the normal course of business. And other than that, there was nothing. Okay. And just one more question. On the outflows of Russian and other deposits, has that affected you or the sector? And how do you see that progressing? The deposit base of the bank has been fairly stable. We have been deliberately pricing deposits down to find that point of elasticity. You'll see that our deposits are down a little in the Q1, mostly in March, and we're monitoring it carefully. We're not unhappy with that. The Russian deposits as at the end of the Q1, I think, as the chart shows it at 4%. So it is constantly being a smaller and less relevant part of the overall group's exposures. So we're not seeing a slight of any particular type of deposit or any particular we're paying 0 on all nonresident euros. So we would expect them to be less than the kyke. And our cost of deposit, it's funny. Our journey is at an all time low, all time being, post prices of 40 2 basis points blended. So they are incredibly cheap at the moment. Yes. No, the Cypress deposit base funds the Cypress loan book, and the liquidity surplus is broadly coming from, I mean, in my head, the international book. We're not paying for international deposit at this stage and we're careful about where they come from. So but I wouldn't draw any observations or any trends in this quarter, indeed, any recent quarters on how capital flows are moving. The next question is from the line of Gipaktog Louiasson with HSBC. Hi, everyone. Two questions from my side. I appreciate that a lot of underlying components on that 50 basis points negative impact to capital. But could you maybe give us a view on whether you expect these kind of things to happen in the future? And then a second question on the performing loan book and the reduction we have seen in yields due to competitive pressures and the lower interest rate environment. If you can give us some color on what you expect on that going forward as well, that would be very helpful. Okay. So on the other on the capital, let's say, just as an example, I don't we don't expect it to recur in the future quarters at least of this year. Just as an example of what's in there, euros 8,000,000 of the pretax impairment that was included in the P and L found its way through on this item in the waterfalls. So it's not things that you don't know about, and it's not things that haven't come through the P and L. There's nothing unusual about that. But to just asked. So you will see every January to from every December the phasing in of IFRS 9 in every bank. And you will also see, much less in our bank than others, some level of DTA phasing in as well. But they are the 2 adjustments you expect to see until they are fully phased in by reference to regulatory rules. Yes, of course. But I think on that waterfall chart, you're very helpfully saying that somewhere else. Yes. Okay. And on interest income, there were 2 opposite trends in the quarter. One was the base rate reduction. A large percentage of our performing book is base rate related. By base rate, I mean, DOT base rate, our own base rate. That base rate is linked to the deposit average deposit rate of the country, which fell this quarter mainly because of the COGS, Helenic merger, which led to the repricing of deposits of COGS deposits by Helenic. So it was a base rate reduction impact, not a margin impact. And as you will see from the funding costs, we have been working hard to offset that both from the volume and the cost of deposits. And I'd add to that, that we've also changed the manner in which we're doing the new lending from the Q1 going forward to be much more attached to Urobor and other rates, which are not sensitive in the same way. So we are addressing it through a number of actions on pricing. Okay. Thank you very much. The next question is from the line of Cunningham Corrine with Credit Autonomous Research. Please go ahead. Hi, there. Thanks very much for taking my call. I also wanted to explore that 50 basis points reduction in CET1 from provisions. Is this because you're changing assumptions that are feeding into IFRS 9? Is that any part of that? Or is it I'm just quite puzzled to see it in the capital line rather than the P and L line. And then just generally, if you have anything you can tell us with more discovery going on with block sales, anything that you can tell us on that? Thank you very much. Okay. Let me try again on the 50 basis points to be tied for 55. So of the 50 basis points, around 30 basis points, and it is much more difficult, is the provision charge in the P and L. So if you just calculate the P and L charge over risk weighted asset, it's around 30 basis points. There's another €8,000,000, so that would be just shy of 10 basis points of the tax, quick tax impairment that went through the tax line, which has been presentational included in these are, which is another 10 ish basis points and the other 10 are threat related. And they are mainly progress related actually to formulate SREP higher deduction to capital. That was one off and came in January, mainly relating to overseas legacy progress. So none of these are expected to curtail other than the cost of risk continuum. And then the second question. In terms of block sales, I'm going to assume that relates to the potential for follow on trades or structured solutions. I think there clearly is that potential. It's been referenced a few times by John, a few times by me in the course of this conversation. It's something we're looking at. It's naturally the right thing to look at, having delivered a heated solution, having the market recognize what we've been telling the market for quite some time. That type of thing is different. It has a robust property market underpinning it it and robust cash generation. And I think people are seeing that with the Helix portfolio. And I think with the strength of the real estate market, that earlier, continuing to be in place, there's quite a lot of interest in Cypress from potential other suitors for those countries. So look, that's all to general comments at this point. There isn't anything specific to talk to you about. I think if you have a look at our balance and where it sits at the moment in terms of NPEs, you can get a pretty good idea of the kind of assets that will be in there and a pretty good for how that might look. So we'll crack on with it, but no promises at this point and no decisions, and we won't update you until we have something to update you on, which will be somewhere down the track. Thanks, Nick. And is there any sense that there's more competition now with maybe Palenik and then the Greek banks as well looking all to do the kind of same thing that you've already achieved? Is it more difficult, do you think, going forward? Well, I think there's I think there obviously is competition out there. There's also hungry buyers who have an appetite put their balance sheets to work. And they see opportunities. I like to think maybe on buyers that they see a stronger opportunity in Cyprus, and they might be well aware given the stats on the performance that are diligenceable in Cyprus. Based on the inbound interest rate, I receive, I think there's more than enough appetite out there to credibly think that you could run a little bit of trade, but let's not dwell on that too much. It's all nice words at the moment. We'll develop our thinking and talk to you at the appropriate time. And just add one thing to that, Geraint. When we were discussing this trade with investors over the course of the last 12 months, it was an idea that we were gestating to become a reality. We have now delivered a significant trade in reality and proven that spending time on Cypress risk, in fact, can yield a significant use of equity for an investor. So I think we actually have more credibility and more straightforward conversations now than we would have had a year ago. So I'm just echoing what Nick is saying. I think the incoming is good. There's also a proven debt market for these trades, which we have demonstrated in our own trade. And we feel, I think, quite confident that the conversations we're having with buyers are real. From the line of Bolo Golisa Aleksandros with Wood and Co. Please go ahead. Hello, good afternoon. Just a quick question because I joined the debate, I'm sorry about that. Regarding the cost of risk in Q1, did I hear correctly that you think it's seasonal in the Q1 and we should expect that to go down towards 100 bps in the full year? Thank you. I'd like to note about the time being and information we know at this point in time, our expectation hasn't changed. We do expect it to be below 1% at the end of the year. Small gap, of course, including any further. And the reason for the increase in the Q1, what exactly why is it seasonal? What is the seasonality around the I would not recall the seasonality view. So the done on IFRS 9 and there is some other volatility with respect to that. There is some, let's say, additional findings that hit P and L smaller with respect to Helix. So I wouldn't I haven't seen anything extra off nearly in the Q1 results per se, But we do expect that by the end of the year, all things being equal, we should be going below 1% on time, I guess. Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Hirtgen for any closing comments. Thank you. L'Odell, I would say thank you very much for your time. The information, as always, is in front of you in the same and consistent format as the previous quarters. The team stand ready to answer any detailed questions, which I'm sure many of you will have. So we look forward to engaging with you over the coming few days. Thank you very much. Ladies and gentlemen, the conference is now concluded,