The Bank of Cyprus is expected to report net profits of €119 million for the third quarter of 2026, with higher interest income and continued lending growth helping offset rising operating costs, according to an estimate by investment firm Alpha Finance-AXIA.

The forecast points to stable profits compared with the same period last year, although earnings are expected to decline by 9 per cent from the second quarter.

Alpha Finance-AXIA has reiterated its Buy / High Risk recommendation on the bank and maintained its target price at €12.30 per share.

Based on a share price of €10.59 at the time of its report, the investment firm estimates a potential total return of 21 per cent, including the expected dividend.

The results are expected to underline the bank’s ability to combine strong profitability with substantial shareholder distributions, supported by a balance sheet that continues to provide considerable liquidity and capital headroom.

The figures are due to be announced on November 5, after the bank’s board reviews the nine-month results at a meeting on November 4.

The results will be released before trading begins on the Athens Stock Exchange and the Cyprus Stock Exchange.

The main driver of the expected performance is a further increase in net interest income, which Alpha Finance-AXIA forecasts at €195.5m.

This would represent a 9 per cent increase year-on-year and a 4 per cent rise compared with the second quarter, with credit growth, the repricing of assets and the composition of deposits helping to limit the impact of changes in benchmark interest rates.

Net fee and commission income is also expected to improve, reaching €48m compared with €45.3m a year earlier.

Together with a slightly stronger contribution from insurance activities, the higher income streams are forecast to lift total revenue to €268.5m.

The cost outlook is less favourable, with operating expenses expected to reach €110.8m, representing a 7 per cent increase compared with the previous quarter.

The rise is attributed mainly to a higher special levy on banks and increased other operating expenses.

Profit before provisions is forecast to stand at €157.8m.

The bank’s balance sheet remains a significant source of strength, with gross loans expected to reach €11.45 billion and deposits forecast at €23.48 billion.

A loan-to-deposit ratio of 49 per cent would leave the group with substantial liquidity reserves to finance further expansion.

Asset quality is also expected to remain strong, with the non-performing exposures ratio forecast at 1 per cent, alongside a coverage ratio of 148 per cent.

The bank’s common equity tier one (CET1) capital ratio is expected to stand at 20.7 per cent, a level that remains among the highest in the European banking sector.

Investor attention is expected to focus on how management intends to deploy this capital strength, particularly through shareholder distributions and potential acquisitions.

The bank’s existing guidance provides for a regular distribution of 70 per cent of its 2026 profits, with the possibility of an additional return of up to 20 per cent.

Smaller acquisitions also remain under consideration, following the bank’s recent purchase of performing loans and deposits from the Cyprus Development Bank (CDB).

The transaction, completed on October 21 after regulatory approvals were secured, involved approximately €130m in performing loans and €440m in deposits.

Agreed in March, the acquisition covered substantially all of CDB’s performing loans and deposits, together with certain other assets and liabilities, at a price close to their book value.

The estimated discount on the transferred assets amounted to approximately €2.8m, with any balancing amount settled in cash.

Bank of Cyprus Holdings said the transaction was expected to have a modest positive impact on its income statement, while its effect on capital was limited to approximately 30 basis points.

The bank said the acquisition was aligned with its strategy of expanding its performing loans and deposit base over the medium term, strengthening its customer base and pursuing both organic growth and acquisitions to deliver sustainable returns and create shareholder value.

CDB described the transfer as an appropriate step that took into account the interests of depositors, creditors, bondholders and shareholders.

Arrangements were implemented to ensure continuity in customer servicing, while CDB will continue to manage assets and liabilities excluded from the transaction, including its Tier 2 subordinated bonds, under their existing terms.

Following completion, CDB’s activities will focus on managing and servicing its remaining assets and liabilities.

Both banks confirmed that the transaction did not relate to or affect the interests of their respective company secretaries or designated persons under Cyprus securities and stock exchange legislation.

The expected third-quarter performance follows a strong first half of the year, during which the Bank of Cyprus reported profit after tax of €252m, a 7 per cent increase year-on-year.

The bank also announced an interim dividend of €0.24 per ordinary share, equivalent to approximately €105m, representing a 44 per cent payout ratio on first-half earnings and a 20 per cent increase compared with the previous year.

“We delivered excellent financial results in the first half of 2026, reflecting our diversified and efficient business model and continued strong performance,” Bank of Cyprus group chief executive Panicos Nicolaou said at the time.

The bank generated €131m in profit during the second quarter alone, while its return on tangible equity reached 18.8 per cent for the first half, comfortably above its full-year target in the mid-teens.

Basic earnings per share stood at €0.58, while the cost-to-income ratio remained at 36 per cent.

“Cost management remained disciplined, evidenced by a cost to income ratio of 36 per cent,” Nicolaou added.

The bank’s gross performing loans rose to €11.4bn in the first half, representing growth of 5 per cent since the beginning of the year and 8 per cent year-on-year.

Its predominantly retail-funded deposit base increased to €22.8bn, up 3 per cent year-to-date and 9 per cent compared with a year earlier.

“Our strategy execution drove solid lending and deposit growth,” Nicolaou stated.

“Our loan book expanded by 8 per cent year-on-year and by 5 per cent year-to-date, driven both by domestic and international demand,” he added.