The Bank of Cyprus Group has set as key priorities the continued generation of stable and resilient profitability and the delivery of strong returns to shareholders, despite an uncertain geopolitical environment, according to its new business plan for the period 2026–2028.
During an Investor Update event, the bank presented its strategic priorities, updated financial targets and capital management framework. A separate briefing for journalists is scheduled to take place today.
Strong dividend policy
Under the new three-year plan, the bank aims to significantly increase dividend distributions.
For 2026, the group is targeting an ordinary dividend payout ratio of 70 percent, which represents the upper limit of its distribution policy, along with an additional dividend of up to 20 percent. This would bring the total payout ratio to as much as 90 percent.
For 2027 and 2028, the group aims to maintain a standard dividend payout ratio of 70 percent and provide additional dividends of up to 30 percent, potentially raising the total annual payout to as much as 100 percent.
Most distributions are expected to be paid in cash, including interim dividends. Share buybacks may also be considered when appropriate.
The bank returned to dividend payments in 2023 after several years, distributing €0.25 per share. In 2024, total distributions reached €241 million, corresponding to a 50 percent payout ratio, including a dividend of €0.48 per share and share buybacks worth €30 million.
Total distributions from the bank’s 2025 profitability correspond to a payout ratio of 70 percent, reaching the upper limit of the group’s distribution policy for that year.
Financial targets and capital generation
According to the bank, the updated financial targets reflect stronger operational performance, prudent asset management and positive momentum in the core sectors in which the group operates.
These developments strengthen the group’s ability to consistently deliver high returns while maintaining elevated dividend distributions.
The bank expects to achieve a return on tangible equity (ROTE) in the mid-teens, equivalent to more than 20 percent ROTE when calculated on a CET1 ratio of 15 percent.
Profitability is expected to support organic capital generation of between 350 and 400 basis points annually during the 2026–2028 period.
Profitability drivers
Net interest income is expected to stabilise in 2026 as interest rates normalise, before increasing by an average of around 3 percent per year between 2026 and 2028.
These projections are based on average annual loan growth of around 4 percent over the same period. Growth will be supported by increased domestic lending in the retail and corporate sectors, expected expansion of the Cypriot economy and selective growth of the international loan portfolio.
The bank expects new international lending to reach approximately €2 billion by the end of 2028, up from €1.4 billion recorded in December 2025.
At the same time, Bank of Cyprus plans a cautious expansion of its bond portfolio, which is expected to reach around 22 percent of total assets by 2028, depending on market conditions.
Deposits and deposit costs are expected to remain broadly stable.
The net interest margin is forecast to stabilise above 270 basis points in 2026 and increase thereafter, reflecting an improved composition of interest-earning assets as liquidity is gradually channelled into the loan and bond portfolios.
Growth in non-interest income
The group also aims to further increase recurring non-interest income streams with lower capital requirements. These include net fee and commission income, net insurance income and gains from foreign exchange trading for clients.
Recurring non-interest income is expected to grow by about 4 percent annually between 2026 and 2028, broadly in line with economic activity and higher transaction volumes.
Net insurance income is forecast to grow at a high single-digit rate over the same period.
Cost discipline and asset quality
The group will continue to focus on disciplined cost management. The cost-to-income ratio is expected to remain around 40 percent during the 2026–2028 period.
The normalised cost of risk target remains between 40 and 50 basis points. For 2026–2028 it is expected to remain at the lower end of this range.
There are currently no indications of deterioration in the quality of the loan portfolio.
As of 31 December 2025, the Common Equity Tier 1 (CET1) ratio stood at 21 percent following strong organic capital generation averaging 440 basis points annually between 2023 and 2025.
The group has set a medium-term CET1 target of approximately 15 percent and has established clear and disciplined priorities for the use of capital, with the aim of gradually converging towards that level.
These priorities include organic growth, investment in the group’s business model and regular dividend distributions at the upper end of its policy.
In addition, the bank noted that its strong capital ratios provide strategic flexibility and allow for additional shareholder returns through supplementary dividends.
Leading position in Cyprus
Bank of Cyprus chief executive Panicos Nicolaou said Cyprus is emerging as a rapidly growing business hub in the region, with the bank maintaining a leading position in banking and broader financial services through diversified and sustainable profitability.
In the retail segment, the bank holds the top position supported by its deposit franchise, with approximately 60 percent of the deposit portfolio.
It also offers solutions in the wealth management sector.
At the same time, Nicolaou said the bank ranks first in serving international clients in Cyprus, acting as a financial partner for companies choosing the island as their business hub and providing diversified financing to clients with international activities.
He also highlighted the strong liquidity levels of the banking sector.
According to the data presented, Bank of Cyprus holds a 47 percent share of loans and a 39 percent share of deposits in Cyprus.
Its subsidiary Eurolife holds the largest market share in life insurance at 33 percent, while General Insurance of Cyprus ranks second in the general insurance market with a 16 percent share.
The group is also the number one payments provider in Cyprus, with JCC holding a 79 percent market share, and it leads in mobile banking services.
Nicolaou also pointed to the bank’s leading position in investment services in Cyprus through CISCO.
Finally, he emphasised that Bank of Cyprus is among the best-capitalised banks in Europe and has delivered strong shareholder distributions totalling €705 million since 2022.
Delivering on 2023 commitments
During the briefing, Nicolaou said the bank had successfully delivered on the commitments made in 2023 through strong execution.
These included achieving high and sustainable profitability, normalising shareholder distributions and creating an attractive remuneration profile for investors.
He also highlighted strong organic capital generation, the maintenance of healthy capital buffers and the preservation of high asset quality, along with normalisation of the cost of risk and reductions in other impairments.