Ladies and gentlemen, thank you for standing by. I am Gale, your conference call operator. Welcome, thank you for joining the Bank of Cyprus conference call to present and discuss the group's financial results for the six months ended 30th of June 2018. All participants will be in listen-only mode, 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. John Patrick Hourican, Group Chief Executive Officer, Ms. Eliza Livadiotou, Group Finance Director, Mr. Nick Smith, Director of Restructuring and Recoveries, Mr. Michalis Athanasiou, Group Chief Risk Officer, and Ms. Annita Pavlou, Manager, Investor Relations. Mr. Hourican, you may now proceed.
Thank you very much, good morning, everyone. I'll start just by one minor correction, which is Nick Smith is not with us on the call today. He has been otherwise doing the closure of Project Helix, which I'll come on to later in my remarks. We've got a busy day today. We have an AGM underway, we will try and be reasonably pithy on this call to try and get through the key messages. Our results this quarter reflect continuing delivery against our core objectives of balance sheet repair. Today, we also announced the sale of EUR 2.8 billion of loans to a highly reputable international buyer, Apollo Global Management. This loan portfolio sale significantly accelerates the repair of the bank's balance sheet and further underpins the risk reduction strategy that we have pursued since the crisis of 2013.
Slide two summarizes the key highlights of the corporate actions post-quarter end, I'll briefly go through these. As I mentioned earlier this morning, we announced the sale of EUR 2.8 billion of gross loans, of which EUR 2.7 billion are NPEs, for a consideration of EUR 1.4 billion. This translates to approximately EUR 0.24 on contractual balances and EUR 0.48 on gross book value. The loans were carried in our books at a little under EUR 1.5 billion. The sale, also known as Project Helix, reduces the NPE ratio by 10 percentage points and combined with organic reductions, result in the net NPEs being reduced to EUR 2.7 billion, down 72% net since the peak. The net NPE balance is now substantially covered by capital. The transaction is capital accretive by 60 basis points in CET1 and total capital ratio.
The accounting loss from the transaction recorded in the six months resulted was at EUR 135 million, which declines to EUR 105 million by the year-end as a result of the time value of money of EUR 30 million, which unwinds over the third and fourth quarters of 2018. Slightly more than half this accounting loss in the full year related to the cost of executing the trade and sensible levels of provisioning against deal warranties, et cetera. The bank also will underwrite an initial portion of the senior funding tranche of EUR 450 million, of course, subject to regulatory approval. As previously announced in July, the bank signed a binding agreement for the sale of our U.K. subsidiary for EUR 117 million.
This sale will result in a profit of EUR 3 million on completion and is expected to add 75 basis points to CET1 and 70 basis points to total capital based on our June results. This is in line with our strategy of delivering value to shareholders and focusing on supporting the growth of the Cypriot economy. We previously announced that we were exploring opportunities to raise AT1 additional Tier 1 capital to further strengthen the bank's capital base. Today, we are in the process of finalizing the terms with and seeking binding commitments from third-party investors in respect of a privately placed AT1 transaction of an anticipated size of circa EUR 200 million, again, subject to market conditions. Our capital levels will be significantly enhanced following the corporate actions described above.
Pro forma for Helix and the U.K. bank sale, we estimate that CET1 will be circa 14% and pro forma total capital ratios will be about 15.5%. Total capital ratios will be further strengthened if we are successful in placing the AT1 bond later in the week. The corporate actions we undertook result in a stronger, safer, and more focused bank serving the Cypriot economy and maintaining its position as the number 1 bank in the country. Just turning to slide three. Our pro forma balance sheet is EUR 9 billion smaller now than it was in 2013. We have de-leveraged through selling off non-core operations in Russia, the Ukraine, Romania, and elsewhere, and most importantly, through reducing the stock of non-performing loans. Post the delivery of Helix and the U.K. sale, NPEs are expected to have reduced by 65% or circa EUR 10 billion since their peak in 2014.
To put this in context, this amounts to 55% of the country's GDP. Provisional coverage on the residual non-performing portfolio remains adequate at 49%, and all of this will have been achieved without state aid. The NPE ratio pro forma for Helix and the U.K. sale is reduced by 25 percentage points since the peak in 2014 to 38%. The 10 percentage point improvement from Helix is partly offset by the five percentage point deterioration from the U.K. sale since the U.K. bank carries predominantly performing loans. Our capital levels remain adequate and above regulatory requirements. As at the half year, the CET1 ratio stood at 11.9%, including the accounting result from Helix that was recorded in the period. Pro forma for the entire impact of Helix and the U.K. sale, CET1 is expected to be, as I said, at 14% and total at 15.4%.
This will be further strengthened by any issuance of AT1. Moving on to slide four and five that provide further information on Helix. Helix is a transformational trade for the bank and is also the first meaningful corporate and SME trade in Cyprus. It accounts for 15% of Cyprus' GDP. The trade achieves accelerated de-risking, the equivalent to six quarters of organic NPE reduction, and it is capital accretive by improving the CET1 and total capital ratios on completion by 60 basis points. Helix complements the organic NPE reduction achieved in the quarter, which was EUR 435 million. The transaction is subject to a number of conditions precedent, mainly regulatory and other approvals, including the ECB agreeing to a significant risk transfer benefit for the transaction.
The Helix portfolio consists of, as at the 30th of June 2018, gross loans of EUR 2.8 billion, of which EUR 2.7 billion, as I said, are NPE. The contractual balances as at the reference date of the 31st of March 2018 amount to EUR 5.7 billion. Slide five presents the accounting treatment of Helix. Eliza can come back to this if anyone needs further explanation on it, but I don't intend to go through the detail of it. Something Eliza likes to do. Slide six summarizes the key highlights for the six months ending the 30th of June 2018. I'll briefly go through these. We have continued to make good progress on balance sheet repair. This was the 13th consecutive quarter of material organic NPE reduction. We reduced the stock of NPEs organically by EUR 435 million to EUR 7.9 billion in the second quarter of 2018.
The subsequent sale of EUR 2.7 billion of non-performing loans accelerates this reduction to EUR 5.2 billion pro forma and provision coverage on the residual non-performing loan book remains adequate at 49%. Our capital levels, as I said, remain adequate at the quarter end, above the SREP minimum requirements, and are expected to be strengthened further once both the post-quarter end transactions are completed. CET1 ratio, as I've said, stood at 11.9% and total capital at 13.4%. Pro forma for both Helix and the U.K. sale, the capital ratios are 14% and 15.4% respectively. The pro forma total capital ratio excludes the impact of any issuance of AT1.
We are in the process of finalizing the terms, as I said, and seeking binding commitments from investors in respect of a privately placed AT1 transaction. That size, as I said, is about EUR 200 million in size, subject again, always to market conditions. During the second quarter, deposits increased by 2.4% to EUR 18.4 billion. We remain fully in compliance with all liquidity ratios, both local and European. Following the relaxation of the local liquidity requirements as at the 1st of July, the bank had surplus liquidity to ratio compliance of about EUR 1.4 billion. Our loan-to-deposit ratio stood at 77% at the quarter end and 68% pro forma for both transactions. The bank is now focused on reducing the cost of deposits and ensuring its deposit base has the appropriate shape to maintain compliance with liquidity ratios.
Our organic performance was in line with guidance of EUR 0.10 per quarter or EUR 44 million in Q2. We recorded total income of EUR 201 million and operating profits of EUR 89 million, and net profit from organic operations of EUR 44 million in the quarter. The reported results for the first half reflect the accounting impact of the bank's decision to proceed with Helix, which I have already described. With that, I'm going to hand to Eliza to go through capital and funding.
Thank you, John. Good morning from me, too. Turning to slide eight, our capital levels, as John just mentioned, remain adequate and above regulatory requirements. As at 30th June, the CET1 ratio before Helix and the U.K. sale stood at 12.6%, and during the second quarter of 2018, we generated 50 basis points of capital in operating profits, partly offset by 20 basis points of provisions and other impairments. Pro forma for Helix and the U.K. sale, the CET1 ratio is expected to be at around 14% and total capital ratio at 15.4%, excluding any AT1 issuance impact. These figures assume SRT approval by the ECB, which is required in order to realize the Helix capital benefit. Our average risk-weighted asset intensity decreased from 77% to 73% during the second quarter and to 69% on a pro forma basis. Moving to funding and liquidity on page nine.
Deposits grew by around EUR 600 million in the first half of 2018. Within the Cypriot business, local deposits increased by 3% on a quarterly basis and 6% year to date. There was a 4% reduction in international deposits during the year. On liquidity ratio compliance, as you are aware, the previous local liquidity requirements were replaced by an add-on requirement on the LCR, effective as from 1st January 2018, with which we are compliant. As from 1st of July 2018, there was a 50% relaxation of this LCR add-on rule, increasing the surplus liquidity of the bank to EUR 1.4 billion. The elevated deposits and the increasing liquidity, however, will continue to put pressure on NIM as excess liquidity is placed with ECB at negative rates. The bank is actively taking measures to reduce the cost of deposits and to optimize deposit mix to achieve efficient liquidity ratio compliance.
I'll hand over now to Michalis to take us through asset quality.
Good morning all. Thank you, Eliza. I'll be covering the section that is normally covered by Nick, who is in London concluding the Project Helix, as John said, and probably needs some rest.
Turning to slide 11, the first half of 2018 has seen the Bank continuing to deliver strong organic NPE reduction, with NPEs reducing by EUR 890 million or about 10%, broadly in line with guidance. Since 2014, the organic NPE reduction was EUR 7.1 billion or 47%. Pro forma for Helix and U.K. sale, the NPEs reduced further by EUR 2.7 billion, leading to a total reduction of circa EUR 10 billion or 65% since 2014. The NPE ratio improves further to 38%. As mentioned earlier, Helix reduced NPE ratio by 10 percentage points, whereas U.K. sale increases it by five percentage points due to the reduction of performing loans. Write-offs were the most substantial component of the first half of 2018 NPE declines, representing 52% of NPE outflows achieved in the first half of 2018.
We continue to guide that the proportion of write-offs in a given quarter will be volatile, driven by, firstly, the volume of heavily delinquent recovery cases resolved in the quarter, and secondly, the level of natural NPE curing achieved. Turning quickly to slide 12, the pace of NPE outflows depicted in the top chart remains reasonable and in line with our guidance levels. Default and redefaults, as shown in the bottom chart, have increased in the second quarter of 2018 due to reclassification of a corporate performing customer group of around EUR 150 million. Turning to slide 13, here we present the Bank's view on its core and non-core NPEs using a consistent approach to that described in our last results presentations.
As a brief recap, non-core NPEs relate to restructured cases that have no arrears and based on them continuing to meet all relevant exit criteria should exit from NPE status over time. Core NPEs relate to delinquent borrowers that await consensual or non-consensual solutions to deliver NPE exits. These two pools have materially different characteristics in terms of cash generation and risk, and therefore we continue to believe it is worth considering them separately. Non-core NPEs totaled EUR 1.4 billion at June 30, representing 8% of gross loans and 18% of total NPE stock. Coverage on these loans is relatively modest at 18%, reflecting the lower risk associated with this type of NPEs. Pro forma, following the sale of Helix and U.K., non-core NPEs total EUR 1.1 billion. Around 23% of these are available for NPE exit in 2018, subject to continuing to meet all relevant exit criteria.
Core NPEs totaled EUR 6.5 billion at June 30, representing 76% of gross loans and with 58% coverage. Coverage of these loans has improved substantially from 36% in December 2015 to 58% in June 2018. Capturing sale of Helix and U.K. impact, core NPEs will reduce further to EUR 4.1 billion with a coverage of 57%. Following sale of Helix and the core NPEs mix changes to mainly retail 51% from 35%, and corporate NPEs reduce from 38% to 22%. Turning to slide 14, the Bank's NPE coverage ratio stands at 52% of the quarter end, in line with our previously disclosed expectations, and 49% based on pro forma results for Helix and U.K. sale. The Bank stands today above the European average coverage ratio of 46%, and total coverage, including tangible collateral, remains at 118% on pro forma results.
Our cost of risk for the second quarter stands at 0.9%. Turning to slide 15, tackling the bank's loan portfolio is of course of utmost importance for the group. The group has been successful in engineering restructuring solutions across the spectrum of its loan portfolio, and expect this to continue in the coming quarters at a revised pace of around EUR 200 million per quarter as portfolio size and business line mix change radically after Helix. In parallel, the bank continues to examine other structural solutions to accelerate balance sheet de-risking. The SPS scheme proposed by the government in July is designed to address NPEs collateralized by lower value primary residences. The scheme is expected to address up to EUR 0.9 billion of sticky retail core NPEs subject to eligibility criteria and participation rates.
Eligibility criteria relate primarily to the open market value of the residence, total income, and net worth of household. These will act as a clear definition of socially protected borrowers. There's also a clear segmentation between retail and corporate SMEs in the core NPE universe. We intend to increase our focus on retail, non-SPS eligible exposures, in addition to maintaining the existing strong pace in SME/corporate space. The bank will also strengthen the foreclosure team to more actively use this channel going forward. Turning to slide 16, there have been important positive changes in the legislative front, the amendments are summarized in the slide, I will very briefly go through them. Firstly, on the foreclosure law, the approved amendments aim to strengthen the foreclosure framework and mainly reducing the waiting repossession period from 12 to six months from date of first unsuccessful auction.
On the sales of loans law, the changes aim to improve the law and close current gaps that hindered the use of the law by improving the framework around transfer of rights and obligations to the buyer. We now have the securitization law, that this new law came into effect on 30th of July 2018 and facilitates the banks to securitize NPL and is regulated by the Central Bank of Cyprus. On the tax legislation front, the amendments give incentives to customers to agree in consensual solutions, including exemption of capital gains tax and transfer fees in sale of property banks, and additional exemption for sale of property directly to third party. With respect to the insolvency framework, the changes aim to close gaps and enhance the participation and applicability of personal repayment schemes for physical persons.
Turning now to slide 17 on the REMU sales front, REMU had a strong half year and is building a consistent record of quarter-on-quarter delivery against expectations. Sales volumes were high. REMU sold or signed SPA in relation to 395 properties during the first half of 2018. This actually represents 30% of the total volume of properties sold by the bank today. Sales values continued to be strong with EUR 207 million of sales made or SPA signed in the year-to-date period, resulting to EUR 21 million of revenue profit in the first half of 2018. In addition, market statistics remain encouraging. Residential property prices rose by 1.8% year-on-year, and sales contracts deposited at the land registry, excluding those that relate to bank foreclosure activity, increased by 23% year-on-year by volume. Turning now to slide 18, which deals with new lending.
New lending reached EUR 1.3 billion in the first six months of the year. Cypriot lending was 42% up year-on-year. Corporate continues to be a strong component of our activity in new lending, representing 66% of total loan originations, with SME 10% and retail 24% in the second quarter of 2018. With that, I'll hand over to Eliza to take you through the rest of the presentation.
Moving to page 20. As explained in previous quarters, the continuing balance sheet de-risking is resulting in a smaller but lower-risk loan book. Overall, net loans have reduced by 16% since the end of 2015, driven by a 47% reduction of the legacy book, mainly due to increased provisions, curing, and therefore asset swap. On a pro forma basis, following Helix and the U.K. sale, net loans will have been reduced by 35% since the end of 2015, driven by a 65% reduction of the legacy book. The performing book continues to grow. This is on the back of increased new lending, as Michalis mentioned earlier, in Cyprus, and we expect this trend to continue in the coming quarters. The legacy book interest income increased by EUR 2 million in the quarter, mainly due to increased collections.
The accelerated de-risking of the legacy book will result in further pressure on interest income, this will be somewhat offset by lower provisions. This secular accounting is something we have explained previously on results calls. The performing book interest income continues to be under modest competitive pressure as a result of the sustained low interest rate environment. Moving now to slide 21. This is a familiar slide again from previous quarters. The key dynamic on this slide is that as the performing book increases as a percentage of the total loan book, the overall net interest income and margin will be negatively impacted, despite this being an entirely positive development and one which confirms the health of our customer franchise. Our impairment charge, however, is expected to be positively impacted and our risk intensity is expected to decline as the delinquent book shrinks.
We have broken out Helix and the U.K. bank on this slide in separate columns so that you can use it for your own modeling purposes. Moving to slide 22. As explained on previous results calls, net interest income is under pressure as a result of a number of actions we have taken, which had a positive impact on capital and liquidity. However, we remain confident given the strength of the underlying customer franchise. This is not reflected in margin, as the accounting NIM is volatile for a bank in recovery. The NIM was stable in the second quarter, whilst the year-on-year drop in NIM reached 87 basis points, a phenomenon we have discussed at length previously. Continuing on slide 23, non-interest income for the second quarter was at EUR 76 million.
I remind you that the first quarter non-interest income included non-recurring treasury gains from bond disposal of 19 million and a further 19 million of revenue gains. Revenue gains in the second quarter were at a net EUR 2 million. Recurring fee and commission income was 6% up on a quarterly basis in the second quarter and now represents 21% of total income for the quarter. Moving to slide 24, you can see that total income is much more stable than net interest margin. As we have said before, for a bank in recovery, profits are reported on different lines of the P&L other than net interest income. Examples of these are the revenue gains and net recurring treasury gains. The total income drop in the second quarter was mainly due to the one-off interest income items.
Sorry, the one-off non-interest income items I just mentioned on the previous slide. Moving to expenses, our cost-to-income ratio, excluding regulatory levies, stood at 48% for the second quarter, compared to 43% in the previous quarter and 44% last year. This is within market guidance. The reason for this increase is lower total income, as mentioned above, and higher operating expenses. OPEX was EUR 8 million higher on a Q on Q basis, and EUR 6 million higher on a year-to-date basis, mainly due to the timing of certain project-related costs. Our operating expenses are monitored closely, and we are in early-stage implementation of a multi-year digital transformation program aimed at re-platforming our product distribution channels and reducing, over time, our operating costs. As regards staff costs, these were stable at EUR 58 million in the second quarter.
We remind you that the renewal of the collective agreement for 2018 remains under discussion with the union. Turning to slide 26, on the profit and loss account. What I would highlight on this page is that profit after tax from organic operations was at EUR 44 million and corresponds to a quarterly earnings per share of EUR 0.10, in line with previous guidance. Moving to slide 28, on guidance. The bank is currently generating around EUR 0.10 per quarter in organic profit after tax on its current balance sheet and risk profile. The impact of the U.K. sale and Helix are uncertain from a timing perspective. In the interest of ensuring you have an appropriate level of disclosure to model future returns, we have separately set out the U.K. and Helix impact on these results on pages 29 and 30.
With this, I'll hand back to John and the operator for questions.
Right. In the interest of making sure we are efficient on the call, I'll open this to questions now, operator.
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 handset when asking your question for better quality. Anyone who has a question may press star and one at this time. The first question is from the line of Corinne Cunningham with Autonomous Research. Please go ahead.
Good morning. Two questions, please. The first one is, can you give us a bit more detail on the funding that you're providing as part of the NPE sale? The second one, can you clarify when you talk about the ECB, you're waiting for approval there to get the pro forma CET1 that you're talking about of 14%? Can you give us details on what exactly you're expecting there and what the CET1 ratio would be if you don't get that ECB waiver? Thank you.
Okay. On the funding, the plan and the agreement is that we will underwrite or acquire EUR 450 million worth of the senior tranche. There is only an equity and a senior tranche, so we will be buying the senior tranche. We cannot disclose the details in terms of that because we're bound by confidentiality agreement. On SRT, Michalis?
The approval that we are expecting from the ECB revolve around our participation in the senior tranche of the transaction. An approval with respect to the significant risk transfer of the entire transaction will enable us to get the benefit of our RWA action and the capital impact that was described by Eliza during the presentation.
Corinne, it wouldn't surprise you to know that we would sensibly and correctly caveat a transaction that's just come straight off the press to ensure that we meet any regulatory sort of requirements around the perimeter. It is a unitranche deal from a senior perspective. We expect it to be easily understood. There's a very significant amount of both equity and indeed other people's participation in the senior tranche coming in as well. We are hopeful that this transaction presents a reasonably straightforward discussion around SRT, of course, we can't guarantee that. Therefore, we are required to, and sensibly are, caveating the transaction around regulatory approvals.
Thank you. I didn't hear you properly. Was it the whole of the 450 is senior tranche?
Yes. No, there is no mezzanine tranche in this transaction. It is a unitranche senior piece. Then there's the other piece being handled by the acquirers, the equity. We are taking a component of the senior tranche. We will be alongside other lenders in that space.
Okay. Thank you.
The next question comes from the line of Alexandros Boulougouris with Wood & Company. Please go ahead.
Yes. Hello, good morning. My first question is regarding the guidance for 2018, the EUR 0.40 that you had previously guided. You keep this guidance, or post these transactions you will revise in 2019? This is my first question. My second is on cost and efficiency. You mentioned that you want to take extra measures given that the NII from the Helix is about 18%-20% of the NII, if I understand correctly, of interest income. That could be quite significant in terms of cost to income, the increase to cost to income. Should we expect some measures in terms of cost or VRS by year-end to offset that? One third question, if I may, regarding Apollo and who will manage this NPE book, the EUR 2.7 billion.
Once it's off your book, do you have an agreement in place in the short term until they set up a platform, or is there any news of that, or it's too early? Thanks.
Very good. Eliza.
Okay, Alex. On guidance for 2018, as I said, on the existing balance sheet and existing risk, we think we could achieve the EUR 0.40 or the EUR 0.10 per quarter guidance. However, given the uncertain de- recognition timing of the U.K. sale and Helix, we are not guiding as to earnings for the third and the fourth quarter at this stage. We will come back to guide on 2019 and medium term closer to year-end or actually with the full year 2018 results.
We've given you the information that you can form a view on when these things might occur, that view is not a certain view, depending on regulatory approvals, et cetera. You have the information in the disclosure we've given you this morning to be able to model out the impact of a Q3, Q4, or Q1 next year impact of the execution of one of those trades. The balance sheet and risk on our bank today is capable of generating EUR 0.10 per quarter. We have work to do to replace risk that comes off with income that we will have to find elsewhere to create future earnings. Eliza.
On costs, we will be examining now or re-examining our business model. We are intending to revisit the cost base of the bank. At the moment, given that Helix has only just crystallized in the early hours of this morning, we are not ready to provide guidance on the timing or the significance or the degree of this cost reduction, this is something that's definitely on our radar screen. On digital-
Let me add to that, Eliza.
Yeah.
We are of course, re-engineering our operating platforms in the bank and have embarked over a year ago on the beginnings of a digital transformation program for the bank. That program is designed to make the bank future-focused and capable of aligning itself to a shifting paradigm in the banking world. That is a multi-year program with naturally the cost out of that program to be achieved in the later years. Of course, we would've had an eye to the balance sheet repair agenda in the creation of the renewal agenda. I think that will be a conversation in detail as we head into 2019. We're not in a position at this stage to be putting out detailed information on those programs. You would expect us to want to consult and engage internally well before doing that.
You can rest assured we are examining and under construction in preparing a bank that is capable of being more efficient in a smaller balance sheet context into the future, but this takes time to replatform under a digital transformation program. With Apollo?
On servicing with Apollo, I'll refer you to the Helix announcement, which has a reference to this, but effectively we have a transitional servicing arrangement or agreement in place whereby we will continue through our in-house team to service these loans on behalf of Apollo for a period of time. At the end of this and during this period, detailed agreements will be put in place as to how and in what exact form the servicer will be separated from the bank. This is not yet finalized because the buyer wanted to keep some flexibility and test the waters.
Indeed, it's a question that is no longer a bilateral question to us. It's one which involves Apollo, and we wouldn't presuppose to determine how they wish to manage their portfolio going forward.
Okay, clear. Thank you, and congratulations on concluding the deal.
Thank you.
The next question comes from the line of Aindrias O'Caoimh with HSBC. Please go ahead.
Thank you. I understand the timing of both the U.K. sale and Helix is uncertain, but at least with regards to the U.K. sale, it's been a while since you made the announcement. Has there been any progress? On the U.K. sale, it is a binding agreement, but are there any circumstances under which the buyer can walk away? Thank you.
Andres, progress has been made with the regulators, but we don't yet have visibility of their decision. Our working assumption is that the U.K. sale will conclude in early Q4. That's our working assumption based on the day count of the regulatory approval calendar. To your question on whether there are walkaway clauses, there is a minor walkaway clause in the contract, which is extremely remote, and it relates to actually the loss of the license of the U.K. bank. No.
It's effectively subject to regulatory approval, if regulatory approval is granted by the U.K. authorities for the acquirers to acquire the bank, the transaction will go through subject to the ECB allowing us to sell it, which we expect to occur.
Yeah.
Okay, thank you very much.
As a reminder, if you would like to ask a question, please press star and one on your telephone. Once again, to register for a question, please press star and one on your telephone. As a final reminder, to register for a question, please press star and one on your telephone. The next question is from Marshall Stocker with Eaton Vance. Please go ahead.
Good morning. Marshall Stocker. Two questions. One is, I may have missed this in the call, there was a lot of details I couldn't keep up with. Can you characterize the NPEs that were sold? I remember in the early plans, there was talk of maybe three different tranches. Can you characterize these? Are these the large ones, the small ones, and so forth? Secondly, do you have any guidance as to the timing of when the Nominations Committee will finish their efforts to find a new chairman? Thank you.
Yeah. I'll hand the first one to Michalis, I'll endeavor to give you something on the second.
The initial understanding on Helix was that it would have been broken down to three main portfolios. One would have been more retail orientated, the second on the SME space, and the third one on the larger corporate. Finally, we only proceeded with the last two. The Helix portfolio that has been disposed is mostly focused on the corporate side and the SME space and associated exposures along those portfolios. There have been no retail exposures disposed in the Helix portfolio.
Yeah. There was never really any retail exposure in it. The smaller portfolio was more smaller SMEs, and that portfolio was just too voluminous to try and tackle from a diligence perspective in the timing we wanted to execute the trade. As you can see, there are what, 12,000 or 13,000 individual loans and 9,000 pieces of collateral in this trade, so it is a monster in its own size. Yeah, it was the large and medium portfolios, not the small portfolio, but it was the majority of the perimeter that we had decided to examine from a Helix perspective. On the guidance for the NomCo, well, Josef Ackermann just wishes to, in the context of good governance, announce in good time to the shareholders that he expects to be around between this AGM and the next AGM.
We have begun vendor already engaged to examine the universe of potentials for a chairman. Of course, it could come from internal or external. This is a matter for the nominations committee over time. I would expect their deliberations to go through the year-end. Frankly, I don't have visibility on it. I'm not a member of the nominations committee. I'm sure that Joe would be happy to take a question from you, Marshall, if you want to call him.
Okay. Thank you.
The next question is from Sheward Rob with Toscafund Asset Management LLP. Please go ahead.
Hi. Good morning, everybody. Thanks for the update. Just two quick ones. Firstly, just on sort of further NPE reduction, obviously being a little bit greedy here, you've done a great job, looking at the other items on the agenda. The Estia, how likely is all that to happen? Given the scale of the transaction, presumably it's a bit early to be talking about other things that are going on, is there sort of scope within the balance of NPEs to do more sales of, not obviously of a similar size, but other transactions?
The second question, obviously it sounds like the cost side, you are going to maybe give us a few more updates later on in the year, thinking about the kind of costs related to the portfolio, I don't know if you can give us any more kind of color on the sort of related costs of that that might be able to come out. Thanks.
Look, I'll just take the first one and allow Eliza to remark on the second one. Look, I think accelerating by 6 quarters, as you suggest, should satisfy your greed for a little while there, Rob. Look, there is effectively EUR 4 billion of core real NPEs existing in the residual 5. EUR 1 billion of that is Estia related, we need to create some performance characteristics around that EUR 1 billion portfolio before we can understand what the options are around funding it or doing anything with it. I think the work for us will be to create performance and cash dynamic in that EUR 1 billion of the residual core 4. If you split the rest into, they're not actually equal, they're not far off equal, EUR 1 billion in each of corporate, retail, and SME.
We have a machine that's working hard on the SME and corporate space. We will look at and explore these ideas, I don't think we should be saying that we're going to sell any of them. It will really depend on what we see as value and what we see as opportunities in front of us. On the retail non-Estia piece, we've made less progress in that over recent years. The changes in the foreclosure law and the definition of who is vulnerable in the context of Cyprus society is a very important data point for us because it allows us with less impunity to actually go after the now defined non-vulnerable. You'll see an accelerated focus for us on basically seeking collateral recovery in the retail space as a direct machine from the bank doing it itself.
We will continue to prosecute the SME and corporate agenda as we have been doing with an eye to exploring whether there are opportunities on the way for us to see if there is a structured solution or two. We are going to be open to everything, but at this moment in time, we do not have an explicit one on it. Just handing to Eliza on cost out.
On cost, there is a modest cost reduction coming with Helix directly through the servicing team. We have not guided specifically to that. It is a single-digit euro annual saving. It falls in the context of what I said earlier to Alex's question, that we will look in a more holistic view on the cost base post this transaction and the business model and decide on the next move.
We don't want to be announcing on a call what's happening in terms of whether or not some of our people may or may not go to Helix Services portfolio. It wouldn't surprise you to know that there's a conversation with our own employees, but also with Apollo on whether or not the competent people who have been delivering the success so far in that transaction may have an opportunity to work with them, and that would be a direct reduction for us in our cost base. As Eliza says, it's in the single millions, not in the multiple tens of millions numbers.
We will be exploring that, and we now have an objective to try and really focus on the efficiency of the cost of the bank, and that, as you know, to take cost out costs money, but also it takes time, and we will be focused very heavily on that, on the renewal agenda, as we move from pure repair as being our focus.
Perfect. 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. Hourican for any closing comments. Thank you.
Ladies and gentlemen, thank you for this early post-bank holiday weekend in the U.K. joining of the call. For any of those who are in different time zones, again, thank you for joining. We have bombarded you with a lot of actual activity this morning between announcing the Helix, announcing succession issues, announcing the results, indicating that we're exploring AT1. We hope that all these messages are broadly positive for you, and we hope that you regard them as us delivering on the promises that we've made over the course of the last few quarters. We will leave you to digest the information. There's a lot of it, Annita, Eliza, myself, and the team are all happy to take inbound queries as and when you digest the information. Thank you very much, and I'll let you back to work.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant