The Bank of Cyprus has shown remarkable profitability and capital strength following one of the most extensive restructurings in Europe over the past decade. A report from Eurobank Equities highlights this transformation, backing the institution with a buy recommendation and setting a target price of €10 per share. This valuation suggests a price-to-tangible book value (P/TBV) ratio of 1.47 times for 2027, making it a compelling option for investors.
Bank of: Improved Financial Metrics Highlight Success
According to the findings shared by Greek business outlet Newmoney, the Bank of Cyprus has significantly reduced its non-performing loan (NPL) ratio, which peaked at a staggering 63 per cent in 2015, to just 1.7 per cent in the first half of 2025. This improvement positions the bank among the lowest NPL ratios in Europe, with a coverage ratio of 124 per cent.
The bank’s successful de-risking of its balance sheet, coupled with a high sensitivity to interest rates during the tightening cycle of 2022–2023, has substantially boosted its profitability. In 2024, the return on tangible equity (RoTE) reached an impressive 21.4 per cent, with the first half of 2025 showing a RoTE of 18.4 per cent, significantly above the 14–15 per cent average of its Greek and regional competitors.
Strong Capital Position and Dividend Yield
The Common Equity Tier 1 (CET1) ratio stands at 20.6 per cent, excluding deferred tax credits (DTCs), while the bank has managed to maintain a cost-to-income ratio of approximately 36 per cent, notably lower than the regional average of 42 per cent. This operational discipline has positioned the Bank of Cyprus as one of the most attractive income-generating banks in Europe, particularly following the reinstatement of dividends.
Eurobank Equities noted that the Bank of Cyprus now offers an enticing dividend yield of 8–9 per cent, appealing to income-focused investors. The bank commands a dominant market position, holding roughly 80 per cent of the two-bank market in Cyprus, which enhances its pricing power.
Interest Rates and Revenue Projections
As of mid-2025, the average one-year time deposit rate in Cyprus was reported at 1.1 per cent, compared to 1.8 per cent in the eurozone. The spreads on new housing and business loans were projected at 2 per cent and 2.8 per cent, respectively, sustaining a net interest margin (NIM) of around 2.5 per cent until 2027, outpacing the regional average of 2 per cent.
With interest rates expected to normalise between 2.0 and 2.25 per cent from 2025 to 2027, the bank’s net interest income (NII) is anticipated to remain near €750 million throughout this period. The projections indicate a stabilisation in 2026, with a 5 per cent increase expected in 2027, driven by margin discipline and volume growth.
Diverse Revenue Streams Enhance Stability
Non-interest income, which currently accounts for 28 per cent of total revenue, is bolstered by various operations including credit cards, insurance services through Eurolife and General Insurance—enhanced by a partnership with Ethniki Insurance—payments via JCC, and wealth management services. These diverse revenue streams contribute to the stability of the bank’s earnings.
Forecasts suggest that the Bank of Cyprus could achieve pre-provision profits ranging from €581 million to €593 million between 2025 and 2027, with a RoTE projected between 15 and 15.7 per cent, reflecting its strong operational performance.
Shareholder Returns and Growth Potential
With a CET1 capital ratio of 20.6 per cent, well above the internal target of 13 per cent, the bank holds €670 million in surplus capital, representing about 18 per cent of its market capitalisation, which is expected to grow to €1 billion by 2027. This surplus provides the capacity for further growth, increased dividends, and selective acquisitions.
In 2025, the Bank of Cyprus returned €241 million to shareholders, equivalent to 50 per cent of its 2024 profits, through dividends and share buybacks, marking the payment of its first interim dividend of the decade at €0.20 per share. The bank’s payout policy, set at 50–70 per cent—70 per cent for 2025—alongside an annual tangible book value growth of approximately 5 per cent, reinforces its position as a shareholder-friendly institution.
Attractive Valuation Relative to Peers
Despite its successful transformation and improved market perception, the Bank of Cyprus shares currently trade at just 1.27 times its projected 2025 tangible book value, which is on par with Greek peers but lower than Eurobank (1.38x) and the National Bank of Greece (1.47x). This valuation exists even as it demonstrates equally strong fundamentals and profitability.
The noteworthy dividend yield of 8–9 per cent makes the stock an attractive high-yield investment, particularly as its valuation remains below that of regional banks, which average 1.5 times, and the SX7E index at 1.35 times. The Bank of Cyprus not only delivers comparable or higher RoTE but also offers a dividend yield exceeding 8 per cent, against the 6–7 per cent yield of the index.
Future Outlook and Institutional Interest
Since its relisting on the Athens Stock Exchange in September 2024, the Bank of Cyprus share price has surged by 55 per cent, supported by increased liquidity with an average daily trading volume surpassing €6 million and a lower cost of equity. The report indicates that greater institutional participation and potential inclusion in the MSCI indices could provide further re-rating potential for the stock.
