Bank of Cyprus Holdings Public Limited Company (BOCH) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Mridul, 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 March 31, 2021. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Panicos Nicolaou, Chief Executive Officer; Mr. Eliza Livadiotou, Executive Director, Finance; and Mr. Demetris Demetriou, Chief Risk Officer. Mr. Nicolaou, you may now proceed.

Thank you. Good morning, everyone. Thank you for joining our call for the Group financial results for the quarter ended 31st of March 2021. As always, we welcome any queries you may have to our Investor Relations team. Go straight to Slide #4, which summarizes the key highlights of the quarter. I will briefly go over this. The pandemic remains a very real part of our lives. Despite this, we are happy to see the Cypriot economy gradually recovering, and we continue to work hard to support our colleagues and customers to recover Cyprus from the crisis. Although the Cypriot economy contracted in Q1 2021 as a result of the restrictions, we expect growth to return over the remainder of the year. We have continued to support that recovery, extended EUR 487 million of new loans in the period, the strongest quarter in new lending since the pandemic struck a year ago. The vaccination rollout program has helped us to gain momentum. Cyprus ranks fourth amongst EU members in COVID-19 vaccine doses administered per 100 people. Statistics are encouraging. Today, we're approaching half of the other population in Cyprus, having been vaccinated with the first dose, on track with the target of reaching 65% by the end of next month. During Q1 2021, we generated total income of EUR 136 million, down 3% on the previous quarter and a positive operating result of EUR 45 million, flat on the quarter. Cost of risk is improved by 33 basis points quarter-on-quarter to 66 basis points. We achieved a 9% reduction in total operating expenses, helped, of course, by seasonality, leading to a cost to income ratio of 60%, down 4 percentage points on the previous quarter. The underlying results from the quarter was a profit after tax from organic operations of EUR 14 million, while after exceptional items, we generated post-tax profit of EUR 8 million. The bank's capital position remains good and comfortably in excess of our regulatory products. As of 31st of March 2021, our capital ratios on a traditional basis were 18.3% for the total capital ratio and 14.6% for CET1 ratio, both pro forma for q-to-q. In April 2021, we successfully refinanced our Tier 2 notes, further optimizing the capital ratio of the Group ratios of EUR 300 million Tier 2 capital notes at the significant lower coupon rate is expected to increase the Group total capital ratio. As of the quarter end, pro forma increased by approximately 100 basis points to 19.2%. The deposits remained broadly flat in the quarter at EUR 16.3 billion, and we continue to operate with a significant liquidity plus of almost EUR 5 billion and an LCR of 284%. Balance sheet repair has also continued in the first quarter of the year. As a reminder, despite the challenging environment, in January 2021, we reached an agreement for the sale of circa EUR 0.5 billion of NPE portfolio known as Helix 2B continue to deliver on one of the Group's strategic priorities of improving asset quality through the reduction of NPEs. Pro forma for NPE sales in December amounted to EUR 1.3 billion and the NPE ratio stood at 16% and 7% on a net basis across the revenue. This remained stable in the quarter as organic reduction was impacted by lockdown. NPE coverage was maintained at 59%, reducing the residual risk on our balance sheet to EUR 700 million pro forma for Helix 2. We have a clear plan to reach a single-digit NPE ratio by the end of 2022, including further portfolio sales. At the same time, we will continue to closely the monitor the performance of loans, which has been granted payment deferrals, 95% of these performing loans with an installment due by mid-May 2021, presented no arrears. Slide 5 provides an overview of macroeconomic conditions. Real GDP contracted by 1.6% in the first quarter of the year as decline 1.8% contraction across Euro area, demonstrating again the ability of the Cypriot economy as an open, small and flexible economy to quickly recover from economic crisis. Based on the wealth projections, GDP growth in 2021 and 2022 is estimated to range between 3% to 3.6% and 3.6% to 3.9%, respectively. The government has successfully managed the pandemic today. Cyprus ranks fourth in EU in their administration of COVID-19 vaccine doses per 100 people. As mentioned earlier, almost half of the adult population has been vaccinated with the first dose, on track with the target of reaching 55% by end of June. The tourist activity in the year is expected to recover from second half onwards, helped by the fact that 3 countries with well-progressed vaccination plans, U.K., Israel and Russia account for over 60% of arrivals based on 2019 statistics. Similar to the last year, the reduction in international tourist arrivals in 2021 compared to 2019 is expected to partially offset by domestic tourism. Slide 6, new lending. New lending continued to grow in the first quarter of 2021 and amounted to EUR 487 million, up 30% quarter-on-quarter, driven mainly by corporate. For 2021, demand for new lending is expected to increase in line with economic recovery, especially for housing loans in the context of the government interest subsidy scheme. We have already approved EUR 117 million loans under the scheme, and we'll continue to have a strong pipeline of over EUR 100 million as of mid-May. New lending continues to be carefully considered against robust solvency criteria. We have highly quality origination via prudent underwriting standards, and we make strong assessment of repayment ability of our customers. Turning now to Slide 7, where we provide an update on the performance of loans that were under expired payment deferrals. We are very pleased with the trends we have seen, which are better than we had expected. As shown on the slide, EUR 4.2 billion loans represented over 80% of the performing loans under expired deferrals had installment due by mid-May. 95% of these performing loans present no arrears, of which only EUR 260 million have been restructured, mostly concentrated in the tourist sector. Restructures have always been a very important part of how we manage credit risk. We offer trageted restructuring solution following strong assessment of repayment ability, aiming to alleviate pandemic-related, short-term cash flow burst. And our track record is outstanding. Over recent years, over 90% of corporate restructured loans presented no arrears, and we expect that to be the case going forward. Arrears remained stable at around 5%, and will continue to be in close contact with our customers that present arrears in order to provide support and to alleviate any short-term cash flow burst. Let's now go to Slide 8 that provides an overview of the nonlegacy loans of private individuals. As of 31st of March, nonlegacy loans to private individuals amounted to EUR 4.12 billion, of which over 80% relates to housing loans. This segment is well collateralized with 2/3 of customers having a loan-to-value below 60%, and only 8% of the portfolio has loan-to-value over 100%. Other loans to private individuals amounted to EUR 690 million as of the end of March, the majority of which is secured. We are very encouraged by the performance of the performing loans to private divisions under expired payment deferrals. Around 96% of these have installments due by mid-May 2021 and 91% presented no arrears. Moving now to the nonlegacy business loans on Slide #9. The nonlegacy business loan book as of 31st of March 2021 amounted to EUR 5.18 billion and is well diversified with high-quality collateral. Following the outbreak of COVID-19, the sectors most affected are tourists and to a lesser extent, trade, transport, manufacturing, construction. The portfolio has a loan-to-value ratio -- with almost 3% of portfolio having a loan-to-value of less than 80%. Almost 3/4 of the performing business loans that we have under expired moratorium had installment due by mid-May '21. 98% presented no arrears, of which EUR 240 million have been restructured relating mainly to tourist sector. Slide 10 provides an update of our exposure to the sectors that were mostly impacted by COVID-19, tourist and trade. As of the end of March, our total exposure to tourism and trade amounted to EUR 1.15 billion and EUR 0.9 billion, respectively. The utilized liquidity of tourist sector remained broadly unchanged from December 2020 and amounted to EUR 0.32 billion at quarter end. The majority of these loans entered the crisis with significant liquidity and maintained until today. 98% of tourist loans are secured by property, and hence, almost 95% of these loans have a loan-to-value ratio below 80%. EUR 1 billion of tourist-related performing loans were under the expired payment deferral scheme, of which 60% had an installment due by mid-May 2021. 99% of loans with installment due present with no arrears, of which EUR 190 million have been restructured. Our exposures to trade as of the end of March amounted to EUR 190 million, of which EUR 330 million were performing loans under expired payment deferrals. 90% of this had an installment due by mid-May 2021, with 96% presented no arrears and of which EUR 6 million have been restructured, just [indiscernible] I will now hand over to Eliza to take you through the performance of Q1 2021. Eliza?

Thank you, Panicos. Good morning from me, too. So I'll start from Slide 13 on income statement. Net interest income amounted to EUR 76 million for the quarter, down 5% on the previous quarter, mainly due to higher interest collections in the previous quarter of around EUR 2.5 million, which was not previously recognized. The net interest margin reduced to 1.63%, negatively impacted mainly by the increase in liquid assets following the EUR 1.7 billion participation in TLTRO in March 2021. Noninterest income amounted to EUR 60 million in the quarter, down 2% on the prior quarter, reflecting mainly lower revenue profits. Total operating expenses were reduced to EUR 82 million for the quarter, down 9% Q-on-Q, driven by seasonally lower operating expenses. Total loan credit losses, provisions and impairments amounted to EUR 26 million in Q1 compared to EUR 40 million in the fourth quarter, driven mainly by lower loan credit losses. Cost of risk improved by 33 basis points in the quarter to 66 basis points. The overall result was a profit after tax of EUR 8 million for the quarter. Moving now to Slide 14 on the drivers of NIM. I'll briefly go over this slide. And as I previously mentioned, our NIM in the quarter decreased by 163 basis points, negatively impacted mainly by the increase in liquid assets on the continued pressure on lending yields. Our margin dynamics are complicated with several important underlying components that perhaps I'd like to explain to you. First, our performing book yields remained under pressure due to the sustained low interest rate environment, impacting our reference rates and competition pressure. The repricing of the reference rate is reaching its end, and we are aiming for higher credit spreads in the post-COVID environment. Second, higher-yielding, higher-risk legacy loans are reducing as we successfully exit NPEs. And third, the cost of funding continues to decrease as we price down the cost of deposits. Going forward, our funding costs will also be positively impacted by the significantly lower coupon rate on the Tier 2 notes that we issued in April and future debt issuance of MREL. Now a couple of points about the TLTRO borrowings. In March 2021, the bank borrowed a further EUR 1.7 billion under TLTRO III, increasing the product funding from Central Bank to EUR 2.7 billion, and that's taking advantage of the favorable borrowing rate in combination with the relaxation of collateral terms. The bank has exceeded the benchmark net lending threshold. And hence, we estimate the NII benefit from TLTRO borrowings for the 12 months to June 2021 at around EUR 7 million, recognized over the respective period in the income statement. The potential NII benefit from a period after that, that is from June '21 to June 2022, amounts to EUR 13.5 million based on current ECB rates and provided that the bank meets the lending thresholds. Moving now to noninterest income on Slide 15. In the first quarter, noninterest income decreased to EUR 60 million compared to EUR 62 million in the fourth quarter, driven mainly by lower revenue gains. Net fee and commission income increased to EUR 39 million in the quarter, accounting for 28% of total income, mainly due to the extension of liquidity fees and the introduction of a revised price list in February 2021, partially offset by lower transactional fees due to the reintroduction of lockdown in the first quarter. Net insurance income amounted to EUR 13 million, down 9% Q-on-Q, mainly due to lower premiums, partially offset by lower claims. I will provide more information about the insurance business of the Group in the following slide. REMU net gains decreased to EUR 2 million in Q1 compared to EUR 5 million in Q4, mainly due to higher net revaluation gains resulting -- relating to specific properties in Greece in the fourth quarter of last year. REMU sales remains volatile. Now moving to insurance on Slide 16. Net insurance income from our life business, EuroLife, amounted to EUR 7 million for the quarter compared to EUR 6 million a year ago, contributing 12% to total noninterest income. Despite the challenging environment, EuroLife increased its gross written premiums by 4% year-on-year. Net insurance income from our general insurance business, GIC, remained flat year-on-year at EUR 6 million, contributing 10% to total noninterest income. Looking now at costs on Slide 17. Overall, total operating expenses for the quarter were down 9% on the prior quarter, EUR 22 million, mainly reflecting seasonality. As a result, our cost-to-income ratio fell by 4 percentage points to 60%. Note, however, that the cost-to-income ratio when we adjust for the lost income from the Helix 2 transaction is at 64% in the quarter. Staff costs amounted to EUR 50 million in Q1, flat on a Q-on-Q basis, while operating expenses amounted to EUR 32 million, down 21% on the prior quarter, again, due to seasonally lower marketing, consulting and professional fees. As a reminder, our cost-to-income ratio is expected to be in the mid-60s for the year as revenues remain under pressure and operating expenses increased due to higher IT and digitization investment costs. Beyond this year, however, we then expect our cost-to-income ratio to decline through specific initiatives, including exit solutions to lease and further branch rationalization. And over the medium term, our cost-to-income ratio is expected to reduce to mid-50s. Now let's turn to Slide 21 on capital. Our CET1 ratio as of March 31 was 14.6% on a pro forma for NPE sales basis. During the first quarter, we generated 40 basis points of organic capital through operating profits. These were offset by expected loan credit losses and impairments of 20 basis points and an additional 45 basis points from the phasing in of IFRS 9. The CET1 ratio on a fully loaded basis was at 13.1% as at 31st of March and 13.3% pro forma for Helix 2. As a reminder, the onset inspection is reviewed by the SSM on the top of revenue properties was completed with findings related to a possible potential charge of up to 44 basis points, the majority of which is expected to be taken in the second quarter of this year, depending on the bank's progress in disposing the progress is impacted by the prudential charge. Now moving to Slide 22. In April, the bank issued EUR 300 million unsecured and subordinated Tier 2 capital notes to refinance its outstanding EUR 250 million Tier 2, which was issued in 2017 at a significantly lower coupon rate of 6.625%. The issue was met with strong demand, attracting interest from more than 140 institutional investors with the final orderbook almost 4x oversubscribed. More than 65% of the orders came from new investors. The Tier 2 capital refinancing further optimizes the Group's capital structure and is expected to increase the Group's total capital ratio pro forma for Helix 2 by around 100 basis points to 19.2% on the basis of the March 31 figures. This refinancing represents a major milestone for the Group and has helped to diversify the Group's investor base, rerate the Group's pricing in international credit markets and demonstrate the Group's proactive capital management. Also, the highly successful Tier 2 capital refinancing will allow the Group to focus on evaluating opportunities for MREL issuance in terms of the capital markets activity. Now I will take you through the asset quality section, starting from Slide 25, which presents a short summary of the Helix 2 transaction. Despite the economic challenges prevailing with the ongoing pandemic, in January this year, the Group announced the sale of an additional EUR 529 million of NPEs, a project known as Helix 2 Portfolio B. The gross consideration amounts to 44% of gross book value and 31% of the contractual balance payable in cash, of which 50% is payable at completion, and the remaining 50% is deferred up to December 2025 without any of the conditions attached. The accounting loss on Portfolio B recorded in the fourth quarter last year amounted to EUR 27 million. Overall, Helix 2 including legal completion, is expected to have a negative capital impact of 48 basis points on the Group's CET1 ratio on the basis of March 31 figure. The legal completion of the transaction is expected to increase the CET1 ratio from 14.4% to 14.6%. And upon the full payment of the deferred consideration and without taking into account any positive impact from the earn-out, Helix 2 is expected to have an additional positive capital impact of 64 basis points on CET1 on the basis of March numbers. Now moving to Slide 26. During the first quarter, gross NPEs were reduced by EUR 59 billion to EUR 3 billion and EUR 1.1 billion on a net basis. Performance of Helix 2, gross NPEs decreased to EUR 1.7 billion and EUR 700 million on a net basis. The gross NPE ratio stood at 16% pro forma or 7% on a net basis and stable Q-on-Q as the pace of organic NPE reduction was impacted by the lockdown. The bank's NPE coverage ratio remained broadly flat at 59% at quarter end, pro forma for Helix. When taking into account tangible collateral at higher value, NPEs are fully covered. Coverage on performing NPEs is relatively lower at 19%, reflecting the lower risk associated with this type of NPEs, where coverage of core NPEs increased to 65%. As a reminder, Slide 28 gives a longer-term perspective of our NPE journey and targets. We have a clear plan to reduce our NPE ratio to single-digit by 2022 and to around 5% over the medium term. Our track record here has been excellent, reducing NPEs by almost 90% over the past 6 years, the vast majority organically. We have a highly experienced and highly effective team in place, and we expect NPE reductions to continue next year through both organic and inorganic actions. We expect to have a high coverage of over 50% in the medium term, excluding any collateral. Moving now to Slide 29. As shown on the left graph, pro forma for Helix 2 almost 2/3 of our loan book is classified in Stage 1 and 20% is in Stage 2. The coverage of these 2 stages pro forma for Helix 2 was at 1.4% and 2.3%, respectively, while its coverage for Stage 3 was maintained at 50%. During the quarter, there was an overall net transfer of EUR 53 million of loans under expired payment deferrals from Stage 2 to Stage 1, arising as follows: firstly, the transfer of EUR 304 million gross loan from Stage 1 to Stage 2, driven by management overlays and restructuring; and secondly, a migration of EUR 357 million gross loan from Stage 2 to Stage 1, mainly due to the good performance of loans to private individuals; lastly, in this quarter, there were transfers of EUR 14 million, mainly from Stage 2 to Stage 3. Now moving to cost of risk on Slide 30. The annualized cost of risk for the first quarter was reduced to 66 basis points of gross loans, mainly driven by the strong performance of the loans that were under expired payment deferrals that led to a reversal of 26 basis points. We are encouraged by the trend in the first quarter. And at the full year, we indicated that we expected the cost of risk for 2021 to be lower than 2020 level, clearly, given the Q1 performance, that firmly remains the case. Finally, as a reminder, interest on net NPEs, not received in cash is fully provided for, which in Q1 represented 22 basis points out of the total 66 bps cost of risk. On Slide 32, we are looking to build an organization with a clear strategy supported by effective corporate governance aligned with ESG priorities. We are working to further enrich our ESG strategy and further embed the ESG priorities in our business targets. On this slide, we set out some of the areas where we are already delivering. I will now hand back to Panicos for his closing remarks.

Thanks, Eliza. Let's go now to Slide 34. We have been through a period of considerable change. We are now laying the foundations for delivering greater shareholder value. Today, our near-term priorities include the completion of our balance sheet derisking through ongoing organic NPE reduction and potential disposal as well as ensuring that our cost base remains appropriate. We further invested in our digital capabilities. Over the medium term, our priorities will evolve. We'll be increasingly focused on capitalizing on our strong market position across both banking and financial service products to enhance our revenues. At the same time, we are very focused on improving our operating efficiency and driving down costs. And combined with the expected normalization of the cost of risk, we have a clear path to generating sustainable profitability. Moving now to Slide 35. Bringing all of this together, we remain committed to our medium-term financial targets that we have shared with you back in November 2020. We are committed to generating the return on tangible equity of around 7% over the medium term. This concludes our presentation. I will now open the floor for your questions. Thank you.

[Operator Instructions] The first question comes from the line of Quinn, Daragh with KBW.

3 quick questions from me, if I may. The first, just on the outlook for loan loss provisions. Even excluding the write-back in this quarter, it looks like the cost of risk is below your medium-term guidance. Is that just a reflection of some seasonality in Q1 or more a reflection of your medium-term target being conservative. The second question on the real estate revenue assets, the regulatory charge that you will be booking later in the year? How active will you be in looking to dispose the specific assets that are generating that charge? And would the disposal of them imply any additional provisioning requirements? And I guess the same kind of question for Helix 3 or the potential NPE disposal that you're working on. We've seen the previous disposals were all positive from a capital perspective given the impact on risk-weighted assets, but did generate negative additional provisioning requirements. Just if you have any expectations on how Helix 3 will be structured or the kind of magnitudes or impacts it could have on the P&L and capital?

Okay. I will start with the last question, and then I hand over to my colleagues for the first and second question. As we said, a meaningful reduction in our NPE ratio will come through in organic transactions and namely Helix 3. And as you all know, we have completed a number of trades, which almost all of them have been either slightly positive or slightly negative. I will call them at least capital neutral. At this point of time and based on the underlying portfolio, the perimeter that we know and the provisioning coverage, at this point of time, we don't have any reason to believe that any new trade will have a different, let's say, conclusion in terms of capital on P&L. So we don't have any reason to believe that any future trade will not be at least capital neutral. I mean, even in 2020 under the pandemic, we have achieve NPE reduction through -- under, let's say, I will call them the worst market conditions, and we achieved the results that you all know. So I don't expect any material deviation from the track record we have all the previous years. So I will hand over to Demetris on cost-rich question and maybe Eliza can comment later on the prudential cash on the revenue properties. Demetris?

Yes. Thank you, Panicos. Good day from me as well. Well, let me start by saying that we take guidance very seriously, and we are very careful about only communicating updates when we are very confident. Now having said that, the performance of the moratorium portfolio has been better than we projected back in 2020, and the trend continues and is encouraging. Up until now, this has not been an important generator of NPEs. NPEs have been created because of our own prudent assessment of borrower viability as part of our ongoing review and assessment of the UTP criterion. Now as the year progresses and we get more evidence of the performance of the Cypriot economy, we will have greater certainty. We continue to monitor clients and trends very closely. Now it is clear that our cost of risk this year will be meaningfully lower than the 2020 level, and that is what we will say for now.

Okay. So moving to the revenue question. The first part was how active are we in selling the properties. We are very active. In fact, in the quarter, despite a number of weeks of lockdown, we managed to sell and actually be resonating the P&L, EUR 28 million worth of properties, which is significantly higher run rate compared to last year. Now on the properties at hand, those that relate to which the prudential charge relates, they do include, as we mentioned in the past, they do include some lumpy assets. We are active in our efforts to sell them. However, they are likely to be more of interest to foreign into international buyers. And given the current travel restrictions, marketing these assets has been more challenging, but this is an ongoing effort. We are encouraged by some early discussions more broadly on revenue assets with nonlocal buyers. And we will definitely be active in trying to sell them. I think this will be -- for at least the largest assets, this will be a journey that will take us through a number of quarters, and I wouldn't be guiding you to expect an imminent phase. But I do need to interpret that this 44 basis points charge now that is coming in Q2 was significantly lower at the beginning and, through sales, we've managed to reduce it. Let me just also remind you that this prudential charge just because you also asked on the -- any further P&L hit, this is a prudential charge. So it's a capital reduction, not a P&L hit, that's coming in Q2. And to your question, do we expect any more losses on the sale of the properties? Our view on the valuations on the balance sheet continues to stand. This is why this is a prudential charge as opposed to an impairment. So we do continue to believe that those products, all the progresses on the books are conservatively valued. In fact, they are valued at below 80% of open market value, actually closer to 70% of open market value in total. And there are some slides that show that in the deck in the appendix as well, including the analysis and including the prices at which we've been consistently selling at a profit-to-book value.

The next question comes from the line of Boulougouris, Alexandros with Wood & Co.

My question would be regarding the loan yields. And I see on Slide 14, where the nonlegacy yields have fallen to about 3% from 3.4%. Overall, we have seen about 15 bps decrease every quarter for the past year or so. Do you think this will continue? And what are the trends in the next quarters? What do you see on that? And also maybe to -- on this point regarding new lending, you had a very good quarter. As I can see, it was close to EUR 500 million. Do you think this is likely to continue? So the number we see here in the first quarter, is reasonable to assume that could be extrapolated as a full year performance of around EUR 2 billion new lending for the full year? And maybe on that, to come to the previous question, I mean, what is the yield on the front book compared to the back book?

Okay. Alexandros, about new lending, I will say that we have a better-than-expected performance for Q1. And if we extrapolate this for the whole year, then as you correctly said, means EUR 2 billion, which was our performance pre-pandemic. I will comment that it's still early. But as the economy in Cyprus is totally unlocked, and usually, the second half of the year, it's more active in terms of lending and economic activity. I will just comment that we will be -- the end result of new lending would be materially higher than what we have in 2020. Whether this will approach EUR 2 billion, probably by next quarter, we'll be in a better position to ask on this. In terms of the yields, I will say that there is a reduction in the yields because usually on the EURIBOR have been highly on the very low point. We do believe that the majority of our yield distraction because apart from EURIBOR, we also have our back book linked -- pricing link with the pricing of the deposits in the country. So we believe that all this distraction is coming close to an end. On the other side, as we improve the mix of front book and back book with new lending, and as we are -- as you know, our pricing strategy is actually on the more rationalization, more aggressive stance. We do believe that in the near term, this will show an improvement. But I will also ask Eliza to comment on it because it's a combination of also of NIM and other things.

Yes. Just to add a couple of points. First of all, we have been suffering in this quarter, especially from reference rate attrition as the EURIBOR -- primarily EURIBOR which is a reference rate for round and outperforming book has continued to reduce and it comes through the P&L with a time lag. The second point to say is that also going to your front book, back book point, Alex, is that our front book and you will see this from the new lending analysis as well, our front book both in Q4, but more so in Q1 did have a large -- a larger component than usual of retail housing loans. And as you know, they are lower price on average. So that distort new lending rate statistics. It is a function of -- and the result as Panicos mentioned of the government subsidy, and we do believe that the mix will land to a more stable contribution, if you like, of new lending down the road as this subsidy impact is reduced.

The next question comes from the line of [indiscernible] with Goldman Sachs.

Congratulations again on a nice quarter. My question is just around the loans under moratorium. So if I look at the EUR 4.18 billion of loans that had a payment due. I noticed it says 89% have resumed payments as per the original schedule. Does that mean that 89% have made an amort payment? Or is that just referring to interest payments?

No, no. I mean they have returned back to their repayment schedule post pre -- moratorium pre-pandemic. So -- and this is usually the original repayment schedule for it. It has to do with payment of interest and capital. And those that have been -- and a small percentage of those that have been restructured, they still continue to pay with a different repayment schedule, not the original that has been pre-pandemic. That's why we believe that -- that's why we say that we are very, very pleased of what we see on the performance of our clients that used to be under moratorium. And of course, they are also expected restructures as expected. But as I mentioned earlier in my comments, this is not new for us. For loans that follow both Cyprus and at Cyprus, they know that we have a structural record in dealing with instructions, this will be the case going forward. So -- and even compared actually to the performance of the moratorium of -- that offset with some peers, I will -- I can easily say that we have the highest percentage of our clients going back to normal -- to the original payment, to the regular repayment, capital interest, and of course, very low number in restructure and areas. And I also emphasize that in 2021, there is no moratorium and there is a very small amount of roughly up to EUR 20 million, that is under moratorium until end of June. So we'll consider this to be actually negligible.

Got it. Does it just say that all of the 89% have made at least one amortization payment?

Yes. Yes. Maybe more. I mean, usually, the risk, the per individual, they have much installment capital interest.

[Operator Instructions] 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 your time and for the questions. Myself and the team will be more than happy to take off-line any more questions and of course, arranged by later calls. So thank you all. And as I said, very happy to answer any questions any time.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.