cyprus banking — cyprus banking — The profitability of Cyprus’ banking sector fell significantly in early 2026, showing a decline of €62 million. According to updated aggregate figures released by the Central Bank of Cyprus (CBC) on Friday, profits dropped by 23.6 per cent during the first quarter, down to €202 million from €264 million in March 2025.
- The CBC attributed this decrease primarily to a reduction in net interest income (NII). Additionally, losses arising from foreign exchange differences contributed to the lower profitability figures.
Cyprus banking: Factors Behind the Profit Drop
The CBC attributed this decrease primarily to a reduction in net interest income (NII). Additionally, losses arising from foreign exchange differences contributed to the lower profitability figures.
Asset Growth Amid Profit Decline
Interestingly, while profits took a hit, the total assets of the banking sector actually increased by €274 million, marking a rise of 0.4 per cent. As of March 31, 2026, total banking sector assets stood at €70.23 billion, up from €69.96 billion at the end of December 2025.
Loans and Debt Securities Drive Asset Increase
This asset growth was largely due to higher levels of loans and advances, alongside an increase in holdings of debt securities. The CBC noted that these factors played a crucial role in offsetting the losses seen in profit.
Capital Adequacy Ratio Declines
Compounding the challenges faced by the banking sector, the Common Equity Tier 1 (CET1) ratio also saw a decline of 0.7 percentage points, dropping to 25.1 per cent compared to 25.8 per cent at the end of December 2025. The CBC explained that this decrease was primarily due to an increase in the total risk exposure amount, which overshadowed the rise in Common Equity Tier 1 capital.
Implications for the Banking Sector
The central bank’s report reflects a complex picture for the Cypriot banking sector, balancing between declining profitability and growing assets. As banks navigate these changes, the focus will likely shift towards stabilising net interest income and managing risk exposures effectively.
