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I will start with some key remarks on Slide The bank operates in a more open and flexible economy, which has proven in the past that it can quickly recover from economic crises. We are the leading financial hub in Cyprus with strong franchise and customer base. Our team, led by proactive and strategically minded Board, has an excellent track record and is fully committed to deliver shareholder value.
Our strategic priorities are clear: complete the restructuring and derisking of the bank as soon as possible and set the bank on the path for sustainable profitability, and of course, deliver on shareholder value. Slide 29 provides an overview of the journey the bank has been on these past few years and where we want to be in the medium term. 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, as before, through organic NPE reduction and prudential disposal as well as ensuring our cost base remains appropriate while further investing in our digital capabilities.
Over the middle term, our priorities will evolve. We will increasingly focus on capitalizing on our strong market position across both banking and financial service products to enhance our revenue. At the same time, we are very focused on improving our operating efficiencies and driving down cost. Combined with the expected normalization of the cost of risk, we have a clear path to generating sustainable profitability. Slide 30 to 33 contain information that you already know, in order to address people that look at the bank for the first time, and so I will not spend much time on this.
Slide 30, the Cypriot economy has outperformed the European Union over the past 5 years and growing market confidence can be seen in the sharp fall in sovereign spreads. Despite the negative impact from the pandemic, Cyprus maintains an investment-grade rating.
Turning now to Slide 31 very briefly. Our market presence in Cyprus remains very strong with large market shares across all key products. Moving to Slide As noted, we have been on a transformative journey since Today, we have a modern, healthier balance sheet. We are well funded and enjoyed a capital ratio considerably in excess of regulatory minimums.
But as shown on Slide 33, the balance sheet derisking has come at the expense of operating performance. Our loan book and revenues are down sharply over the past few years. And although we have managed to reduce our cost base to some extent, it hasn't been enough to protect profits. I will now outline how we expect these trends to reverse direction over the next few years. Moving to Slide 34, we have the starting point of our medium-term strategy. We are a diversified financial group with profitable subsidiaries in our field of business with high market shares in operations like insurance and credit card services.
We are the leading digital bank in Cyprus with , users of Internet and mobile banking and the widest range of internet and mobile functionalities. Finally, we have an excellent track record on delivering against strategic objectives. Moving now to Slide We have 4 key strategic pillars, all important building blocks for us to deliver shareholder value. Firstly, we will complete our balance sheet derisk. Secondly, we will return to revenue growth, and that growth will be in a more capital-efficient way.
Specifically, we will aim to enhance revenue generation by a growth in less capital-intensive banking and financial services businesses. Thirdly, we are planning to improve our operating efficiency through digitization and automation. And finally, we are building a forward-looking organization with a clear strategy supported by effective corporate governance aligned with ESG priorities. Starting with derisking on Slide We've had a highly experienced and highly effective team in place, and we expect NPE reduction to continue in through both organic and inorganic actions.
Moving now to revenue growth, and I will start with net interest income on Slide The net interest income challenges are clear to us, and we have a plan of action in place to mitigate the pressure we face. We will address challenges from low rates and surplus liquidity. We will intensify our efforts price away or price correctly deposits through liquidity fees and improve credit spreads.
Finally, the funding cost for MREL compliance is expected to reduce as we successfully complete derisking. We are looking to build a bank with better quality net interest income, and overall, we expect revenues or total assets to improve from basis points to basis points over the medium term. Turning now to Slide Our fee and commission income is expected to grow, driven by cross-selling and pricing initiatives.
Now I realize that you may well have heard before banks promising to improve cross-selling metrics. Let me explain why we are confident that Bank of Cyprus can deliver. Firstly, as you know, that we have spent the past half-decade focusing on derisking, understandably improving revenues from existing customers, which most of them were NPEs, was not a major strategic focus. It is now. Secondly, we have, for the first time, the system in place to deliver on our plans, in particular having made and continued to make considerable investment in our digital construction and analytical capabilities.
And we have some clear practical measures to help us deliver. For example, starting early next year, we will extend the liquidity fees to other group of customers and introduce a new price list. Both actions are expected to increase our fees. We will also aim to increase the average product holding through cross-selling to the underpenetrated customer base. And more widely, we are working to gather new revenue sources through the introduction of a digital economy platform, leveraging the bank's market position, knowledge and digital infrastructure.
Turning now to Slide 39 and Slide 39, one of the important sources of increased revenues will come from our insurance business. In the past, we haven't spoken about them in much detail. But over the last few years, our life and nonlife insurance subsidiaries have delivered sustainable healthy profitability.
Our life insurance business, operating under the EuroLife brand, has a leading market share in Cyprus. However, we believe it can deliver more. On Slide 40, our general insurance business, known as General Insurance of Cyprus, similarly has a strong market position and has delivered rising profits.
Here, we are making some important improvements. We are revamping our bancassurance channels while extracting more synergies with our life insurance sales network, and we are expecting to enhance the digital sales. Let's now move to Slide A significant enabler for our revenue growth strategy is our digital transformation program, which continues to progress well. We are aiming to leverage on our leading digital capabilities to serve customers and the Cypriot economy, creating shareholder value.
These statistics will allow us to further improve our operating efficiency through further automation and brand rationalization, and of course, will support our efforts to improve cross-selling through modeling customer needs and offering tailored products and services.
Turning to Slide We are revamping our operating model to further improve efficiencies through specific initiatives, including exit solutions to release full-time employees and further branch footprint rationalization. In addition, restructuring expenses are expected to reduce to single digits following the successful completion of our balance sheet derisking.
Our cost-to-income ratio is expected to rise in the near-term as revenues remain under near-term pressure and operating expenses increase due to higher IP and digitalization investment costs. However, we then expect our cost-to-income to decline over the middle term, which we expect to reduce to mids. Let's move on to Slide 43 and Slide Of course, delivering for our shareholders is important, but it's only one part of our responsibility to a wider group of stakeholders, who are working to build a forward-looking organization with a clear strategy supported by effective corporate governance aligned with ESG priorities.
You can see on Slide 44, some of our areas where we're already delivering. Turning now to capital, Slide Making a strong capital base has been a key tenet over the past few years, and that remains a nonnegotiable for the bank going forward.
Our capital will be supported by organic capital generation, supported by focus on less capital-intensive businesses, the careful reduction of high-risk weighted assets and the Helix 2 risk-weighted asset benefit upon full repayment of the deferred consideration. At the same time, factors that could potentially impact our capital ratios include the IFRS 9 phasing-in and any potential regulatory impacts and one-off cost optimization charges.
As a reminder, as of 20th September , our CET1 ratio fully loaded pro forma for Helix 2 is up Until the completion of derisking and the restructuring of the business, there may be volatility in our capital ratios due to timing of potential future impacts from regulatory changes and one-off restructuring costs. Slide Bringing all of this together, we are pleased to share with you our medium-term financial targets. We are in a strong position to take advantage of our many strengths over the next few years.
And like all other banks, we have to manage through a constantly inaudible environment and a constantly changing regulatory environment. We recognize that our shareholders have suffered over the past few years as a result of the considerable cost and effort necessary to derisk the bank.
However, now is a time for us to raise our sights, and therefore, we felt it was very important to introduce a return on tangible equity target for the first time. And we expect our normalized cost of risk to reduce between 70 and 80 basis points, appropriate for a bank with our mix of businesses. As I mentioned earlier, making a strong capital base has been a key tenet for the past few years, and that remains a nonnegotionable for the bank going forward.
Turning now to the last slide, This is a new phase for Bank of Cyprus, a bank that has completed derisking becomes smaller and safer, but also a bank that will return to revenue growth as we take advantage of our market-leading position in most of our product areas. We have strong customer trust, while developing powerful digital knowledge and infrastructure. And we have a clear strategy in place to complete a turnaround and set the bank on a path for profitability and delivering value for our shareholders.
This concludes our presentation, and we'll now open the floor for your questions. Thank you very much. Myrtle, the floor is yours. My first question is on asset quality and expectation for I remember, you had some comments that out of your exposures under moratoria, around EUR 1 billion or so would probably come into NPE flows in Do you still see that as a reasonable number?
And I also remember that your idea was to offset those inflows with organic outflows to the same amount, so pretty much keeping up with the EUR million, EUR million per quarter, and then adding to that, a transaction has been the main factor of the decrease in the NPE stock. Then my second question is on your costs and your cost outlook, operating expenses.
I was just wondering if there's not more room for further reduction, especially when you talk about your medium term target. I mean, I acknowledge that you referred to less than EUR million. So this could be many numbers. But the run rate of is already around that level, right, if you annualize it. So I mean, if you can just explain a bit more the rationale behind your cost cutting.
So again, linking to costs, is there any figure you can share in terms of estimated IT or digital investments that you're probably also going to incur in the future? Thank you, Jonas. I will take the questions. Starting from asset quality in -- What we have disclosed is that -- and this is still in place is that any new NPE flows will be broadly offset by the organic delivery. And we do project to have a reduction on our NPE ratio in through nonorganic actions.
So will continue to be a year of reduction of our NPE ratios. And the big question -- and it's about moratorium because this is the main assessment being for next year. And as you all know, we have a moratorium that expires in December. This is an area of focus for us. We have some, cautiously, I would say, positive signs. We have -- once our retail clients start paying their loans. This is important in business. As Eliza mentioned, we have 2 of our major sectors, tourist and trade, generally increasing their liquidity, including cut-off costs, at the pre-COVID levels.
And this is something that provides some comfort for next year. Of course, we all need to be very cautious because on the one hand, we have the recent increases in COVID, and on the other hand, we have -- we do not know yet the timing and the effect of the vaccine to the strengthening of the economy and also to the people. So -- but we are ready as a bank. We have specific products for our retail company clients that -- which are viable, and we kept them going through the short-term financial difficulties.
So overall, we expect a reduction in our NPEs. Going to the cost question, Jonas. Okay, I would like to remind you all that cost has been a priority for me from the time I took over. In the first year, in , we have achieved great results. This will be remain a priority. I do not focus on specific actual cost or income numbers, but I mostly focus on the cost-to-income ratio, which, as you said, is mids. It's mids. It's -- for this bank, as a first step, I consider this to be positive.
But of course, as you mentioned, as you implied, during the middle-term period, we need to continue investing in our IT expenses, which are material, without being able to monetize on all these initiatives within this period of time. And this is important for everyone to understand, and this is something that affects return on tangible equity as well.
I mean, the investments in IT and some other corporate reductions are not reflected fully on this period, on this middle-term period. So this is something that we'll keep delivering to the bank ongoing in the years after the outlook. I don't know, Eliza, do you want to add anything on this? I have a follow-up there on -- back on the asset quality. In terms of your expectations for trade in , is there any progress you can share on that, I mean, in terms of perimeter, in terms of days?
Is this a first half or second half event, something like that? It depends. I mean, we are ready. We are progressing -- let's say, we're finalizing the perimeter. They all depend on our market conditions, market readiness. And this is something we are constantly reviewing. So I don't have anything specific to share with you right now. And what is your plan to reduce the REMU portfolio? And also regarding the on-site inspection and the 50 bps that you mentioned in the presentation as a potential charge in the future, is there any more clarity on the timing of this?
That is my first question. My second question is regarding your assumptions in the business plan. I mean, could we have a bit more clarity on the timing of this? Do you expect this to take place in so we can include them in our numbers for ? Or it could be something a bit more longer term? And my third question is regarding cost of risk. You did mention the medium-term target of 70, 80 bps. Thanks for this. This is in line with what we see now in the numbers.
Do we have any more visibility on or where the cost of risk would stand? Thank you, Alex. For the revenue, I will pass the question to Eliza. As you know, REMU is kind of approach of the bank, has been considerably successful in selling real estate assets over the last few years.
It will continue to be a priority. It will continue to see the stock reducing because derisking that we will not onboard any more real estates on our balance sheet. So continue selling, we'll only reduce the product portfolio. On this, Eliza, can you elaborate more on this? So Alex, I mean, actually, as you may remember, we were actually expecting this year to be the first year when stock would come down post-Helix 1 and Helix 2.
COVID has delayed us. Although sales of small properties continue at pace than the larger sales, the larger transactions, inevitably we were impacted by both practical considerations but also macro conditions. So as for next year, for , we expect to have the stock of properties to start being materially reduced, and we expect that to have -- to go down to, effectively, run rate levels by the end of the medium term.
On the We have not yet been in discussions with the SSM on this. So it remains a pending point. And don't forget 2 things. One is that this 50 basis points -- or up to 50 basis points impact will be reduced as we sell properties in this universe impacted by the on-site inspection adjustment. And we are already starting to focus on this population of properties. Some of them, though, will go away. We sold -- we plan to be selling them in the -- more in the medium-term because they're larger.
Some of the smaller ones, we may be able to successfully sell them relatively quickly. Thank you, Eliza. On the NPE trade, Alex, I mean, if you move to Slide 36, you're going to see that during the short term, one of the drivers of NPE reduction is inorganic, and this is -- by that, we mean, trade.
Nonprofit Organization Management. Cyprus capt. Cyprus Managibg Director at Owner of Ch. Cyprus Bostart ltd Marketing and Advertising. Cyprus Plastic surgeon Medical Practice. Cyprus Managing Director at P. Civil Eng. Cyprus Manager Computer Hardware. Cyprus Manager at C. September - Present Electro-Tech Inc. Cyprus Focus Master at Amdocs Telecommunications. Cyprus Research. Cyprus fashion designer at red hot peppers Wholesale.
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