The Cyprus Development Bank Group (CDB) on Wednesday reported total net income of €17.2 million for 2025, marking a 25 per cent decline when compared with the €22.8 million recorded in 2024.

The drop in profitability was primarily driven by a sharp fall in net interest income, reflecting the impact of lower interest rates and a slight contraction in interest-earning assets.

Net interest income stood at €13.8m, down 28 per cent year-on-year from €19.1m, as interest income fell significantly.

Interest income declined by 31 per cent, from €25.3m in 2024 to €17.5m in 2025, due to lower rates and a marginal reduction in average interest-earning assets.

Interest expense decreased by 39 per cent, from €6.2m to €3.8m, largely reflecting a reduction in interest paid on client deposits, which fell by 34 per cent from €4.9m to €3.2m following deposit repricing.

Interest expense on loan capital also declined to €0.5m from €1.1m, due to the non-payment of interest on the perpetual unsecured subordinated note.

The group’s net interest margin narrowed to 2.54 per cent, down from 3.44 per cent in 2024, representing a decline of 90 basis points.

Average interest-earning assets stood at €548m, reflecting a modest 1.3 per cent decrease from €555m in the previous year.

Non-interest income amounted to €3.5m, down 6 per cent from €3.7m, comprising €2.8m in net fee and commission income, €0.1m in foreign exchange gains, €0.1m in gains from property disposals and €0.5m in other income.

Total operating expenses declined by 5 per cent to €16.1m, compared with €16.9m in 2024, primarily due to lower staff costs.

Staff costs fell by 10 per cent to €9.4m, reflecting the absence of one-off voluntary exit costs of €0.95m recorded in 2024, while underlying costs rose by around 1 per cent due to salary increments partly offset by a reduction in headcount from 140 to 133 employees.

Other operating expenses increased by 2 per cent to €4.8m, driven by higher IT-related costs, up 14 per cent, and increased provisions for pending litigation, up 29 per cent, partly offset by lower consultancy, legal and regulatory fees.

The special levy on deposits and other contributions remained unchanged at €0.85m, reflecting stable deposit levels.

Depreciation rose by 10 per cent to €1.0m, mainly due to increased investment in IT software and hardware.

The cost-to-income ratio deteriorated significantly to 85 per cent, compared with 66 per cent in 2024, mainly due to reduced income.

Impairment provisions fell sharply to €0.3m from €1.2m, reflecting lower charges and recoveries of previously written-off loans amounting to €0.2m.

The impairment charge included €0.03m on loans and advances, €0.3m on financial guarantees and commitments, and €0.1m on property stock valuation, largely offset by recoveries.

On the balance sheet, total assets declined by 3 per cent to €602m from €623m, mainly due to lower loans and advances linked to reduced deposits.

The group maintained a strong liquidity position, with the liquidity coverage ratio (LCR) at 296 per cent, well above the regulatory minimum of 100 per cent, although down from 348 per cent in 2024.

The net stable funding ratio (NSFR) stood at 236 per cent, also comfortably above the minimum requirement.

Liquid assets increased slightly by 1 per cent to €407m, accounting for 68 per cent of total assets, up from 65 per cent in 2024.

These included €345m in central bank balances, €7m in placements with other banks and €55m in debt securities.

Gross loans and advances declined by 11 per cent to €190m, reflecting ongoing resolution of non-performing exposures and customer repayments exceeding new lending.

New lending dropped sharply by 60 per cent to €13.5m, compared with €34.0m in 2024.

At the same time, the bank reported that performing loans fell by 10 per cent to €158m.

Non-performing exposures (NPEs) decreased by 15 per cent to €32.1m, with the NPE ratio improving to 16.9 per cent from 17.7 per cent.

Net NPEs declined to €17.9m, while the net NPEs-to-total assets ratio improved to 3.0 per cent from 3.8 per cent.

The NPE coverage ratio increased to 44.1 per cent, compared with 37.1 per cent in 2024.

Client deposits stood at €530m, down 3 per cent from €549m, while continuing to account for 88 per cent of total assets.

The net loans-to-deposits ratio improved to 33 per cent, indicating a high level of liquidity.

Furthermore, the group’s capital position remained robust, with a CET1 ratio of 21.93 per cent, exceeding regulatory requirements by 10.84 percentage points.

The overall capital ratio stood at 27.12 per cent, also well above the minimum requirement.

CET1 capital declined by 3.58 per cent to €45.6m, reflecting supervisory deductions and lower profitability.

The bank pointed out that the Central Bank of Cyprus (CBC) introduced additional supervisory measures on legacy NPEs and real estate assets, resulting in a €3.6m negative impact on CET1 capital.

Despite this, capital ratios declined only marginally due to a reduction in risk-weighted assets following the implementation of updated regulatory rules.

The group confirmed that its financial statements were prepared on a going concern basis, supported by strong liquidity and capital buffers.

The assessment incorporated an agreement signed in March for the sale of substantially all performing loans and deposits to the Bank of Cyprus, alongside contingency planning should the transaction not be completed.

The bank’s management said it expects the group to remain compliant with capital and liquidity requirements over the forecast period through 2028.

What is more, the bank reiterated that no dividend will be paid for 2025.

Looking ahead, the group’s strategy focuses on strengthening its balance sheet, improving asset quality, enhancing profitability and diversifying income streams, while continuing to prioritise the reduction of non-performing exposures.