The overall solvency ratio of the Cypriot banking sector stood at 21.2 per cent at the end of September 2022, its highest level since the Central Bank of Cyprus (CBC) began collecting data.
According to the main aggregated financial indicators for the private banking sector, published by the central bank this week, the indicator reflects an improvement of 60 basis points, compared to the second quarter of 2022.
In addition, on an annual basis, there has been an increase of 90 basis points.
The Common Equity Tier 1 (CET1) marked an improvement of 0.5 per cent, compared to June 2022, reaching 18 per cent, with the annual improvement amounting to 80 basis points.
The improvement in the capital ratio of the banking sector mainly reflects the reduction of risk in the balance sheets of Cypriot banks.
According to the data, a key ongoing challenge for banks is improving their efficiency, as the cost-to-income ratio continued its upward trend, climbing to 82.6 per cent at the end of September 2022, compared to 71.7 per cent at the end of June of the same year.
In terms of sources of income, net interest income at the end of September accounted for 74.3 per cent of total income, compared to 70.1 per cent in the previous quarter, reflecting the normalisation path of the ECB’s monetary policy, which began in July 2022.
Net fee and commission income stood at 29 per cent at the end of September, up 0.3 per cent from the previous quarter, and 4 per cent higher when compared to the same quarter of 2021.
In terms of the Cypriot banking sector’s assets, there is a convergence of cash deposited in central banks with total loans, in terms of total assets.
At the end of September 2022, total loans accounted for 41.2 per cent of total assets, compared to 41.5 per cent at the end of June.
Cash that banks had deposited with central banks accounted for 37.3 per cent of total assets, compared to 36.9 per cent at the end of June of the same year.
This convergence reflects the continuous deleveraging recorded in the banking sector, after the financial crisis of 2012 -2013.
Indicatively, in September 2012, deposits in central banks corresponded to only 5.5 per cent of total assets, while total loans corresponded to 79.6 per cent.