Cyprus’ banks are the backbone of the community. Their ongoing investment in both people and businesses has helped many companies flourish, in both good and bad times. The Covid-19 pandemic urged banks to rise above the storm and be a beacon of stability and guidance to customers in the most challenging of times.
The banking system in Cyprus is a latticework of financial markets that help drive the daily activities of our community. The system needs to remain strong, and cannot fail, especially during times of crisis such as the one we are currently witnessing. More importantly, banks need to see customers as people, not just numbers. Knowing your customer fosters greater customer loyalty.
Banks have a huge impact on the economy, and on society. Not to mention that they also have an important social responsibility. Most institutions take their Corporate Social Responsibility (CSR) very seriously; consumer trust is important for building long-term relationships, reducing customer churn, and even being able to offer personalised service and solutions that work to build those relationships. Positive social engagement provides positive customer outreach. Consumers actively respond to organisations engaging in CSR. It also builds internal trust, employee relationships, and boosts creativity.
Banks are instrumental in community development. To stay relevant in a quickly evolving world, banks need to place emphasis on building relationships with customers through digital channels. Banking extends beyond money alone, and Cyprus’ banks must explore ways to differentiate themselves, cultivate loyal customers, and elevate their brands.
Two key players in Cyprus’ banking landscape, Bank of Cyprus, and Hellenic Bank, insist their key objective is to serve the community, at the same time promote economic growth. Both institutions have an essential role to play in sustainable development and help lay the foundation for businesses to thrive.
The banking sector in Cyprus is undergoing a radical shift, and is faced with many industry challenges that include new competition from FinTech startups and companies, digital transformation, regulatory compliance, rising expectations from consumers, effective, fast and easy-to-use mobile app experience, investing in the latest technology-driven security measures to keep sensitive customer data safe, and benchmarking effective practices to address market demands while improving customer experience.
However, reducing the level of non-performing loans for financial stability remains a top priority, as these loans weigh on banks’ profitability and absorb valuable resources, restricting credit institutions’ ability to grant new loans.
Bank of Cyprus is the largest lender on the island, and is currently exploring strategies to accelerate de-risking, and reducing the non-performing loan ratio to a single digit by the end of 2022. Since its peak in 2014, Bank of Cyprus has reduced its non-performing exposure by 89% to 1.6 billion euros and cut its NPE ratio by 48 percentage points.
Hellenic Bank, the island’s second largest credit institution, is still on course to meet its long-term objectives, following the bank’s report indicating an after-tax profit of €21m for the first half of 2021. Concerning non-performing loans, Hellenic Bank’s non-performing exposure’s ratio to gross loans is at 15.1%, while its net NPE to total asset ratio stands at 2.2%. Furthermore, the bank’s NPE ratio stood at 59.4% at the end of June 2021.
Both Bank of Cyprus and Hellenic Bank unveiled new targets regarding the reduction of non-performing loans as part of their strategic plans. Bank of Cyprus aims to reduce its ratio to less than 10% by the end of 2022, and around 5% in the medium term. Similarly, Hellenic Bank plans to reduce its index to single digits in the medium term.
The future of Cypriot banking is in customer experience and community relationships. Addressing the many industry challenges will ultimately change the game in many ways, however, it boils down to how banks can better serve the community and its members.
Most banks in Cyprus engage in selected actions focusing on collaboration, quality, and sustainability. Bank of Cyprus’ mission extends itself beyond its corporate role as a banking organisation. The bank aims to make a difference by elevating the Cyprus society and contribute to its continued socioeconomic development by remaining a strong driving force of sustainable development in the country.
As a result of the Covid-19 pandemic, Bank of Cyprus created a support network that includes businesses, non-governmental organisations, and organised groups, working together to assist the local community through numerous products and services.
Hellenic Bank is committed to having a long-lasting, positive impact on society. The bank aims to tackle social change and green transition by drafting strategies that will contribute to a more equitable and sustainable society. Through financial contribution and volunteering, Hellenic Bank also aims to support valuable community projects.
This is what distinguishes our Cypriot banks featured in this edition of Cyprus 4.0. Both institutions aim to become more resilient, safe, and sustainable institutions, which support the development of the Cypriot economy and the social sector including health, cultural and creative industries, education, and housing but also social enterprises and vulnerable groups.