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Banks on the offensive

13/05/2003 21:59
The accumulated losses of the last few years, increased labour costs and the negative consequences from the liberalization of the financial system have pushed Cypriot banks to proceed to new measures to boost their profitability.

This counterattack is in progress for more than a year now, in the form of a gradual but steady increase in the profit margins in basic accounts and products. Popular Bank set the most recent example, considerably increasing the margins of key or risky client accounts (individual and small medium companies). The new interest rate policy of the Bank will be effective as from June 1 and will include an increase of up to 0.95% in the margin of interest rates in loans and overdraft accounts. The margin in overdraft accounts will increase from 3.25% to 3.75%, Studentbest will increase by 0.95% to 3.75%, while the margin in personal loan Triple Express will increase from 0.50% to 3.25%.

Head of the Bank of Cyprus’ Investments Relations, Marianna Pantelidou, said that the Bank of Cyprus is currently expecting to see the market’s reaction and will act accordingly. In 2002, the Bank of Cyprus increased the net interest rate margin from 2.18% in the first quarter of 2002 to 2.4% in the fist quarter of the same year.

The Hellenic Bank has recently proceeded to a significant increase in house loans. In May 2002, the Bank managed to penetrate in house loan market and gain a market share by offering low interest rates.

General Manager of the Hellenic Bank's Strategic Development, Yiannis Telonis said that the margins are already low in Cyprus but will gradually increase with the island’s accession in the European Union. Mr. Telonis stressed that profit margins in Cyprus are the lowest in Europe.

Sooner or later this silent counterattack will become reflected on the banks' profit and loss accounts. The first indications might be released on Wednesday, when the Bank of Cyprus will announce its Q1 results. The profits after taxation for the first quarter of 2002 amounted to CYP 6.7 million against CYP 13.1 million in the first quarter of 2001. In contrast to last year, the Bank has not warned that the results for 2003 will be significantly different from those announced in 2002.