Bank of Cyprus ups outlook to reflect "higher for longer rates"

(Alliance News) - Bank of Cyprus Holdings PLC on Thursday said it has upgraded its financial targets and return on tangible equity guidance, amid revised expectations for net interest income, primarily to reflect "higher for longer rates".

The Nicosia-based lender said net interest income is now expected to exceed EUR650 million in 2023 and then fall to EUR625 million in 2024.

This is based off current expectations that the European Central Bank's deposit facility rate will average 3% in 2023 and 3.1% in 2024, the bank explained.

For 2025, net interest income is expected to be lower than 2024 reflecting a lower projected ECB deposit facility rate of 2.5%.

Bank of Cyprus added that its net interest income targets also incorporate assumptions of "modest" loan growth of 4% per year between 2022 and 2025; "careful growth" of its fixed income portfolio"; the "gradual" increase in time and notice deposit pass-through to 50% by June 2024; a "gradual" change in deposit mix towards time and notice deposits to 50% by December 2024; and higher wholesale funding costs.

The firm's cost to income ratio is expected to fall below 40% for 2023 and then to increase modestly to around 40% for 2024.

For 2025, the bank expects to generate a ROTE of over 13%. It said this is equivalent to over 16%, based on a 15% CET1 ratio, reflecting lower interest rate assumptions.

Shares in Bank of Cyprus finished 2.0% higher at 250.00 pence on Thursday in London.

By Heather Rydings, Alliance News senior economics reporter

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