Panayiotis Rougalas
Bank of Cyprus says it is keeping a close watch for potential acquisitions that could add value to the group, focusing on three main areas: insurance, asset management and fintech.
Speaking during an investor update on Wednesday, the bank’s leadership said its strong capital position gives it the flexibility to pursue strategic investments when the right opportunities arise.
CEO Panicos Nicolaou and Executive Director of Finance Eliza Livadiotou told investors that the bank intends to keep its options open for acquisitions and partnerships, using its solid capital base to support growth.
One example, they noted, is the bank’s recent investment in Wealthyhood Ltd, a platform designed to make investing accessible and easy for everyone, regardless of their experience or the amount of capital they have available. The bank has also previously invested in Ethniki Insurance, a move that executives said had only a small capital impact.
Bank officials stressed that any acquisitions would be targeted and would move forward only if they meet the group’s investment criteria. When asked whether a new acquisition is currently on the table, management said that if there is any development worth announcing, it will be disclosed at the appropriate time.
Growth strategy and targets
According to the bank’s updated strategy and financial targets presented during the investor briefing, net interest income is expected to stabilize in 2026 as interest rates begin to normalize. The deposit facility rate of the European Central Bank is expected to average around 2% next year.
From 2026 to 2028, net interest income is projected to grow by about 3% annually, driven largely by loan growth of roughly 4% per year over the same period.
The bank expects this growth to come from increased lending in Cyprus to both households and businesses, supported by the anticipated expansion of the Cypriot economy. It also plans a careful expansion of its international loan portfolio, which is expected to reach about €2 billion by the end of 2028, up from €1.4 billion in December 2025.
At the same time, the group plans a gradual increase in its bond portfolio to around 22% of total assets by 2028, depending on market conditions, while keeping deposit levels and deposit costs broadly stable.
As a result, the bank expects its net interest margin to remain above 270 basis points in 2026, before gradually improving. This will largely reflect a better mix of interest-earning assets as excess liquidity is gradually channeled into lending and bond investments.
Expanding other sources of income
The group is also aiming to boost recurring non-interest income, which requires less capital. This includes revenue from fees and commissions, profits from insurance operations and gains from customer foreign-exchange trading.
These recurring revenues are expected to grow by about 4% annually between 2026 and 2028, in line with economic activity and higher transaction volumes. Profit from insurance operations alone is projected to rise at a high single-digit rate over the same period.
The bank expects its cost-to-income ratio to remain around 40% during 2026-2028.
Dividends and capital strength
For 2026, the group is targeting a regular dividend payout of 70%, which is the upper end of its distribution policy, along with an additional dividend of up to 20%, bringing the total payout ratio to as much as 90%.
For 2027 and 2028, the bank aims to maintain the regular 70% payout while adding extra dividends of up to 30%, potentially pushing the total annual payout ratio to 100%.
Most distributions are expected to be paid in cash, including interim dividends, though share buybacks may also be considered when appropriate.
As of December 31, 2025, the bank’s Common Equity Tier 1 (CET1) capital ratio stood at 21%, after generating capital organically at an average rate of 440 basis points per year between 2023 and 2025.
The group has set a medium-term CET1 target of around 15% and says it has established clear and disciplined priorities for using its capital as it gradually moves toward that goal.
