In a recent update from the European Banking Authority (EBA), Cypriot banks have emerged as top performers in the Eurozone in terms of shareholder returns, alongside Hungarian banks. This positive development, however, contrasts with the challenging scenario for depositors in Cyprus, who continue to receive some of the lowest interest rates within the European banking system.

The EBA's latest quarterly Risk Dashboard report, with data up to September 2023, reveals that Cyprus leads the Eurozone with a 25.2% Return on Equity (ROE), a significant increase from 2.8% in September 2022. This impressive growth secures Cyprus' banking system the second spot in the Eurozone, trailing Hungary's leading 28.4% ROE.

Across Europe, the average ROE stood at 10.9% at the end of September 2023, bolstered by the expansion of net interest margins (1.62% in Q3 2023) and the creation of net interest income.

Cyprus, however, grapples with a higher ratio of Non-Performing Loans (NPLs) compared to the European average. The NPL rate in Cyprus was recorded at 2.6% at the end of September 2023, down from 3.2% a year earlier. The average for the European banking system remains stable at 1.8%.

Sweden, Latvia, and Lithuania are among the countries with the lowest NPL rates in the banking sector, marked at 0.3%, 0.5%, and 0.6%, respectively. A concerning trend for Cyprus is its persistently high NPL rate in the real estate sector, despite a recent decrease. The NPL rate in this sector was 18.1% in Q3 2023, down from 26.2% at the end of September 2022 but still the highest in Europe.

The average NPL rate in the Eurozone's real estate sector is 1.9%, with Bulgaria following Cyprus at 11.8%.

Cyprus also reports a relatively high NPL rate in the construction sector, at 6.4%, down from 7.7% in the previous quarter and 8.3% in September 2022. This rate is above the European banking system's average of 5.5%. Italy records the highest rate in this category at 10.1%.