Nicosia, Cyprus – The Bank of Cyprus has announced a mixed financial performance for the first three quarters of the year, revealing a dip in profits even as it upgraded its annual outlook and shareholder returns. This corporate update arrives against a contentious political backdrop, with the left-wing AKEL party renewing its push for a substantial, temporary levy on financial institution earnings. The concurrent developments underscore a broader European tension between corporate profitability and political calls for economic redistribution.
For the nine months concluding in September 2025, the nation’s largest lender reported a net profit of €353 million, representing a 12% contraction compared to the same period last year. Chief Executive Panicos Nicolaou attributed the decline primarily to a reduction in net interest income, a key revenue stream for banks. Despite this, the institution’s underlying metrics showed robust health. New lending surged by nearly a third, significantly outpacing annual targets, while the ratio of non-performing loans improved markedly to a record low of 1.2%. Consequently, the bank’s board expressed confidence by raising its full-year profitability target and disbursing an interim dividend to shareholders in late October.
This demonstration of resilience, however, has intensified political scrutiny. AKEL, the opposition political party, has formally submitted legislation to parliament proposing a "solidarity levy" on bank profits for the 2025 and 2026 tax years. The party’s Secretary-General, Stefanos Stefanou, argues that financial institutions have reaped windfall gains from elevated interest rates, while consumers and small businesses grapple with the concomitant higher borrowing costs and persistent inflation. The proposed mechanism is complex, designed to tax a portion of profits deemed excessive relative to a 2022 benchmark. To deter banks from transferring the burden to clients, the draft bill includes a severe financial penalty.
The political maneuver revisits a previously defeated proposal, which stalled in parliament a year earlier following a tied vote and several abstentions. The banking industry has consistently warned that such sector-specific taxation could undermine Cyprus's attractiveness to foreign investment. Meanwhile, external commentary from international finance adds another dimension to the debate. Nigel Green, CEO of the deVere Group, recently highlighted the risks of "fiscal drag" in the UK, where frozen tax thresholds effectively increase the tax burden. "When a government fixes thresholds while inflation and wages rise, it quietly increases tax every year," Green noted, suggesting such policies can trigger capital and talent flight—a consideration for Cyprus as it positions itself as a regional financial hub.
The market’s current appraisal of Bank of Cyprus appears optimistic, with its share price having appreciated substantially over the past twelve months, elevating its total market value to over €3.3 billion. This investor confidence reflects the sector’s strengthened balance sheets and return to normalized operations following past crises. Nevertheless, the legislative proposal introduces a note of uncertainty. The coming parliamentary debate will test the government’s appetite for intervening in corporate earnings to fund social support, posing a significant question for Cyprus's economic policy direction. The outcome will signal whether political pressures for immediate fiscal redistribution will outweigh longstanding commitments to maintaining a competitive banking landscape.