The Bank of Cyprus has completed one of the most extensive restructurings in Europe over the past decade, according to a new report by Eurobank Equities.

The brokerage issued a buy recommendation on the stock with a target price of €10, implying a price-to-tangible book value (P/TBV) ratio of 1.47 times for 2027, and one of the highest dividend yields in Europe.

According to the report, whose contents were shared by Greek business outlet Newmoney, the bank’s non-performing loan (NPL) ratio, which had peaked at 63 per cent in 2015, has now dropped to 1.7 per cent in the first half of 2025, one of the lowest levels in Europe, with coverage at 124 per cent.

The de-risking of the balance sheet, combined with high interest-rate sensitivity during the 2022–2023 tightening cycle, has boosted profitability sharply.

The return on tangible equity (RoTE) reached 21.4 per cent in 2024 and 18.4 per cent in the first half of 2025, well above the 14–15 per cent average of Greek and regional peers.

With a Common Equity Tier 1 (CET1) ratio of 20.6 per cent (excluding DTCs) and a cost-to-income ratio of around 36 per cent compared to 42 per cent in the region, the bank demonstrates the discipline of its operating model.

Following the reinstatement of dividends, the Bank of Cyprus is now seen as one of Europe’s most attractive income banks, offering an 8–9 per cent dividend yield, Eurobank Equities noted.

The report highlighted the bank’s dominant position in a two-bank market, where it holds roughly 80 per cent market share, providing strong pricing power.

As of mid-2025, the average one-year time deposit rate in Cyprus stood at 1.1 per cent, compared with 1.8 per cent in the eurozone, while spreads on new housing and business loans, at 2 per cent and 2.8 per cent respectively, are expected to sustain a net interest margin (NIM) of around 2.5 per cent until 2027, compared with 2 per cent in the region.

With interest rates expected to normalise between 2.0 and 2.25 per cent for 2025–2027, net interest income (NII) is projected to remain near €750 million through 2027, stabilising in 2026 and rising by 5 per cent in 2027, thanks to margin discipline and volume growth.

Non-interest income, already accounting for 28 per cent of total revenue, derives from credit cards, insurance operations (Eurolife and General Insurance, strengthened by the partnership with Ethniki Insurance), payments through JCC, and wealth management, which adds further stability to earnings.

Combining top-tier efficiency and strong revenue generation, the Bank of Cyprus is expected to achieve pre-provision profits of between €581 million and €593 million in 2025–2027, with RoTE between 15 and 15.7 per cent.

With CET1 capital at 20.6 per cent, well above its internal target of 13 per cent, the bank holds €670 million in surplus capital, equivalent to about 18 per cent of its market capitalisation, which is expected to grow to €1 billion by 2027, or 28 per cent.

This provides capacity for further growth, higher dividends, and selective acquisitions.

In 2025, the bank returned €241 million to shareholders, equivalent to 50 per cent of 2024 profits, through dividends and share buybacks, and also paid its first interim dividend of the decade (€0.20 per share).

With a payout policy of 50–70 per cent (70 per cent for 2025) and annual tangible book value growth of around 5 per cent, the Bank of Cyprus is consolidating its position as one of Europe’s most shareholder-friendly banks.

Despite its transformation and strong re-rating in recent years, the Bank of Cyprus share trades at just 1.27 times its projected 2025 tangible book value, comparable to Greek peers but below Eurobank (1.38x) and National Bank of Greece (1.47x), even though it exhibits equally strong fundamentals and profitability.

The superior dividend yield of 8–9 per cent offsets more modest loan growth prospects, making the stock an attractive high-yield investment.

Its valuation remains below regional banks, which average 1.5 times, and the SX7E index (1.35x), even though Bank of Cyprus delivers comparable or higher RoTE while offering a dividend yield above 8 per cent, versus 6–7 per cent for the index.

Since its relisting on the Athens Stock Exchange in September 2024, the Bank of Cyprus share price has risen by 55 per cent, supported by increased liquidity with an average daily volume exceeding €6 million and a lower cost of equity.

The report concluded that greater institutional participation and a potential inclusion in the MSCI indices offer further re-rating potential for the stock.