EU alarm over poor-performing Cyprus banks

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The European Union’s monetary authority has raised the alarm over the performance of Cypriot banks, as the island’s banking system lags behind all other eurozone states.

The Single Supervisory Mechanism (SSM), in a recent report, said that Cyprus has the lowest return on equity ratio (ROE) in the eurozone, while it has the highest expense-to-income ratio.

Return on equity is a financial ratio indicating how efficiently a company uses its capital to generate additional value.

It is used as an indicator of a company’s efficiency using its resources: capital invested by its shareholders and its reserves.

Investors typically look for companies with a high and growing return on equity (ROE).

According to SSM data, the return on equity for Cypriot banks is just 0.18%, the lowest in the eurozone.

The second-lowest index is Austria (0.63%), followed by Luxembourg (1.82%).

On the contrary, Slovenia’s banking system has the highest index (35.57%), while Greece, Latvia, Lithuania, and Spain also have a double-digit index.

In addition, Cyprus also records the lowest return on assets (ROA) ratio of 0.01%.

If that was not a tough pill for Cyprus banks to swallow, the banking system also records a high cost-to-income ratio of 84.07%, the highest in the eurozone.

Cost to revenue is also high in Belgium (82.45%) and Malta (82.34%).

On the contrary, Greece has the lowest index.

Regarding other indicators, the cost-of-risk ratio is 1.17%, the fourth highest in the eurozone.

Tier 1 capital ratio stands at 14.60%, below the Eurozone average of 14.98%.

The leverage ratio in Cyprus is 7.18% compared to the eurozone average of 5.68%, and the loan-to-deposit ratio is 54.3%, the second lowest in the eurozone.

On the liquidity coverage ratio, Cyprus has the fourth highest in the eurozone at 334.88%.