Filenews 12 October 2023
The second strongest in the Eurozone was the profitability of systemic banks in Cyprus in the second quarter of 2023, which highlights again their benefits from the increase in lending rates and the maintenance of deposit rates at very low levels.
According to data from the European Central Bank (supervisory banking statistics), the return on equity (RoE) of Cypriot systemic banks, calculated in the second quarter of 2023, amounted to 26.3%, compared to 26.7% in the first quarter of 2023 and only 6.9% in the second quarter of 2022, which is low because the ECB had not yet started raising interest rates.
The return on equity (RoE) of significant euro area banks rose further in the second quarter of 2023 to 10.8%, from 10.2% in the first quarter, almost exclusively due to higher net interest income, as noted in the European Central Bank report.
Croatia's banking system led the way in return on equity, with an ROE of 28.7% year-on-year at the end of June. The lowest return on equity ratio (7.8%) is recorded by France's banking system.
Return on equity is a financial indicator that shows how efficiently a company uses its capital to generate additional revenue. It is used as an indicator of a company's efficiency, that is, how much profit it can generate using the available resources invested by its shareholders and its reserves.
As regards non-performing loans (NPLs), the ratio in systemic banks in Cyprus stood at 2.8% in the second quarter of 2023, compared to 2.9% in the first quarter of 2022 and 3.6% in the second quarter of 2022. The decrease in the ratio is mainly due to sales of bad loans to credit acquiring companies.
The ratio of non-performing loans in Europe's banking system was 1.8% in the second quarter of 2023, remaining stable both compared to the first quarter of the year and last year's corresponding quarter.
Importantly, loans with higher credit risk due to borrowers' default have not increased. Banks use three categories to classify loans. Stage 1 records orderly performing loans, stage 1 records medium quality loans and stage 2 registers problem loans.
In the Cyprus banking system, loans in stage 2 amounted to 11.3% (second quarter), compared to 12.7% in the first quarter and 15.6% in the second quarter of 2022. In Europe's significant banks, the corresponding ratio is 9.1%.
