The Cypriot banking sector experienced a decline in profitability, an increase in total assets, and a further strengthening of capital adequacy, according to a report from the Central Bank of Cyprus (CBC).

Specifically, the CBC reported on Wednesday that the sector’s profitability fell by €82 million in the first quarter of 2025, dropping from €346 million in March 2024 to €264 million in March 2025.

“This decrease is mainly attributed to a reduction in net interest income,” the central bank said.

Despite the decline in profits, total assets in the banking sector grew by €422 million, a rise of 0.6 per cent, in the first quarter of the year.

Assets rose from €65.60 billion in December 2024 to €66.02 billion in March 2025, the report showed.

The central bank explained that the increase was primarily driven by higher volumes of loans and advances, as well as debt securities.

At the same time, the Common Equity Tier 1 (CET1) capital ratio improved by 1.3 percentage points, rising from 24.7 per cent at the end of 2024 to 26.0 per cent in March 2025.

“This increase is mainly due to a reduction in total risk exposure, which offset a modest decline in the absolute amount of CET1 capital,” the CBC said in its announcement.

The figures suggest that while profitability has softened, the Cypriot banking sector continues to strengthen its balance sheet and maintain robust capital levels.

Meanwhile, the non-performing loans (NPL) ratio in the Cypriot banking sector recorded a marginal decrease to 6.1 per cent at the end of March 2025.

At the same time, the coverage ratio of NPLs through credit loss provisions increased to 60.5 per cent.

The central bank reported that the NPL ratio declined slightly from 6.2 per cent at the end of December 2024.

The CBC attributed the change mainly to repayments, upgrades to performing loan categories, loan write-offs, and currency fluctuations.

“The NPL ratio of the banking sector declined marginally to 6.1 per cent at the end of March 2025,” the central bank said.

It added that “the improvement was mainly due to repayments, positive migration of loans to performing status, write-offs, and foreign exchange movements”.

Moreover, the NPL coverage ratio strengthened to 60.5 per cent in March 2025, compared with 59.9 per cent in December 2024.

The CBC explained that this increase reflects a more robust provision buffer to absorb potential losses from bad loans.

In terms of restructured loans, total exposures that had undergone restructuring stood at €1.3 billion at the end of March 2025.

Out of this amount, the CBC continued, loans valued at €0.7 billion remained classified as non-performing.

The latest figures signal continued efforts to clean up banks’ loan books, maintain prudent provisioning, and support financial sector resilience.