profit payout — The Bank of Cyprus (BoC) has set ambitious financial targets, aiming for a complete profit payout to shareholders by 2027. During a recent investor presentation, the bank outlined its updated capital allocation plans and financial objectives, signalling a strong commitment to delivering high returns.
Profit payout: Strategic Investment in Wealthyhood Ltd
In conjunction with its financial updates, the Bank of Cyprus announced a significant investment of €6 million in Wealthyhood Ltd, solidifying its role as a strategic partner and major shareholder. GlobalWealth Group PLC, which operates Wealthyhood, confirmed this partnership, highlighting the bank’s ongoing efforts to diversify its portfolio.
Financial Targets and Shareholder Returns
The bank’s updated guidance reflects a robust operating performance and disciplined management of its balance sheet. Notably, BoC expects to achieve a mid-teens reported return on tangible equity (ROTE) by 2028, indicating a projected ROTE of over 20% based on a 15% CET1 ratio. This financial strength will support organic capital generation of 350 to 400 basis points annually from 2026 to 2028.
Interest Income and Loan Growth Projections
As interest rates normalise, the bank anticipates net interest income to stabilise in 2026, with an expected average European Central Bank deposit facility rate of 2%. The bank projects a loan growth of approximately 4% annually, supported by both retail and corporate segments, as well as cautious international expansion.
Focus on Non-Interest Income and Cost Discipline
In addition to interest income, the Bank of Cyprus aims to enhance its capital-light recurring non-interest income, which includes net fee and commission income. The bank expects this to grow at a compound annual growth rate of around 4%, aligned with economic activities and an increase in transactions.
Cost management remains a priority, with the cost-to-income ratio projected to hover around 40% throughout the planning period. The bank has set a normalised cost of risk target of 40 to 50 basis points, although it expects to operate at the lower end of this range.
Strong Capital Levels and Shareholder Distributions
As of December 31, 2025, the group reported a CET1 ratio of 21.0%. Over the medium term, it is targeting a CET1 ratio of around 15% and plans to deploy surplus capital towards organic growth, investments, and shareholder distributions, aiming for a payout ratio of 70%.
For 2026, the bank anticipates an ordinary dividend based on this 70% payout, coupled with a potential top-up dividend of up to 20%. This could lead to total distributions of up to 90% of adjusted recurring profitability. By 2027 and 2028, the group aims for a similar 70% ordinary payout, supplemented by top-up dividends of up to 30%, potentially enabling annual distributions of up to 100% of adjusted recurring profitability.
Investment and Market Expansion Plans
The partnership with Wealthyhood Ltd aims to democratise investing across Europe, focusing on the development of AI-driven capabilities for personalised investment solutions. The collaboration is also set to enhance Wealthyhood’s offerings in the business-to-business (B2B) segment, thereby expanding its market reach beyond the UK and Greece.
Both Bank of Cyprus and GlobalWealth Group PLC have clarified that their operational and commercial activities will remain independent, ensuring that the partnership does not imply the provision of regulated services by the bank.
