Cyprus’ banking sector recorded lower profitability in the second quarter, with exchange-rate losses accounting for much of the decline. The central bank said exchange differences were the main factor behind the weaker result, showing the impact currency movements can have on earnings.
Balance Sheet Growth Continues
Despite softer profitability, total banking-sector assets increased by €1.15 billion, or 1.6%, between March and June, reaching €71.38 billion at the end of the second quarter.
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The Central Bank of Cyprus said the increase was driven mainly by higher loans and advances and growth in debt securities. Lending and investment activity therefore continued to support balance-sheet expansion despite weaker earnings.
Capital Strength Improves Further
Capital adequacy also strengthened during the quarter. The sector’s Common Equity Tier 1 (CET1) ratio rose to 25.5% in June from 25.1% in March.
The CBC attributed the 0.4 percentage point increase mainly to CET1 capital growing faster than total risk exposure. The higher ratio indicates that capital levels increased relative to the sector’s risk exposure.
Sector-Wide Trends Remain In Focus
The figures provide a consolidated view of Cyprus’ banking sector rather than individual institutions, so they show industry-wide trends rather than the performance of specific lenders.
By the end of June, banks had lower profitability but higher assets and stronger capital ratios. Exchange-rate volatility remained a source of pressure on earnings.
