articles | 22 September 2015

Banks maintain profitability as interest margin narrows

Banks in Cyprus saw their net interest margin narrow to 2.8% in June 2015 from 3% in March and 3.2% in June 2014, the Central Bank of Cyprus said.

The narrower margin, caused by a decline in interest rates in the Cypriot banking system which accelerated in February following a regulatory decision, did not prevent banks to maintain their profitability, as reflected in the averagereturn on equity ratio which fell to 5.2% in June from 5.7% the quarter before and more than doubled compared to a year ago, the central bank said in a statement on its website today. The core equity tier 1 capital ratio in the banking system rose to 15.5% in June from 14.7% in March and 13.3% a year before, which also reflects the injection of fresh capital in Bank of Cyprus and Hellenic Bank in the second half of 2014.

The net interest income as a percentage of total assets fell in June to 2.7% from 2.8% in March and 3% a year before, the central bank said. An increase in net non-interest income partly offset lost income from interest, as it rose as a percentage of total assets to 1.2% in June from 0.6% in March and 0.9% a year before.

Also as a percentage of total assets of banks in Cyprus, interest expenses and total operating costs remained unchanged in June at 1.7% and 1.4% compared to March and dropped from2% and 1.5% compared to June 2014 respectively, the central said. Staff costs was more than half of total operating expenses.

The cost to income ratio in June dropped in the Cypriot banking system to 35% from 41% in March and 37% in June last year, the banking supervisor said. Operating profits as a percentage of total assets rose 2.5% at the end of the first half of the year from 2% at the end of the first quarter and remained unchanged compared to a year before.

Impairments per total assets rose to 1.7% in June from 1.3% in March and fell from 1.8% in the respective month of 2014, the central bank said.

Source: Cyprus Mail

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