In 2023, Cyprus witnessed a remarkable surge in the profitability of its banking sector, with profits soaring by an impressive 644 percent to reach €1.27 billion

This substantial increase, as revealed by data from the Central Bank of Cyprus (CBC), was attributed to the prevailing high-interest environment.

The Central Bank's data highlighted that net interest income for the year surged by 97 percent, totalling €1.92 billion compared to €0.98 billion in 2022. This surge in interest income was largely driven by consecutive interest rate hikes by the European Central Bank, implemented as a strategic response to combat inflationary pressures.

The inflationary spike in 2022, triggered by Russia's invasion of Ukraine and subsequent energy crises, further emphasized the necessity for such measures. Moreover, bank taxation also experienced a significant uptick, rising by 160 percent to €166 million for the entirety of 2023, contrasting sharply with the €64 million recorded in 2022.

Furthermore, the strength of the Cypriot banking sector was underscored by the increase in Common Equity Tier 1 Capital, which rose to €4.6 billion by the end of 2023 from €3.86 billion the previous year. This uptick in capital signifies the banks' enhanced capacity for internal capital generation, largely attributed to the robust profits they achieved.

The impressive growth in bank profits and capitalization reflects the resilience and adaptability of Cyprus's banking sector in navigating economic challenges and capitalizing on favourable market conditions.

By fLEXI tEAM