Deutsche Bank has described Bank of Cyprus’s third quarter as “good,” upgrading its guidance while maintaining a “Buy” recommendation and a target price of €8.70 per share.

The Cypriot lender reported net profit of €118 million for the third quarter, exceeding Deutsche Bank’s estimate by 14% and remaining practically unchanged on a quarterly basis.

Resilient Interest Income and Upgraded Guidance

Net interest income (NII) fell by only 1% quarter-on-quarter (and by 12% year-on-year), performing better than expected. Deutsche Bank attributes this resilience to effective interest rate risk hedging, volume growth, and lower wholesale funding costs.

The bank has raised its guidance, now expecting:

• Return on equity (ROE) above 20% on a CET1 base of 15%

• Net interest income around €720 million (up from previous guidance of “over €700 million”)

• Cost-to-income ratio below 40%

• Cost of risk below 40 basis points, at the lower end of its previous range

Organic capital generation is projected to show an upside potential of over 300 basis points for the year (326 bps over the first nine months).

Strong Asset Quality and Capital Position

Loan loss provisions were lower than expected, with a cost of risk of 33 bps on gross loans, nearly unchanged from the previous quarter.

The NPE (non-performing exposure) ratio stood at 1.6% on a group basis, or 1.2% pro forma when adjusted for assets held for sale, while the NPE coverage ratio reached 112%.

The CET1 capital ratio came in at 20.54%, down slightly by 9 bps from the previous quarter, affected by an increase in risk-weighted assets (RWA) and the acquisition of Ethniki Insurance Cyprus (–15 bps impact). The accrued dividend payout ratio remains at 70%.

Revenue Growth and Valuation Outlook

Total revenues exceeded estimates by 5%, supported by stronger NII and a one-off insurance gain of €8 million. Operating expenses were marginally higher than expected, with the cost-to-income ratio remaining stable at around 40%.

Deposits reached €21.46 billion, while gross loans totaled €10.84 billion at the end of the quarter.

In valuation terms, Deutsche Bank’s estimates place Bank of Cyprus’s price-to-earnings (P/E) ratios at 4.2x for 2024, 8.5x for 2025, and 9.1x for 2026, with an adjusted ROE of 20.5% in 2024 and 16.0% in 2025.

The bank concludes that this quarter’s results reaffirm its positive stance, noting that management targets remain conservative.