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

Ladies and gentlemen, thank you for standing by. I'm Constantino is your Chorus Call operator. Welcome, and thank you for joining the Bank of Cyprus conference call to present and discuss the third quarter 2023 Financial Results Conference Call. [Operator Instructions] 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. Nicolaou, you may now proceed.

Good morning, everyone. Thank you for joining our financial results conference call for the 9 months ended September 30, '23. I'm joined by Eliza Livadiotou, Executive Director of Finance; and Annita Pavlou, Manager IR & ESG. After my [indiscernible] remarks, Eliza will go into more detail on our financial performance, and then we'll be very happy to take your questions, both during this conference call and afterwards. I would like to start by briefly reminding you of our powerful [indiscernible] story and our core strengths on Slide #4. We are the leading financial group of [indiscernible] banking and other financial services in Cyprus, in a highly liquid and concentrated market sector. Notwithstanding that presented are certainly prevailing in the wider macroeconomic outlook, the [indiscernible] economy remains strong and is growing on pace proving us again resilient to [indiscernible] assets. We will remain one of the most liquid banks in Europe and enjoy the benefits of higher rates. At the same time, we are undertaking [indiscernible] actions to provision ourselves [indiscernible] a more normalized environment in the years to come. On the diversified business model, our ongoing focus on cost discipline and now our fast [indiscernible] provision, all lay the foundation for delivering shareholder value in the medium term. Let's now turn to slide #5 which shows an overview of the macroeconomic environment. In an environment of weak European growth and geopolitical turmoil, the macroeconomic outlook as of Cyprus stands out. The economy expanded by 2.3% in the second quarter of 2023, outpacing the European average. [indiscernible] Based on the latest projections of Revenues and finance the economic growth is expected to be around 2.4% for 2023. Tourist activity continued to recover with the arrival for the first 9 months of 2023 at approximately the same levels as of 2019 pre-COVID. Likewise, tourist receipts, January to August 2023 were 9% higher than the corresponding 2019 levels, indicating higher spending by tourists. The unemployment rate decreased to 6.5% in the second quarter, we expected to the year at 6.4%. As in many other countries, consumer inflation continue to be impacted by energy prices. In Cyprus. inflation stood at 3.3% of October 2023 is expected to average around 4% for the full year. Slide #6 provides evidence of the group's strong financial performance in the third quarter. For the third consecutive quarter, the group achieved an order of over 20% facilitated by strong NII reach continued to grow up 9% on the prior quarter. We generated a ROTE of 25.6% in the third quarter, feeling [indiscernible] through the group's tangible book value, which increased by 22% on the prior year to EUR 4.63 per share. Let's now turn to Slide #7, which summarizes how the key financial metrics are tracking against 2023 targets. Our key financial metrics of [indiscernible], efficiency and asset quality are well ahead over 2023 targets we set in our Investors Day in June this year. While cost of risk is towards the lower part of the wide range shifted to [indiscernible]. All in all, we generated an order of 24.6% for the 9 months 2023. Capitalizing on this strong performance we now expect to comfortably exceed our 2023 ROTE target of over 70%, albeit expected some modest decline in the fourth quarter from the current year-to-date level reflect mainly typical seasonality and then growing equity based asset result of strong profitability. Our [indiscernible] fixed term remained strong for longer and here, we now expect fourth quarter [indiscernible] to be at similar level to the third quarter on the back of high rates and a well-managed deposit pass-through reflects the stronger revenues, we expect that the cost income ratio for 2023 will now be considerably below 40% despite seasonally higher costs in the fourth quarter. In terms of asset quality, the targets are unchanged. The NPE ratio is comfortably below 4% with a cost of [indiscernible] of 50 to 80 basis points. We maintain a clear focus on delivering sustainable returns to our shareholders and our dividend policy is reiterated. We are packaging a [indiscernible] ratio between 30% to 50% on adjusted recurring profitability building progressively through the years. On Slide 8, I would like to provide an update on our digital initiatives and progress. Our aim is to lead the digital economy through our digital transformation program in 2 efficiencies and have digital sales through cross-selling and established new revenue streams. As part of our ambitious digital transformation program, we launched our innovative [ Dio ] brand, quick half that provides customers with better access to products and services with a simple click and the results have been very positive, as you can see on the slide on the number of digitally onboarded clients on the new lending, via quick loans, in deposits and digital insurance. I will now hand over to Eliza to take you to our financial results for the period in more detail.

Thank you, Panicos, and good morning from me, too. Let's start on Slide 10 with the financial highlights of the period. During the first 9 months, we reported a profit after tax of EUR 349 million versus a loss of EUR 19 million in the prior year, of which EUR 129 million was generated in the third quarter. This is up by 3% on the prior quarter, driven by strong revenues. NII reached EUR 572 million, an increase of 144% on the prior year, benefiting from higher rates and the well-managed deposit pass-through. We are proud of our diversified noninterest income as it remains a significant contributor to our profitability, covering 90% of total operating expenses. . Our cost-to-income ratio further improved to 31% as a result of higher income, whilst our cost base remains under control with savings, partly offsetting inflationary pressures. Cost of risk at 58 basis points remained within our 2023 target range. Our balance sheet is characterized by ample liquidity and robust asset quality. Over 1/3 of our assets are cash balances with Central Bank benefited significantly from higher rates, while our deposit base continues to grow. Our NPE ratio stood at 3.5%, and our coverage increased year-on-year to 77%. Focusing now on our robust capital position. As of 30th September, our regulatory CET1 and total capital ratio stood at 15.2% and 20.4%, respectively, including organic capital generation of around 125 basis points in 3Q and after our dividend accrual, our CET1 and total capital ratio stood at 15.8% and 21.0%, respectively. Finally, in October '23, Moody's updated the bank's long-term deposit rating to investment grade for the first time in 12 years. This is a further validation of the group's transformation into a strong, diversified, well-capitalized and sustainably profitable organization. Slide 11, where we present the detailed income statement. I will not cover every line on the page since I will be discussing the drivers of our profitability in the following slides. But I would like to highlight our strong earnings per share, which has grown consistently for 4 consecutive quarters. This is underpinning an improving tangible book value. Our earnings per share for the 9 months stood at EUR 0.78 per share. Let's now discuss the main drivers of NII on Slide 12. Our net interest margin improved by 20 basis points Q-on-Q to 3.63% from 3.43% in the previous quarter. The margin and the net interest income dynamic is explained by a number of factors. Firstly, the immediate repricing of liquid assets. During Q3, we benefited from an increase in the effective yield on liquids of 48 basis points to 3.46%. Secondly, the gradual repricing of the loan book. Over 95% of our loan book is based on variable rates, with around half of it linked to [indiscernible]. 22% of the loan book is linked to the bank's base rate, which, as a reminder, is linked to the cost of deposits in the system. These loans are repricing but more gradually in line with deposits. The effective yield on the performing book grew by 27 basis points to 5.47% in Q3. Thirdly, better-than-expected deposit trends and a well-managed deposit pass-through level, facilitated by the very liquid secured banking system. This is evidenced by the evolution of our cost of deposits, which remains not low at 19 basis points, corresponding to a pass-through level of 15% on time and not just deposits in Q3, up from 12% in Q2. And lastly, our cost of wholesale funding increased by 77 basis points this quarter to 406 in -- this followed the issuance of EUR 350 million of senior preferred notes in July with a coupon rate of 7.375% or an annual interest expense of EUR 26 million. On Slide 13, I want to give you some more details on the assumptions and sensitivities behind our net interest income expectations. The top table provides a summary of the conservative assumptions we set in June. Our deposit trends are currently tracking better than expected, and pass-through remains resiliently low. Given current [indiscernible] rate, we expect 4Q NII to be at similar levels to 3Q. To give some idea of sensitivity, each 1 percentage point increase in deposit pass-through lowered NII by approximately EUR 2 million per annum. Also, please note that the recent decision by the ECB to set the remuneration of minimum reserves to 0, we have an impact of foregone NII of around EUR 8 million per annum at the current debt rate of 4%. The bottom table provides an update on the liquid sensitivity to rising rates. We estimate that a further 60 basis point parallel increase in rates versus the forward case as of September 2023, will add EUR 67 million to annualized NII. A 60 basis point parallel decline would reduce NII by an annualized amount of EUR 76 million, assuming, of course, other things being equal. While high rates are very positive for the group, we are starting to prepare for the period when rates start normalizing. We are undertaking proactive solutions in order to enhance the resilience of NII to future reduction in interest rates, locking in higher NII for longer. These solutions include the increase of investment in fixed rate bonds with longer duration and higher credit quality, increasing our offering of fixed rate loans and loans linked to the bank base rate, which as mentioned before, track deposit costs, in the initiation of reverse repo and derivative positions for the bank having received fixed interest rate swaps. Let's now turn to Slide 14, where we discuss in more detail our liquid balance sheet composition. As of September, cash balances with ECB amounted to EUR 9.6 billion, including EUR 2 billion of TLTRO funding, on which the group immediately benefits from ECB deposit rate increases. Securities, including debt securities, treasury bills and equity investments amount to EUR 3.6 billion. The fixed income portfolio, which increased by 10% on the prior quarter, represents around 95% of our securities. Careful expansion is expected to continue, subject to market conditions, of course. Net loans amount to EUR 9.9 billion, of which EUR 9.7 billion is performing. Around 50% of the loan book is priced on Euribor and 22% is linked to the bank base rate which will benefit as deposit rates reprise over time. Customer deposits amounted to EUR 19.3 billion. Our deposits are nearly double our loans, giving us one of the lowest loan-to-deposit ratios of any bank in Europe. Wholesale funding at EUR 1 billion as of September, following the issuance of 350 million MREL-eligible senior preferred notes in July 2023. On Slide 16, you can see that deposits remained broadly flat on the prior quarter but increased by 3% year-on-year to EUR 19.3 billion. We are encouraged that the shift in deposit mix towards time and notice deposits is progressing more slowly than we expected. In Q3, it was actually flat at 31% of the total. Furthermore, if you look at the breakdown of our EUR 19.3 billion deposit base, you can see on the bottom left chart, at almost 90% of our deposits are with Cyprus residents. Slide 17 on new lending. In the first 9 months of the year, we granted loans of EUR 1.6 billion, driven mainly by corporate demand. The cost performing book stood at EUR 9.9 billion and remained broadly flat both Q-on-Q and year-on-year as repayments continued to offset new lending. It is expected that the current trend will continue into Q4, and therefore, the performing loan book is expected to remain broadly stable for the remainder of the year. Turning now to the fixed income portfolio on Slide 18. As of 30th of September, the fixed income portfolio amounted to EUR 3.5 billion, up by 54% on prior year, representing 14% of total assets net of TLTRO. The majority of the portfolio is measured at amortized cost and is held to maturity. Hence, no fair value gains or losses are recognized in the group's income statement or equity. The mark-to-market negative impact of this portfolio amounted to EUR 91 million as of September equivalent around 90 basis points of CET1. Slide 19 provides a summary of noninterest income. On this slide, we would like to highlight the positive trends on net fee and commission income attributed to higher net credit transformation driven by higher volumes. Net insurance result was also ahead compared to prior year due to the healthy growth of new business. I would also like to remind you that the FX gains are volatile profit contributors. Now moving to Slide 20 and 21, which focus on the performance of our insurance business in the first 9 months of the year. The group's insurance companies are leading players in the life and general insurance business in Cyprus and have been providing a recurring and improving income further diversifying the group's income stream. Both life and general insurance performance are tracking well ahead of the target we set in June 2023 at the investor update with regular income growing by 14% year-on-year in Life and gross written premiums growing by 10% year-on-year in general insurance. Overall, the insurance businesses remain a valuable revenue than for the group has net insurance results contribute 17% on the group's non-NII. Moving now to operating expenses on Slide 23. Our cost-to-income ratio of 30% was broadly flat on the prior quarter, driven by higher income. Our cost base remains under control with savings coming from the efficiency actions we undertook in 2022, partly offsetting inflationary pressure. On a quarterly basis, increase in total operating expenses of 5% is driven by an accrual of EUR 3 million with regards to the reward program announced in June 23, but is to reward performing borrower. Let's now move to Slide 25 and capital. This quarter, we underwent through some structural changes with regards to the way we present and measure our capital. I will spend some time going through these changes thoroughly. To start with on the dividend accrual, during the previous quarter, we were accruing at the 30% payout ratio from the bottom-end of our dividend policy. Based on a better understanding of the EU directive, we are now accruing at a 50% payout ratio, the top end of our policy. Please do not read into this change since management's intention remains as previously stated. We intend to build dividend prudently and progressively towards a 30% to 50% payout ratio, taking into consideration market conditions as well as the outcome of capital and liquidity planning. The final dividend decision will be taken by the board at year-end in accordance with the regulatory process. Secondly, on pillar to add-on. Following the Group's decisions directly that the pillar to add-on 33 basis points were deducted from CET1 capital in the third quarter. Therefore, it's expected that this component will be eliminated from the Pillar 2 capital requirements as of first January 2024. This can be seen in the chart on the upper right-hand side of the slide. And lastly, on the presentation of our regulatory or Basel 3 capital ratio. -- set out on the top left graph on the slide, these do not include the unaudited profit or dividend accrual in the third quarter. Our Q3 regulatory or Basel 3 capital ratios stood at 15.2% for CET1 and 20.4% of total capital as of September. Now moving to the bottom left chart. As shown on the chart, we continue to enjoy strong organic capital build-up in the third quarter with organic capital generation of over 125 basis points. bringing the total to 345 basis points for the first 9 months of the year. As a result, our CET1 ratio, including retained earnings, but before distribution increased to 17.5% After a dividend accrual based on a 50% payout ratio, our CET1 and total capital ratio stands at 15.8% and 21.0%, respectively. Our robust capital position, along with the strong organic capital generation, clearly demonstrates our commitment to deliver sustainable shareholder returns. Now let me give you an update regarding the expected changes in our capital requirements. As of first January 2024, the requirements for CET1 and total capital ratios will be set at 10.92% and 15.63%, respectively, reflecting the following changes. the phasing in of O-SII buffer of 37.5 basis points and the countercyclical buffer to 50 basis points and the elimination of Pillar 2 add-on mentioned earlier. Further details on capital requirements are also set out on Slide 51. We -- now moving to MREL on Slide 26. As of September, our regulatory MREL ratio and LRE ratio stood at 24.1% and 11.0%, respectively. Including retained earnings, post dividend accrual, our MREL ratio and LRE increased to 24.6% and 11.2%, respectively. I would like to update you on the MREL requirements following a draft notification from the SRB in November 2023. The MREL requirement is now set at 25.0% of RWAs against 24.35% previously, and must be met by 31st December 2024, 1 year earlier than the previous decision. The shift of the compliance date one year earlier, signifies the group's progress over the years in becoming a strong, well-capitalized and sustainably profitable optimization. We continue to evaluate opportunities to optimize the buildup of our MREL position. Moving now to Slide 27 and asset quality. The NPE ratio reduced in the quarter to 3.5% or 0.8% on a net basis, and our NPE coverage stood at 77%. When including tangible collateral, NPEs are fully covered. During the third quarter, following a detailed assessment of our portfolio, EUR 37 million of exposure were recognized as UTP or unlikely to pay relating to specific customers with idiosyncratic characteristics. These UTPs are not macro related and continue to present no [indiscernible] adhering to early repayment schedule. With the conclusion of this sub-segment, we expect another similar UTP amount to be potentially recognized in Q4. Note that UTPs trigger an automatic classification to Stage 3, which subsequently generates a cost of risk charge. Our NPE ratio target remains unchanged. We expect the NPE ratio to end the year comfortably below 4%. Turning now to Slide 28 and cost of risk. The third Q cost of risk increased to 76 basis points corresponding to an amount of EUR 20 million loan credit losses. This cost of risk included 43 basis points relating to the classification of UTPs and 15 basis points management overlays on Stage 1 and Stage 2 loans to capture conservative accounts. The monitoring of asset quality and customer behavior is ongoing and trends to date are encouraging. There are no material signs of changes in asset quality. Additionally, we incurred impairment and other provisions of EUR 8 million in the third quarter relating to revenue stock progresses on specific large liquid assets. Moving now to revenue on Slide 29. Revenue is our engine to manage the top of properties acquired from the ported borrowers. As you can see, revenue properties reduced to below EUR 1 billion as of September 2023. With balance sheet derisking completed, the inflows are expected to remain at extremely low level, and our focus will be on delivering sales. As a result, we remain confident that the overall revenue portfolio will have to EUR 0.5 billion by the end of '25. We continue to sell on average close to 90% of independently assessed open-market value or 108% of book value. The profits of the real estate market remains strong based on data by the Central Bank of 5 established in October protective prices increased by 7.4% year-on-year in the second quarter, although it's important to note that these prices remain well below their 2010 peak level. I now hand back to Panicos for his closing remarks.

Thank you, Eliza. Moving now to Slide #30, where we share again of how the bank will look like by 2025, where interest rates are expected to have normalized at the lower level of today as presented to you during our Investor Day in June. Let's cut to Slide 31. We have delivered another cost debt of some profitability recording a profit after tax of EUR 129 million in the third quarter, corresponding to an order of 25.6%. We are pleased that our key financial metrics are tracking well ahead of our 2023 targets. In October, 2023 Moody's upgraded the bank's long-term deposit rating to investment grade for the first time in 12 years. confirming the new chapter of becoming a strong, diversified, well-capitalized and sustainably profitable organization. We aim to give you an update on the 2024 financial targets with the publication of our full year results. This concludes our presentation. We will now open the floor for your questions.

[Operator Instructions] The first question is from the line of Alevizos Alevizakos with Axia Ventures. .

And congratulations for this strong set of results. Just a couple of questions from my side. as we're entering this part of the interest rate cycle where interest rates are starting to flatten and then drop. And as you've in your presentation, you start positioning your balance sheet accordingly, what are the biggest upside in downside risk with this outlook? And how should we think of asset care in the coming quarters?

On the NII, we expect -- we said NII of the fourth quarter to be on similar levels with this quarter. There are some headwinds coming from the increased cost of wholesale funding decreased cost of deposits, where so far, we have been achieving better than expected. But conservatively, we expect deposits to continue to gradually increase. And in addition there is a loss in the NII is coming from -- on the MRR. There are, of course, some tailwinds and bit more repricing on our [indiscernible] loans. There would be also a repricing on bank bearing loans, which are part natural search. This loan portfolio it's approximately 1/5% of the total book. And last but not the least, there are higher -- they expect higher NII on our securities both on volumes but also an uplift in yields as this roll over next year. So, I would say that putting all of this together, we expect -- I would say we expect, as we indicated in the Investor Day, a slightly lower NII in 2024 than the full year 2023. But at the highest asset point that what you have indicated during the investor update.

On asset quality?

On asset quality, we don't -- we have not experienced any signs of deterioration so far. So we are very happy with what we see in terms of the portfolio performance, both in terms of casualty payments and also in terms of any arrears. So the economy is doing good. And unemployment is almost at very low levels, and we are very happy of what we see.

I just wanted to also add on the hedging. I think let me think about that. We are -- I mean the higher for loan rate environment is allowing us the luxury of time to be able to hedge for a rate decline in the future. And as you said on the slide, there are a number of levers we are using -- we started using towards that, and we will continue doing that into Q4 and next year and include tool like longer duration, lower credit risk bonds, fixed rate loans, the base rate loans that Panicos mentioned, which reprice on the back of deposits, and that's a natural hedge. As well as structural hedging derivative tools like the report and receive fixed [indiscernible]

And again, congratulations for this very strong set of results.

The next question is from the line of Hamilton James with Deutsche and Numis.

A couple if I may. Firstly, and again, on the sort of measures you're taking to mitigate potentially future lower rates. I mean we know that around 14% of your -- is in the bond portfolio. I was just curious in terms of when you say you're expanding the duration there, what sort of quantity of duration expansion you're looking for and taken all together with the sort of reverse repos offering fixed rate loans, et cetera, et cetera, et cetera. I mean how much of your asset base do you think that you could eventually get to with some form of interest rate hedging? And the second is on the growth outlook. I noticed you mentioned that repayments are up, and obviously, credit quality is very, very good. The economy's strong, I was just wondering what the outlook for sort of Q4 is for the loan book growth?

So I'll start with the rate and the hedging. We are not yet guiding on how much of the asset book we can get as this is work in progress and obviously also subject to market conditions. We will aim to give more visibility could we [indiscernible] in the last few months. So we aim to give more visibility on our more specific tangible numbers on the back of the year results when we will aim to revisit the guidance in our annual regular cycle. On the growth outlook, Panicos?

Yes. I mean it's true that the net loan growth in 2023 is lower than expected, mainly because the higher repayments. And as we have guided in June this is, we expect to be flat for the full year gains. We do expect to recover in 2024 and our medium-term view is unchanged given our market position and the stress on the Cyprus economy.

The next question comes from the line of Cunningham Corinne with Autonomous Research.

A couple of questions from me. First one is on MREL. Could you give us some idea of what you're thinking there in terms of, obviously, there's more to do as the SREP requirements go up, I guess that firstly means there's more issuance to do, but also just in terms of what you think is a good management [indiscernible] to hold on top of all of that. And then secondly, on asset quality, here what you're saying about no signs of deterioration or arrears. But what specifically is behind the UTPs, specifically interested because you mentioned there's more to come in Q4.

I'll start with MREL. We've always seen always consistently been guiding towards another international issuance sometime next year, with similar size to the one we did before, maybe 300 mark, 300 million mark or thereabout, and that's to comply with MREL dynamically, but also build the buffer of requirements so that they can operate from there refinancing mode from then on. I should also point out that on the slide, you will note that we got the draft MREL decision for the next year effectively. -- where the time line for the transition period for compliance of [indiscernible] compliance, have come forward by a year. So we now need to comply by the December 2024. And there the rationalizing that decision on our stronger financial position, well capitalized, sustainable profitability and so on and so we are comfortable to be able to comply with that. We always our intention in any way. And in a way, all of strength or a vote of confidence, if you like, on the bank. But the time line has been accelerated.

Okay. On the asset quality Corinne, I will start with some facts the first fact is that Q3 outflows of NPE are higher than inflows. You mentioned UTP [indiscernible] are clients specifically as a result of review that we carried, and this will conclude in the last quarter of this year. There is no indication of any deterioration of the portfolio, the cost of rate because of the macros. So NPE targets, we remain unchanged, meaning less than 5% for this year and 6% for 2025, as we indicated in the guidance in June. And of course, cost of risk will be towards the lower part of our guidance in the right range of the 50, 30 basis points for the full year. So I hope this answers your question.

The next question is from the line of Cruz Hugo with KBW.

I have a few questions. So on asset quality, UTP and the Stage 2 UTP going up a bit, but I imagine if these are performing and so on at some point, you have to move them back to performing outside of NPL ratio. So can you give some guidance there, how long it could take for the UTPs to come out from the NPL ratio? And also on Stage 2, you have quite a bit of Stage 2 there. Any guidance you could give on if this move into stage 1. And then related to this, the cost of risk guidance still quite a bit wide. Can you give guidance from a number? What do you expect for the full year '23? And then finally, I hear on the dividend payout, you want to continue to be prudent and gradually grow to that 50%. But you've now created the numbers, so it's out of your CET1 ratio. Results have been better than I think anyone expected. So any room here to potentially accelerate that path towards 50% payout and with the Q4 results, let me know what your thoughts on this.

Okay. I will start with the cost of risk. I think I, replying to Corinne, I said that we expect the cost of risk for the full year to be towards the lower end of this wide range of [ 15 to 18 ] basis points for the full year. So this is for this question. On the UTPs, as we said, it is a [indiscernible] portfolio performance. But yes, this can tell usually is paying in the -- as their original payment schedule. And this is a case, usually the [indiscernible] sooner than core MPs. So we do expect to resolve this within a year or so. In terms of -- before asking [ Stephan ] to comment on the Stage 2, I would comment on the dividend payout ratio. And yes, we are prudent on this I mean what is most -- what is important for me is our strong organic cap generation, which it unlocks anything. -- facilitate the discussion with the regulators. I mean we have generated 345 basis points in 9 months versus the guidance we have of 200 to 250 basis points in June. So this is a fast and this is very important, and this is strong. But as we previously communicated to the market, the [indiscernible] remains subject to the approval. The [indiscernible] on this is expected to take place in late 2023 and early 2024 in line with the annual reporting supervisory cycle, we understand very well how important it is for our shareholders. And we expect a reserve to gradually grow 30% to 50%. Last year, we have 14%. So -- but frankly, right now, I don't think that we can guide 20 specific payout ratio because I expect it to be discussed with the regulator towards the beginning of next year. [ Stephan ] on Stage 2.

Indeed, on Stage 2, we do have 1.6 billion exposures in stage 2. However, let me point out as you can see on Slide 65 that we have EUR 456 million of performing forborne exposures, most of which they were classified as during the period of COVID this relates to exposures in hotels, which are now performing well. And roughly 27% of those exposures are eligible to exit by the end of 2023. So in addition to that, I will also add that the trend for Stage 2 has been decreasing, as you can see from our slide.

[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 for being with us today. As always, myself, Eliza, the team, we are very happy to take offline questions to provide specific details on the performance of the bank. Thank you very much.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling. Have a good day.