Bank of Cyprus raises 2026 profitability target after €383m nine-month profit

Higher lending and deposits boost Bank of Cyprus resultsThe Bank of Cyprus on Thursday reported profit after tax of €383 million for the first nine months of 2026, up 9 per cent year-on-year, as strong lending and deposit growth, robust fee income and disciplined cost management supported profitability, prompting the lender to upgrade its full-year return on tangible equity (RoTE) guidance to the high teens. The bank, a leading player in Cyprus’ financial system, recorded a RoTE of 18.9 per cent for the January to September period, while its basic earnings per share increased by 9 per cent year-on-year to €0.88. “We continue to execute our strategy by delivering solid lending and deposit growth, whilst maintaining cost discipline and prudent underwriting standards,” Bank of Cyprus chief executive officer Panicos Nicolaou said. Nicolaou said the results reflected the bank’s continued strong financial and operational performance, supported by a solid capital base. “Overall, profit after tax reached €383m, up 9 per cent year-on-year, generating a RoTE of 18.9 per cent,” he said. The bank’s third-quarter profit after tax amounted to €131m, remaining broadly unchanged from the preceding quarter. Its cost-to-income ratio stood at 36 per cent, reflecting its ability to maintain profitability while controlling operating expenses. The bank said its performance had strengthened its confidence in achieving higher returns during 2026, while maintaining its commitment to shareholder distributions and supporting the Cypriot economy. Lending and deposits continue to expand The Bank of Cyprus’ gross performing loan portfolio reached €11.6 billion at the end of September, representing an increase of 7 per cent since the beginning of the year and 9 per cent year-on-year. Nicolaou said the expansion had been driven mainly by domestic demand, with the bank continuing to support businesses and households. “Our performing loan book expanded by 9 per cent year-on-year and by 7 per cent year-to-date to €11.6bn, driven mainly by domestic demand,” he said. The bank’s predominantly retail-funded deposit base increased to €23.5bn, rising by 6 per cent year-to-date and 9 per cent compared with September 2025. Nicolaou said the bank’s deposit growth and lending activity demonstrated the strength of its business model and its ability to maintain a stable funding base. “Our predominantly retail-funded deposit base increased by 9 per cent year-on-year and by 6 per cent year-to-date to €23.5bn as at September 30, 2026,” he said. The lender said its asset quality remained robust, with non-performing exposures (NPEs) accounting for just 1 per cent of its portfolio. It also recorded a net release of 14 basis points in its cost of risk, driven by reversals relating to specific customers. The bank said it continued to maintain prudent underwriting standards, with the quality of its loan book remaining resilient. Capital position and shareholder distributions The Bank of Cyprus reported a CET1 capital ratio of 20.6 per cent, including retained profits for the third quarter and after accounting for ordinary distributions at the upper end of its policy. Its total capital ratio stood at 25.2 per cent on the same basis. The bank generated 341 basis points of organic capital during the first nine months of 2026, putting it on course to exceed its full-year guidance of between 350 and 400 basis points. Nicolaou said the continued generation of capital was strengthening the bank’s balance sheet. “Our business continued to deliver strong organic capital generation of 341 basis points in the first nine months of 2026, on pace to exceed our 350-400 basis point guidance for all of 2026, further enhancing our balance sheet position,” he said. The bank’s capital ratios include an accrued ordinary distribution calculated at a 70 per cent payout ratio, the upper end of its distribution policy. Its tangible book value per share increased by 11 per cent since December 2025, reaching €6.21, following the payment of an interim dividend. The bank paid an interim dividend of €0.24 per ordinary share in October 2026, amounting to approximately €105m in total. The payment was declared by the board on August 3, 2026, and represented a 20 per cent increase year-on-year. It corresponded to a 44 per cent payout ratio of the bank’s adjusted recurring profitability for the six months ended June 30, 2026. The bank’s updated distribution policy, introduced in March 2026, provides for ordinary distributions of between 50 and 70 per cent of adjusted recurring profitability, through a combination of cash dividends and share buybacks. For 2026, the bank is targeting an ordinary distribution at a 70 per cent payout ratio, alongside a possible top-up dividend of up to 20 per cent, bringing the total payout to as much as 90 per cent of adjusted recurring profitability. For 2027 and 2028, the bank is targeting an ordinary distribution at 70 per cent, with a potential top-up dividend of up to 30 per cent, resulting in a total payout of up to 100 per cent annually. The board will consider any top-up distributions each year alongside the full-year financial results, subject to market conditions and the bank’s capital and liquidity planning. The bank said distributions were expected to be predominantly in cash, including interim dividends, although share buybacks could also be considered where appropriate. Nicolaou said the bank remained committed to its shareholder return targets. “Capitalising on the strength of our performance, we are upgrading our RoTE guidance for 2026 to high-teens,” he said. He added that the bank remained committed to an ordinary dividend payout ratio of 70 per cent, at the top end of its distribution policy, alongside a potential top-up dividend of up to 20 per cent. The bank’s 2025 distribution amounted to €0.70 per ordinary share, or approximately €305m in total, corresponding to a 70 per cent payout ratio. This comprised a final dividend of €0.50 per share, proposed in February 2026, and an interim dividend of €0.20 per share paid in October 2025. The final dividend was approved at the annual general meeting held on May 15, 2026, and paid in cash on June 24, 2026. Based on the share price at December 31, 2025, the 2025 distribution represented a dividend yield of 9 per cent and was equivalent to approximately 290 basis points of the bank’s CET1 ratio at the end of that year. Cyprus economy remains resilient Nicolaou said the Cypriot economy continued to expand despite ongoing geopolitical uncertainty, with official forecasts pointing to gross domestic product growth of around 3 per cent in 2026. The latest projections had recently been upgraded from approximately 2.5 per cent, demonstrating the economy’s resilience and its expected continued outperformance relative to the euro area. “The Cypriot economy remains robust and continues to grow amid ongoing geopolitical uncertainty,” Nicolaou said. He attributed the outlook to solid economic fundamentals, including low unemployment, a swift recovery in tourism towards 2025 levels and a strong fiscal position. The country’s fiscal performance has been reflected in a declining public debt-to-GDP ratio and consecutive budget surpluses since 2022. Nicolaou said the bank remained committed to supporting its customers and the wider Cypriot economy, while continuing to deliver sustainable returns to shareholders. “We remain committed to supporting our customers and the broader Cypriot economy, while maintaining an unwavering focus on continuing to deliver attractive and sustainable returns to our shareholders,” he said. Bank completes CDB acquisition The Bank of Cyprus completed its acquisition of performing loans and deposits from the Cyprus Development Bank Public Company Limited (CDB) in October 2026, as part of its strategy to expand through both organic growth and acquisitions. The transaction, which followed the fulfilment of applicable conditions and receipt of all required regulatory and other approvals, involved a portfolio of performing loans with a gross book value of approximately €130m and deposits of approximately €440m. The consideration was nearly at par, with the transaction also including certain other assets and liabilities. The bank estimated that the acquisition would have a modest positive impact on its income statement, while resulting in a limited negative effect on capital of approximately 30 basis points. Nicolaou said the transaction was consistent with the bank’s stated strategy of expanding its balance sheet through organic and inorganic growth. “In line with our stated strategy to expand our balance sheet through organic and inorganic growth, we completed the acquisition of performing loans and deposits of approximately €130m and €440m respectively from CDB in October 2026, for consideration nearly at par,” he said. Regulatory capital and requirements The bank’s regulatory CET1 ratio on a transitional basis stood at 20.3 per cent at September 30, 2026, compared with 20.9 per cent at June 30, 2026, and 21 per cent at December 31, 2025. The regulatory total capital ratio was 24.9 per cent, down from 25.8 per cent at the end of June and 25.9 per cent at the end of 2025. Including third-quarter profits, net of ordinary distributions accrued at the upper end of its policy, the CET1 ratio increased to 20.6 per cent, while the total capital ratio reached 25.2 per cent. The bank said the capital ratios reported at the end of September included reviewed profits for the six months ended June 30, 2026, in line with the European Central Bank’s rules on recognising interim or year-end profits in CET1 capital. The figures also reflected ordinary distribution accruals at the upper end of the group’s approved distribution policy. The bank clarified that the accrual did not constitute a binding commitment to make a distribution, nor a guarantee that any payment would be made. Since September 2023, a deduction has been applied to the bank’s own funds in relation to the ECB’s prudential expectations for non-performing exposures. This amounted to 14 basis points at September 30, 2026, compared with 15 basis points at the end of June and 19 basis points at the end of 2025. The bank is also subject to additional capital requirements relating to its repossessed real estate portfolio, under a supervisory review and evaluation process (SREP) provision intended to ensure minimum capital levels are retained against long-term property holdings. These requirements vary according to the real estate management unit (REMU) assets remaining on the bank’s balance sheet and their value. Their impact on the group’s CET1 ratio stood at 93 basis points at September 30, 2026, compared with 90 basis points at June 30 and 65 basis points at the end of 2025. The bank said these requirements were incorporated into its capital plans and projections. Following the ECB’s annual SREP in 2025, the bank’s Pillar II requirement decreased by 25 basis points to 2.50 per cent, effective from January 2026. At the end of September, its minimum phased-in CET1 capital requirement stood at 11.93 per cent, compared with 11.38 per cent at the end of 2025. The minimum phased-in total capital ratio requirement was 16.52 per cent, up from 16.08 per cent at December 31, 2025. The bank said its capital ratios remained above the applicable SREP requirements. It also reported an improvement in its performance in the 2025 ECB banking stress test, compared with the 2023 exercise, attributing the progress to its strong capital position, organic capital generation, profitability and resilient business model. The bank was placed in the highest tier in terms of CET1 depletion and performed favourably compared with the average results of the 96 banks assessed by the ECB. Following the final SREP decision in October 2025, the ECB issued revised, lower non-public guidance for the bank’s additional Pillar II CET1 buffer, effective from January 1, 2026. The Central Bank of Cyprus (CBC) had also decided in January 2025 to increase the countercyclical capital buffer (CCyB) from 1 per cent to 1.50 per cent of total risk exposure for licensed credit institutions incorporated in Cyprus, with the increase taking effect in January 2026. As a result, the group’s CCyB stood at approximately 1.27 per cent at September 30, 2026, compared with around 0.90 per cent at the end of 2025. The Bank of Cyprus has been designated an Other Systemically Important Institution (O-SII) by the CBC under the Macroprudential Oversight of Institutions Law of 2015. Its corresponding buffer stood at 2.25 per cent at the end of September. The bank also stated that own funds held to meet the additional Pillar II guidance requirement could not be used to meet other capital requirements, including Pillar I, Pillar II or the combined buffer requirement. Share capital and additional equity instruments At September 30, 2026, the bank had 435,962,305 issued ordinary shares, each with a nominal value of €0.10. The number of shares was unchanged quarter-on-quarter, compared with 435,686,031 at December 31, 2025. The increase during the year was attributable to the issuance of ordinary shares under the group’s short-term and long-term incentive plans. A total of 276,274 new ordinary shares were issued during the first half of 2026. The group’s other equity instruments amounted to €220m at the end of September, unchanged from the previous quarter, and comprised Additional Tier 1 capital securities. These fixed-rate reset perpetual securities are unsecured and subordinated obligations of the company, issued at par and carrying an initial annual coupon of 11.875 per cent, payable semi-annually. The coupon is scheduled to reset on December 21, 2028, and every five years thereafter. The company has the option to redeem the securities between June 21, 2028, and December 21, 2028, inclusive, and on each subsequent interest payment date, subject to regulatory approval and the applicable redemption conditions. Shareholders’ equity The bank’s total equity excluding non-controlling interests reached €2.97bn at September 30, 2026, compared with €2.95bn at June 30 and €2.93bn at December 31, 2025. Shareholders’ equity stood at €2.75bn, up from €2.73bn at the end of June and €2.71bn at the end of 2025.