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Banks Focus On Costs And Profitability As Interest Rates And Risks Persist

by THEFUTURE.TEAM

March 24, 2026

Banks are entering the next three-year cycle focused on reducing operating costs while maintaining stable profitability. This approach supports dividend distribution and strengthens balance sheets, liquidity and capital positions.

Geopolitical Risks And Banking Strategy

Internal strategy remains important, but performance will also depend on external conditions, particularly developments in the Middle East. Ongoing uncertainty in the region could affect market conditions and indirectly impact banking activity.

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Inflation, Interest Rates, And Economic Dynamics

Inflation and interest rates remain key factors for the sector. Prolonged geopolitical tensions could push energy prices higher and disrupt supply chains, adding to inflationary pressures. In that scenario, the European Central Bank would face more complex policy decisions. Interest rates could remain elevated or increase further, depending on inflation trends.

High Interest Rates: A Double-Edged Sword

Higher interest rates are expected to support banks’ net interest income and overall profitability. At the same time, they may increase pressure on borrowers and raise the risk of non-performing loans.

Bank of Cyprus CEO Panicos Nicolaou said the bank’s loan portfolio remains supported by strong liquidity, particularly in sectors such as tourism, where clients maintain cash reserves.

Profitability In A Challenging Environment

Data from the Central Bank of Cyprus show that profitability declined slightly in 2025, mainly due to lower net interest income. However, the broader trend reflects resilience. Periods of low interest rates have been linked to weaker earnings, while higher rates in 2023 and 2024 supported stronger revenue growth.

Diversifying Revenue Streams

Banks are also expanding beyond interest income. Investments in areas such as insurance are aimed at creating more stable revenue streams and reducing dependence on monetary policy.

Outlook: The Impact Of Geopolitical Shocks

According to Jefferies, geopolitical developments could push inflation and interest rates higher. A 50 basis point increase in rates could raise pre-tax profits by around 3%, although credit risk costs could increase by approximately 17%. The impact is expected to vary across banks. Institutions with greater exposure to housing and consumer lending may benefit more, while those linked to industrial sectors could face higher risk. Greek banks, including Piraeus Bank, Eurobank, National Bank and Alpha Bank, are projected to see pre-tax profit increases ranging from around 2.5% to 5.8% under such conditions.

Banks are adjusting their strategies to balance profitability with risk, as interest rates and geopolitical developments continue to shape the outlook for the sector.

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Greek Retail Powerhouse Expands Into Six Strategic International Markets

Greek retail titan Jumbo has announced an ambitious expansion strategy that positions the company to extend its international footprint beyond its established strongholds in Cyprus and Southeast Europe. In a strategic agreement with the Balfin Group, the retailer is set to penetrate six new markets, including Ukraine, Georgia, Armenia, Azerbaijan, Kazakhstan, and Uzbekistan.

Strategic Global Expansion

The agreement builds on the existing cooperation between Jumbo and Balfin Group, which previously supported the retailer’s expansion into markets including Albania, Kosovo, Bosnia and Herzegovina, Montenegro and Moldova. According to the company, the next phase of expansion will include a greater degree of local operational management across the new markets.

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Enhanced Logistics And Supply Chain Capabilities

To support the expanded international network, Balfin Group is also developing a new central logistics hub in China. The facility is expected to strengthen sourcing, warehousing, transportation and distribution operations across the Caucasus region, Central Asia and Ukraine. Previously, Jumbo relied primarily on logistics infrastructure based in Greece to support franchise operations across Southeast Europe.

Sustainable Growth And Robust Financial Foundation

Alongside its franchise expansion strategy, Jumbo continues focusing on organic growth across existing markets. The retailer currently operates 89 physical stores, including 53 in Greece, six in Cyprus, 10 in Bulgaria and 20 in Romania, in addition to its e-commerce operations. A new store in Baia Mare is expected to open by the end of October.

Jumbo also operates 46 franchise stores across seven countries, including Albania, Kosovo, Serbia, North Macedonia, Bosnia and Herzegovina, Montenegro and Israel. According to the company, its expansion strategy continues to be supported by strong liquidity levels and the absence of bank borrowing.