The latest report from the Central Bank of Cyprus (CBC) reveals that the focus keyword, Cyprus bank profits, dipped to €1.02 billion for the year ending December 31, 2025. This marks a €165 million decrease, or 13.9 per cent, from €1.18 billion in 2024.
This decline in profitability was primarily driven by a decrease in net interest income (NII) across the banking sector. Despite this downturn in earnings, the overall health of the banking sector showed resilience, with total assets growing significantly.
Cyprus bank: Asset Growth Signals Stability
In a positive twist, Cyprus’ banking sector saw total assets rise to €69.96 billion by December 2025, an increase of €4.35 billion or 6.6 per cent over the previous year. The CBC attributed this growth to an uptick in loans and advances, as well as debt securities.
Improvement in Capital Adequacy
Another notable aspect of the CBC’s report was the improvement in the Common Equity Tier 1 (CET1) ratio, which saw a rise of 1.1 percentage points, reaching 25.8 per cent in December 2025. This increase in capital adequacy was primarily due to a rise in CET1 capital and a reduction in total risk exposure.
European Context and Challenges
The performance of Cyprus banks comes against the backdrop of broader European banking trends. According to the European Banking Federation (EBF), the total number of credit institutions in Europe fell to 4,834 in 2024, reflecting a 1.9 per cent decline compared to the previous year. This consolidation trend has also affected the physical presence of banks, with a 2.5 per cent yearly drop in the number of bank branches.
Lending and deposit activity across the EU remained relatively stable, with total loans increasing by 0.12 per cent to €26.84 trillion and household deposits rising by 3.90 per cent. Total assets held by EU credit institutions continued their upward trend, reaching €45.1 trillion.
Resilience Amidst Growing Risks
The European Banking Authority (EBA) highlighted that EU and EEA banks maintain strong capital, liquidity, and asset quality despite ongoing geopolitical tensions and market volatility. However, the EBA also pointed out that rising global tensions and increasing sovereign debt levels have added to the sector’s exposure to external shocks.
Operational risks, including cyber threats and legal challenges, continue to pose significant concerns for banks. Although liquidity levels remain well above regulatory requirements, the shift towards sovereign assets has made banks more sensitive to market fluctuations.
Looking Ahead
While the current figures indicate a stable banking environment, analysts caution that a prolonged period of geopolitical turmoil could lead to increased market volatility and capital flight, as stakeholders look to safeguard their assets. With the situation in the Middle East evolving, the potential economic and financial ramifications for the banking sector remain to be seen.
