CBC: Cyprus' banks maintained high capital adequacy and liquidity in 2024

Cypriot banking institutions maintained high capital adequacy and increased liquidity in 2024, according to revised selected Financial Soundness Indicators of the Cypriot Banking Sector, published by the Central Bank of Cyprus (CBC).

According to the CBC, Cyprus credit institutions continued to maintain strong capital positions throughout 2024. The Common Equity Tier 1 (CET1) ratio at the end of 2024 stood at 24.48%, while the Tier 1 capital ratio reached 25.7%. The leverage ratio stood at 9.47%.

"Capital and leverage ratios improved notably compared to year-end 2023, reflecting the sector’s robust financial position", the CBC noted.

Asset Quality

The quality of banking sector assets continued to improve, according to CBC. However, the Bank said that the stock of non-performing exposures (“NPEs”) that remains on banks’ balance sheets is still considerable, with the NPEs ratio at 6.23% still above the European Union average (close to 2,5%).

Nevertheless, CBC said that the high NPEs coverage ratio (58.3%) demonstrates the sector’s ability to absorb potential future credit losses.

Profitability

The Cyprus banking sector recorded positive profitability during 2024, mainly driven by net interest income. Income was generated from various interest sources, such as loans and advances, investments in debt securities and cash held with the European Central Bank.

It is noted that the operating expenses of credit institutions, although lower compared to their historical average, showed a slight increase relative to 2023, primarily due to higher personnel costs.

Liquidity

The banking sector remains highly liquid, with liquidity ratios at 333% significantly exceeding the minimum supervisory requirements (100%) and continuing on a positive path.

The domestic banking sector assets are mainly concentrated in cash and cash balances with the ECB, loans and advances, as well as debt instruments. Equivalently, the domestic banking sector liabilities consist mostly of deposits and equity.

(Source: CNA)