Banks’ Return on Equity spikes to almost 25% in December 2023

07:39 - 04 June 2024

Financial Services Reporter

The Cyprus banking sector at end-2023 recorded soaring Return on Equity ratios according to key aggregate financial indicators released by the Central Bank of Cyprus (CBC).

The data released by the CBC showed that the Cyprus banking sector’s Return on Equity ratio spiked to 24.6%, compared with just 4.8% in the respective period of last year. The spike in return on equity ratio was mainly driven by high interest rates due to the European Central Bank’s restrictive monetary policy, which pushed earnings for the banks.

Similarly, total profits after tax and discontinued operations per total assets in end-2023 amounted to 2% compared to just 0.3% per cent in December 2022.

According to the CBC, Core Tier 1 capital ratio in the end of 2023 rose to 21.3% compared with 17.8% in the respective period of last year, whereas the overall solvency ratio rose to 25.5% in December 2023 from 21.3% in the respective period of 2022.

Cash and cash balances with Central Banks in end-2023 amounted to 37.8% of total assets, down from 38.9% in December 2022, mainly reflecting the repayment of Targeted Long-Term Refinancing Operations (TLTROs).

Furthermore, cost-to-income ratio, a key indicator with regard to the efficiency of the banking sector improved to 32.7% in December 2023, significantly lower compared 69.1% in end-2022, reflecting both the increased net interest income but the cost-cutting measures taking by the banks as well, as staff expensed in the end of 2023 dropped to 52.9% of total operating expenses, compared with 55.8% in December of 2022.

According to the CBC, the data include all domestically and foreign-controlled credit institutions, excluding banking branches.

(Source: CNA)

Banks’ Return on Equity spikes to almost 25% in December 2023

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