The Bank of Cyprus on Monday reported a net profit of €487 million for 2023, approaching the figures seen before the financial crisis.
This surge in profit is attributed to the prevailing high-interest rate environment.
“The Bank’s results were excellent, our net profit after tax was close to €500 million,” stated Panicos Nicolaou, the Managing Director, during a press briefing on Monday. He proudly noted that the bank’s return on tangible equity index (ROTE) was nearly 25%, positioning it “one of the highest in Europe.”
Nicolaou further elaborated that the bank’s income not derived from interest stood at €300 million for the year, effectively covering 90% of operational costs. He anticipates the bank’s “good return” to persist into the current year as interest rates begin to stabilise.
“Our business model is diversified, as shown by our non-interest income which contributes considerably to the group’s profitability,” he remarked.
While Nicolaou refrained from disclosing the specific dividend amount for this year, he mentioned ongoing discussions with the ECB and recalled the bank’s medium-term objective of maintaining a payout ratio between 30% and 50%, a notable increase from the previous year’s 14%.
“Our priority is to reward our shareholders,” he said.
Total Income Surpasses €1 Billion
The financial statements of the bank reveal that the total revenue for the year climbed by 65% on an annual basis, reaching €1.09 billion, with net interest income accounting for 72% of this figure, amounting to €792 million. The income not based on interest reached €300 million in 2023, with €181 million generated from fees and commissions. The bank’s Net Interest Margin significantly increased to 3.41% in 2023, up from 1.65% the previous year.
The bank’s overall expenses in 2023 saw a 6% annual increase, totalling €384 million, which included €149 million in staff-related expenses. The bank reported a drop in the cost-to-income ratio (excluding the special levy on deposits) to 31% in 2023 from 49% in 2022.
Provisions for credit losses were reported at €63 million, with non-performing loans totalling €365 million, or 3.6% of the total loan portfolio.
By the end of 2023, the bank’s Core Tier 1 ratio improved by 130 basis points to 16.5%, with the total adequacy ratio increasing by 110 basis points to 21.5%.
Customer deposits reached €19.34 billion as of 31 December 2023, showing a slight increase from €18.99 billion at the end of the previous year, with 58% of these deposits insured under the deposit guarantee scheme as of the end of 2023.
New Lending Totals £2 Billion
The bank’s loan portfolio remained relatively stable year-on-year at €10.07 billion as of 31 December 2023, with new lending compensating for repayments. New loans for the year amounted to €2.02 billion, driven predominantly by corporate demand, despite the higher interest rates.
The bank’s Liquidity Coverage Ratio (LCR) stood impressively at 359%, well above the regulatory minimum of 100%, with a surplus reaching €9.1 billion by the end of December 2023.
In response to inquiries, Nicolaou remained reserved about the bank’s dividend distribution plans, indicating ongoing dialogues with the ECB. “The dialogue has begun but there are no final decisions yet,” he stated. The bank had previously distributed dividends of €0.05 per share for 2022.
“Our priority is to reward our shareholders,” he stressed.
Addressing the potential decline in lending rates following the ECB’s cessation of rate hikes, Nicolaou predicted a downward trend this year, influenced by the anticipated lower Euribor rates.
The bank also expressed a commitment to enhancing the environmental sustainability of its loan portfolio.
Eliza Livadiotou, the Chief Financial Officer, emphasised the focus on green loans, while Annita Pavlou, Head of Investor Relations, detailed the bank’s goal to reduce emissions from its mortgage portfolio by 43% by 2030. “We want to give incentives to our customers to opt for green housing loans, complying with the provisions of energy efficiency,” Pavlou stated.
