A provisional agreement has been struck to resolve a contentious and long-standing grievance stemming from Cyprus's 2013 financial crisis, offering compensation to bank employees who suffered losses during the tumultuous bail-in. The breakthrough was announced following a high-level meeting convened at the presidential palace, bringing together government officials, banking executives, and trade union representatives. This significant social and political development unfolds as the Bank of Cyprus Holdings Plc unveils its financial performance for the first nine months of 2025, revealing a complex picture of declining profits counterbalanced by robust lending growth and enhanced shareholder returns.
The dispute originates from a 2017 governmental decision that provided state compensation to the majority of depositors who sustained losses when their funds were forcibly converted into bank equity to rescue the nation's crumbling financial system. However, this measure conspicuously excluded approximately 700 bank employees. These individuals were effectively scapegoated for the sector's collapse and denied the financial redress granted to others, a move widely condemned as discriminatory. The new provisional accord seeks to rectify this perceived injustice, drawing a line under a decade of acrimony.
According to sources familiar with the negotiations, the framework for compensation is estimated to carry a total cost of approximately one hundred million euros. The financial burden will be distributed among the government, the Bank of Cyprus itself, and the Etyk trade union, which has been a staunch advocate for the affected employees. A government spokesman characterized the agreement as possessing a "clear political and social footprint," signalling its importance as a measure of restorative justice. While the deal remains provisional, its brokering at the highest level of the state indicates a strong commitment to its final ratification.
Concurrently, the Bank of Cyprus Holdings presented its financial metrics for the period ending September 30, 2025. The institution reported a net profit of €353 million, representing a 12% decline from the €401 million recorded in the corresponding period the previous year. This dip was largely attributable to a 7% contraction in total income, which settled at €767 million. A significant driver was a €76 million reduction in net interest income, reflecting broader pressures on interest margins within the European banking sector.
Despite these headwinds, the bank's underlying performance demonstrated considerable strength. New lending surged by an impressive 31% year-on-year to reach €2.24 billion, propelled by robust demand from both international and corporate clients. Gross performing loans expanded by 6% to €10.71 billion, while customer deposits grew by 7% to €21.5 billion, indicating sustained public confidence. Furthermore, the bank's asset quality continued to improve, with non-performing exposures falling to a minimal 1.2% of the total loan portfolio.
In a powerful signal of confidence in its financial resilience, the bank's board sanctioned an interim dividend of 20 cents per share, paid in October, and formalized a target to distribute 70% of its profits to shareholders. This commitment to capital returns, coupled with a share price that has ascended from €4.34 to approximately €7.80 over the past year, underscores a positive market reception to its strategic direction. Chief Executive Panicos Nicolaou affirmed the positive trajectory, stating, “We saw healthy balance sheet growth in customer lending and deposits. We granted €2.24 bln of new loans, 31% higher than the prior year, driven mainly by international and corporate demand.” The bank has also raised its full-year return on tangible equity (ROTE) target to 20%, with a comprehensive strategy update anticipated in the first quarter of 2026.
The confluence of these events paints a portrait of a nation and its premier financial institution navigating a complex legacy. The compensation agreement addresses a painful chapter of the past, while the bank's solid operational results and ambitious financial targets point towards a more stable and profitable future, albeit one still subject to macroeconomic challenges.