Newsroom / CNA
The Cypriot banking system's net interest income (NII) saw a remarkable doubling in the first half of 2023, marking an annual increase of 100%, primarily due to the ongoing rate hikes by the European Central Bank (ECB) aimed at tackling rising inflation.
According to aggregated profitability data for the first half of 2023 released by the Central Bank of Cyprus (CBC) on Friday, NII for Cypriot banks surged to €864.6 million, compared to €432 million in the first half of 2022. The relatively low NII in the first half of last year is attributed to the ECB's rate hikes, which began in July 2022, boosting income for commercial banks.
For the second quarter of 2023, NII amounted to €468.5 million, up from €396 million in the first quarter of the same year, reflecting the impact of continued ECB rate hikes.
Total interest income for the first half of 2023 exceeded €1 billion, approaching the total interest income for the full year 2022, which stood at €1.18 billion. Compared to the first half of the previous year, total interest income in the first half of 2023 surged by 98%.
Additionally, interest expenses for the Cypriot banking system rose by an annual 92%, reaching €209.1 million in the first half of 2023, compared to €109.1 million during the same period the previous year. Interest expenses in the second quarter of this year more than doubled compared to the previous quarter, marking a quarterly rise of 130%.
The increase in interest expenses by Cypriot banks is attributed to the moderate rise in deposit interest rates and the significant increase in yields of funding instruments issued by banks, including MREL bonds and Tier 2 bonds.
Income from fees and commissions remained largely unchanged in the first half of 2023, amounting to €178.7 million, compared to €177 million in the same period last year, according to the CBC.
Moreover, in line with increased income, taxation paid by Cypriot banks surged significantly to €76 million, marking an annual increase of 221%. Taxation in the first six months of this year exceeded the amount paid throughout the entirety of the previous year, which totaled €64 million.
The CBC reported that net profit for the Cyprus banking system in the first half of 2023 reached €609 million, signifying a substantial increase of 1,054% compared to the first half of the previous year, which had not been impacted by the ECB's rate hikes.