Increased interest income, driven by successive interest rate hikes from the European Central Bank (ECB), has significantly boosted Cypriot banks’ profits in the first quarter of 2024, which amounted to €226 million during this time. A detailed review of banks’ financial results for this quarter reveals that these interest rate hikes have led to a double-digit surge in banks’ revenues, which has had a positive impact on their profitability.
The Bank of Cyprus (BoC) reported an impressive 31 per cent increase in net interest income, while the Hellenic Bank saw an even more striking rise of 40 per cent. However, despite this robust growth in interest income, there is a discernible slowdown compared to previous months. The BoC’s net income grew by 18 per cent, whereas Hellenic Bank’s net income saw a noteworthy 33 per cent increase. Conversely, fee income for BoC fell by 5 per cent, and Hellenic Bank experienced a 6 per cent decline. In terms of expenses, BoC recorded a modest increase of 2 per cent, while Hellenic Bank saw a significant rise of 11 per cent.
As for provisions, BoC saw a reduction to €25 million from €28 million in the same quarter last year. Similarly, Hellenic Bank provisions dropped to €3.9 million from €13.8 million. The coverage of problem loans with collateral stands at 77 per cent for BoC and 33 per cent for Hellenic Bank. BoC’s ratio of non-performing loans (NPL) decreased to 3.4 per cent from 3.6 per cent, while Hellenic Bank’s NPL ratio remained steady at 2.5 per cent.
Moreover, both banks hold capital well above regulatory limits. The common equity tier 1 capital ratio for BoC is at 17.1 per cent, slightly down from 17.4 per cent, while Hellenic Bank’s ratio has risen to 24.6 per cent from 22.8 per cent in the same quarter last year. Regarding overall capital adequacy, BoC stands at 22 per cent, down from 22.4 per cent, whereas Hellenic Bank’s overall capital adequacy has increased to 30.2 per cent from 28.4 per cent.
Tax Benefits and Corporate Growth
Cyprus continues to be an attractive destination for businesses due to its favorable tax regime. The Cyprus corporate tax rate is one of the lowest in the European Union, providing significant tax benefits for companies operating within its borders. The Cyprus business tax environment offers numerous advantages, including exemptions on dividends and no withholding taxes on interest and royalties paid to non-residents.
Hellenic Bank reported a profit of €93.3m for the first quarter of 2024, compared to €69.7m in the same quarter the previous year and €124.8m in the fourth quarter of 2023. This positive trend was propelled by higher interest income, with return on equity (ROTE) reaching 25 per cent and the tangible book value per share (TBVPS) rising by 34 per cent year-on-year. Similarly, BoC reported a post-tax profit of €133m for the first quarter of 2024, compared to €95m in the corresponding quarter of 2023.
The inc taxes environment in Cyprus continues to provide a competitive edge for businesses looking to maximize their profitability while benefiting from the Cyprus tax advantages.
