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24 May, 2024
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Banks eye over 1 billion euro profits in 2023

Riding high on ECB's ''golden'' interest rate hikes

Panayiotis Rougalas

Panayiotis Rougalas

Cypriot banks, including the Greek bank, are poised to rake in substantial profits for 2023, benefitting from the European Central Bank's interest rate hikes.

With the Greek bank already reporting a nine-month profit of 240 million euros and a projected year-end figure of 350 million euros, the financial landscape looks promising. Bank of Cyprus and Eurobank Cyprus are also in the spotlight, showcasing their profitability amid favorable market conditions.

ECB's Monetary Tightening Cycle Ends, Banks Prepare for Potential Shifts

As the European Central Bank signals the conclusion of its monetary tightening cycle, Cypriot banks, such as Astrobank and Alpha Bank of Cyprus, anticipate increased profits in 2023 compared to the previous year. While interest rates stabilize, these banks leverage their strategic positioning and past investments to navigate potential challenges in the evolving financial landscape.

Navigating Growth with Liquidity Strength and Strategic Investments

The Greek bank stands out with a robust Liquidity Coverage Ratio (LCR) at 506%, showcasing its solid liquidity position. By placing billions in the European Central Bank, these banks strategically capitalize on interest rate increases to bolster profitability. The Bank of Cyprus reports significant improvements, with loan interest income doubling and a net interest income of $572 million for the nine months ending September 30, 2023.

Seizing Opportunities and Addressing Financial Gaps

The surge in profits provides Cypriot banks with a unique opportunity to address financial gaps and optimize their business models. Recognizing the potential decrease in funds by 2024-2025, banks are urged to strategically invest their profits to meet internal objectives and regulatory expectations. Despite a slight decrease in lending—a global phenomenon—banks are gearing up to navigate this new reality.

Strategic Defense Measures Against Potential Rate Reductions

In anticipation of potential interest rate reductions, the Bank of Cyprus is proactively implementing measures to fortify the resilience of net interest income. These include increased investments in longer-term fixed-rate bonds, participation in reverse repos, offering fixed-rate lending, and engaging in interest-rate swaps. This proactive approach aims to shield the bank from the impact of future interest rate fluctuations.

These developments underscore the dynamic landscape for Cypriot banks, requiring agility and foresight to navigate the evolving financial environment.

[This article was translated from its Greek original]

Cyprus  |  banks  |  money  |  economy

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