With its business model, which also focuses on growing non-interest income, delivering results — a return on tangible equity (ROTE) of more than 20% and a strong capital ratio — Bank of Cyprus is expanding its business, with shareholder returns at the heart of its strategy, while keeping a €700 million capital buffer for acquisitions in wealth management.
At the same time, it is monitoring the emerging trend and need for cross-border bank mergers within Europe. The bank’s management is also selective in its lending to both individuals and businesses.
“Loan pricing has to make sense”, chief executive Panicos Nicolaou said as he presented the bank’s performance, clearly setting out the measured risk it takes in its lending.
The success of the new business model, based on diversified revenue streams and lower costs, is reflected in the fact that 80% of the group’s expenses are covered by non-interest income (non-NII).
Investor quality
Over the past two years, 25% of the investors in the bank’s shares have shifted from hedge funds to long-only funds.
The bank’s CFO, Eliza Leivadiotou, said foreign investors were showing strong interest, helped by the bank’s return to the Greek stock market and investors’ growing willingness to invest in the European banking system, given the strict supervision it faces.
The positive sentiment among foreign investors was also highlighted by Anita Pavlou, director of investor relations and ESG. “Cyprus has become a business hub, and that creates value for the bank too. We are on the radar of high-quality investors”, she said.
Dividend
A key priority for management is to return profits to shareholders. The bank will distribute 90% of this year’s profits as a dividend, and on 21 October it will pay an interim dividend of €0.24 per share (a total of €105 million).
In the coming years, the dividend payout will rise to 100%.
Management said the combination of high returns on tangible equity and a strong capital position would allow the bank to continue delivering substantial returns to shareholders.
Acquisitions
The efficient combination of ROTE and capital ratios leaves room for further acquisitions. The capital buffer stands at €700 million. “We don’t make acquisitions for their own sake. Every investment needs a business case. Acquisitions require patience and must make strategic sense”, Mr Nicolaou said.
The area on which the bank’s management is focused for a potential acquisition is wealth management, and it appears a suitable target has been identified.
Mergers
Given the need that has emerged at European level to increase the scale of banks, Bank of Cyprus could not be left out of the picture.
Asked whether the bank could become a takeover target, its chief executive replied: “Pan-European mergers will happen. The job of Bank of Cyprus management is to run the bank properly and efficiently. If something is in shareholders’ interests, we as a board have a duty to consider it”.
On the debate over whether national banks should also be preserved, the bank’s senior executives said there were two schools of thought: one that argues for the creation of large European banks, and another that also supports retaining national banking groups.
“When you are smaller, you are also more agile and quicker in making decisions”, Mr Nicolaou said.
Measured risk
Based on guidance, credit growth is expected to run at more than 5% in 2026.
The bank’s international loan portfolio has €1.5 billion in lending (shipping, corporate and syndicated loans), and “the aim is to reach €2 billion by 2028”, said Haris Pistos, head of International Banking.
Mortgage lending is also growing significantly, with new monthly mortgage disbursements across the Cypriot market totalling €140 million.
Mortgages account for 50% of Bank of Cyprus’s loan portfolio, contributing significantly to risk diversification.
“All the bank’s retail and corporate lending, in Cyprus and abroad, is made up of amortising loans. This reduces risk and the likelihood of additional provisions”, Mr Nicolaou said.
In effect, the bank does not offer loan structures requiring a large repayment at maturity or instalments that increase over time. Its efforts to reduce risk are also reflected in its avoidance of low pricing as spreads on corporate loans come under pressure.
Responding to Revolut
Investment in technology over 2026-2028 amounts to €240 million. 98% of transactions are conducted through digital channels, while digitally originated mortgage lending is growing, according to the bank’s chief digital officer, Dimitris Nicolaou.
The bank is also investing in new digital sales channels, aiming to increase fee income and reach the next generation.
Through Joey, its app for children and teenagers, it is “building” tomorrow’s digital customers from the age of 6. Through its JINIUS platform (similar to Skroutz), it is also entering the marketplace by offering consumers a range of commercial products.
“Competition has always been here”, Mr Nicolaou said when asked about Cyprus’s banking market. He added that “competition now comes from neobanks”.