The Bank of Cyprus on Tuesday announced that it generated a €95 million after-tax profit for the first quarter of 2023, a significant improvement over the corresponding period of 2022, when it recorded a profit of €17 million.

In addition, it posted a Net Interest Income (NII) of €162 million, reflecting a rise of 127 per cent year-on-year, a result which has been supported by interest rate hikes.

The bank also saw its return on tangible equity (ROTE) reach 21.3 per cent, up from 4 per cent in the same quarter of 2022, noting that this is linked to higher-than-expected rates, combined with the anticipated increases in deposit costs not yet materialising.

Total operating expenses fell by 3 per cent year-on-year, while its cost-to-income ratio decreased by 26 per cent year-on-year, dropping to 34 per cent.

Crucially, the bank has also proceeded with the resumption of dividend payments for the first time in 12 years, paying a €0.05 dividend per ordinary share.

“This year we have achieved a significant milestone with the delivery of our longstanding intention to resume dividend payments after 12 years,” Bank of Cyprus CEO Panicos Nicolaou said, noting that “this represents an important step in the group’s journey of delivering sustainable profitability and shareholder returns”.

“We have proposed a dividend of €0.05 per ordinary share, in respect of 2022 earnings, equivalent to a 14 per cent payout ratio on adjusted recurring profitability or 31 per cent based on profit after tax as reported in 2022 annual report,” he added.

What is more, Nicolaou noted that “going forward, dividends are expected to build prudently and progressively towards a payout ratio in the range of 30-50 per cent”.

The Bank of Cyprus CEO explained that the dividend decision was supported by the bank’s strong start to the year with the performance recorded during the first quarter being ahead of its full-year targets.

“The growth in net interest income was underpinned by interest rate rises as well as a continued modest deposit pass-through level,” Nicolaou said.

“Our non-interest income of €72 million, which increased by 8 per cent on the prior year, remained a significant contributor to our profitability and diversified business model,” he added.

Despite elevated inflation, Nicolaou pointed out, the bank’s cost base was 3 per cent lower when compared to the previous period of time. He attributed this to the bank’s recent actions to improve efficiency.

“As a result, the cost-to-income ratio, excluding levies and contributions, stood at 34 per cent, compared to 60 per cent in the prior year,” he said.

“Our cost of risk remained broadly flat at 44 bps reflecting our resilient credit portfolio quality,” he added.

He also noted that “asset quality is in line with our targets, reflected in an NPE ratio of 3.8 per cent, and an improved level of coverage of 73 per cent as at the quarter end”.

In terms of the bank’s capital and liquidity, first-quarter results show a CET1 ratio of 15.2 per cent and a total capital ratio of 20.3 per cent.

In addition, the bank has a highly liquid balance sheet, with €9.2 billion placed at the European Central Bank (ECB).

“Our capital position remains robust and comfortably in excess of our regulatory requirements,” Nicolaou stated.

“Our liquidity position remains robust, stemming from our highly liquid balance sheet and growing retail-funded deposit base,” he added.

In its presentation, the bank also highlighted the fact that Cyprus’ economic outlook remains strong, with the economy expected to grow by approximately 2.8 per cent in 2023, higher than the Eurozone average.

“Against the backdrop in the global and European economic environment, the Cypriot economy continues to demonstrate its strength with GDP forecast to grow by approximately 2.8 per cent in 2023, which is expected to outperform the Eurozone average,” Nicolaou said.

“As the largest financial group in Cyprus, we continued to support the economy by extending a seasonally strong €0.6 billion of new loans during the first quarter of 2023, an increase of 41 per cent on the prior quarter, whilst maintaining strict lending criteria,” he added.

Furthermore, Nicolaou pointed out that the bank’s performing loan book grew by 1 per cent, both in terms of quarter-on-quarter and year-on-year, rising to €9.9 billion.

Nicolaou wrapped things up by stating that 2023 is “providing evidence of the group’s transformation into a strong, diversified, well-capitalised and sustainably profitable banking and financial services group”.

“We have closed the chapter on the restructuring effort of recent years and have started a new chapter in which we aim to provide sustainable returns to shareholders, while continuing to serve our customers, support the Cypriot economy, and contribute to the community,” he said.

“Our positive set of financial results this quarter provides the foundations to help us deliver against our targets,” he added.

Finally, the bank stated that it will provide a further update on the group’s outlook at its investor event on June 8, 2023.