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00:00THANK YOU FOR JOINING US. WE CAN ALL SEE WHY CYPRUS IS GREAT AS A HOLIDAY DESTINATION. WHAT ARE YOU TELLING INVESTORS AS TO WHY NOW IS A GREAT TIME TO INVEST? > > YOU HAVE AN ECONOMY THAT HAS COME OUT OF CARDIAC ARREST IN 2013 AND HAS POSTED FOUR YEARS OF GROWTH. IT DOES NOT LOOK LIKE -- THE SOVEREIGN IS THE LEAD INDICATOR OF WHETHER OR NOT THE COUNTRY IS DOING WELL. AS OF FRIDAY IT RECEIVED ITS FIRST POSTING. WE HAVE MOVED BACK OUT OF JUNK STATUS INTO INVESTMENT GRADE. THE ECONOMY IS GROWING WELL. IT IS BROAD-BASED AND ITS RECOVERY. UNEMPLOYMENT IS FALLING. THERE ARE A LOT OF INDICATORS WHICH SUGGEST THIS IS A GOOD TIME TO INVEST. WE HAVE BEEN SAYING THAT FOR A WHILE. IT DOES FEEL LIKE THE MOMENTUM IS WITH THE COUNTRY. NEJRA: WHAT DOES THE COUNTRY BEING INVESTMENT GRADE MEAN FOR THE BANK OF CYPRUS? > > IT IS A CONFIDENCE ISSUE. THE BANKING SYSTEM IS A WARRANT ON THE ECONOMY. THE BEST WAY TO PLAY IT IS IN A LEVERED INVESTMENT. IF YOU LOOK AT THE TRACK RECORD OF THE BANKING SYSTEM WITHOUT PERFORMING LOANS, SHRIEKING OF THE SYSTEM FROM A TIMES GDP TO FOUR TIMES NOW, THE RELIANCE ON FOREIGN DEPOSITS, THE ATTRACTION OF FOREIGN DIRECT CAPITAL OVER THE LAST THREE YEARS, THERE ARE A LOT OF REASONS WHY CYPRUS ACTUALLY IS POISED TO GROW ACROSS A RANGE OF ECONOMIES. NEJRA: ON THE NONPERFORMING LOANS, AFTER THE SALE OF NONPERFORMING LOANS TO APOLLO, BANK OF CYPRUS ABLE TO IMPROVE ITS POSITION, BUT THE EXPOSURE REMAIN TIED -- REMAINS HIGH. > > WE SETTLED $15 BILLION OF NONPERFORMING LOANS. WE HAVE REDUCED THAT BY $10 BILLION TO $5 BILLION. IT IS COVERED BY 50% PRECISIONS -- PROVISIONS. WE ARE DOWN 3.2% PER QUARTER FOR 13 QUARTERS. PLUS THE 15% GDP TRADE WITH APOLLO. I THINK WE ARE ON THE WAY TO GETTING IT DONE. WE HAVE A THIRD OF THE POSITION LEFT. WE HAVE PLANS ACROSS EACH OF THOSE BUCKETS. NEJRA: CAME WE EXPECT ANY MOVES BEFORE THE END OF THE FINANCIAL YEAR? > > NO. WAY SOLD MORE THAN $5 BILLION OF CONTRACTUAL BALANCES, THREE BILLION DOLLARS BALANCE SHEET VALUE, FOR $1.5 BILLION. THAT IS 14,000 INDIVIDUAL LOANS. A LOT OF WORK INVOLVED. YOU HAVE TO RESHAPE YOUR ORGANIZATION TO GO FORWARD AND MANAGE WHAT'S LEFT. WE ARE CONFIDENT WE HAVE PLANS TO FINISH THE JOB. NEJRA: HAS THERE BEEN ANY CHANGES TO YOUR EPS TARGETS FOR 2018? > > WHEN YOU DO A DRAMATIC TRADE SIGNIFICANT YEAR BALANCE SHEET, YOU HAVE TO RESET YOUR BUSINESS MODEL. WE WILL RE-GUIDE LATER AND LATER -- LATER IN THE YEAR. 10% EPS PER QUARTER IS WHERE OUR GUIDANCE WAS. WE HAVE GIVEN ALL THE INFORMATION NECESSARY TO STRIP OUT THE BITS WE REMOVED. > > 10 YEARS FROM THE CRISIS, LAST WEEK WE WERE TALKING ABOUT LIFE AFTER LEHMAN, ARE WE ANY CLOSER TO RESOLVING THE DOOM LOOP FOR EUROPEAN BANKS? > > EUROPE WAS NOT READY TO REACT TO A CRISIS BACK IN 2007. AS EACH SOVEREIGN CRISIS UNFOLDED AFTER EACH OF THE BANKS CRISIS STARTED TO UNFOLD, WE HAD A RELATIVELY HAPHAZARD RESPONSE TO THE CRISIS. I STILL THINK WE ARE FINDING THEIR FEET IN TERMS OF CRISIS MANAGEMENT FOR EUROPE. LET'S HOPE WE NOW HAVE THE MECHANISMS IN PLACE THROUGH SUPERNATURAL MECHANISMS TO MAKE THIS WORK BETTER. WE HAVE BEEN SLOW. THE U.S. WAS A PERFECT EXAMPLE OF, GET YOUR ACT TOGETHER. THE U.S. IS NO LONGER TALKING ABOUT THE BANKING CRISIS. THERE TALKING ABOUT UNEMPLOYMENT AT ALL-TIME LOWS. THERE TALKING ABOUT THINGS WE WOULD ONLY DREAM OF TALKING ABOUT. NEJRA: POLITICAL RISK STILL RIFE. THIS INTRACTABLE ISSUE OF THE IRISH BORDER. WILL THERE BE ANY IMPACT ON ECONOMIC GROWTH IN CYPRUS IF THERE IS A NO DEAL BREXIT? > > THERE IS A GREAT HISTORY BETWEEN A FORMER COLONY, 1960 WAS ONE CYPRUS RECEIVED INDEPENDENCE, THERE ARE 1.2 MILLION TOURISTS A YEAR WHO COME FROM BRITAIN. THAT HAS BEEN GROWING DURING THIS BREXIT DISCUSSION. THERE IS NO SUGGESTION AT A DATA LEVEL BREXIT IS CAUSING ISSUES FOR CYPRUS U.K. INTO THE FUTURE. BUT BREXIT IS ALL ABOUT CONFIDENCE IN THE RELATIONSHIP BETWEEN THE EUROPEAN UNION MEMBER CYPRUS AND BRITAIN WILL NO DOUBT BE NEGATIVELY IMPACTED. NEJRA: ANOTHER ISSUE I WANT TO DISCUSS IS THE THREAT OF SANCTIONS ON RUSSIA. WE HAVE NOT HAD THE WORST-CASE SCENARIO. HAS THAT HAD ANY IMPACT ON YOUR BUSINESS? > > FOR SURE. CYPRUS HAS A NATURAL AFFINITY TO HISTORY THROUGH THE CHURCH AND THROUGH 40,000 PEOPLE SPEAKING RUSSIAN. 1.2 MILLION RUSSIAN TOURISTS COME TO CYPRUS EVERY YEAR. THERE HAS BEEN AN INTERRUPTION OF CONFIDENCE WITH EUROPE AND RUSSIA. WE HOLD OURSELVES TO THE U.S. PATRIOT ACT INTO ALL OF THE COMPLIANCE STANDARDS YOU WOULD EXPECT. THAT MEANS WE DO LESS BUSINESS WITH THE FORMER SOVIET REPUBLICS. PEOPLE TALK ABOUT CYPRUS BEING A MAJOR PLACE FOR RUSSIAN MONEY. THIS IS NOT TRUE. WE HAVE MORE GREAT DEPOSITS THEN

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Cyprus Economy Has Come Out of 'Cardiac Arrest,' Says Bank of Cyprus CEO

John Hourican, chief executive officer at Bank of Cyprus Holding, discusses investing in Cyprus, the economy, his non-performing loan exposure and the impact of Brexit on the company. He speaks exclusively on "Bloomberg Daybreak: Europe." (Source: Bloomberg)

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