As of September 2023, Cyprus has experienced a further reduction in non-performing loans (NPLs), with a decrease to €2.02 billion, down from €2.08 billion in August. The NPL ratio has improved to 8.3 percent, and the banking sector continues to demonstrate resilience, evidenced by stable coverage ratios and a decrease in loans with delays beyond 90 days.
What is the current status of non-performing loans in Cyprus as of September 2023?
As of September 2023, Cyprus has experienced a further reduction in non-performing loans (NPLs), with a decrease to €2.02 billion, down from €2.08 billion in August. The NPL ratio has improved to 8.3 percent, and the banking sector continues to demonstrate resilience, evidenced by stable coverage ratios and a decrease in loans with delays beyond 90 days.
Decline in Non-Performing Loans
The banking sector of Cyprus has continued its positive trajectory with a significant decrease in non-performing loans (NPLs) as of September 2023. The latest figures from the Central Bank of Cyprus (CBC) indicate a drop to €2.02 billion from the €2.08 billion recorded in August. This decline of €60 million is part of a consistent pattern of improvement that has been observed over recent months. In a more comprehensive view, when juxtaposed with the quarter ending in June, there’s a substantial reduction of €95 million in NPLs.
What’s notable is the corresponding decrease in total lending, which has now reached €24.36 billion. This reduction in lending volume correlates with a reduction in NPLs, leading to an improved NPL ratio of 8.3 percent, a promising decrease from the 8.7 percent seen in June 2023.
Stable Coverage Ratios and Decreasing Delays
An important aspect of the CBC report is the stability of the coverage ratio of NPLs with impairment provisions. By the close of September 2023, the coverage ratio remained relatively unchanged at 50.3 percent, with the total amount covered by provisions hovering around €1.1 billion. This stability is crucial as it suggests that banks have adequately provisioned for potential losses, providing a buffer that reinforces the financial system’s resilience.
In parallel, there has been a noteworthy reduction in the volume of loans experiencing delays beyond 90 days. In September, this figure stood at €1.58 billion, down €80 million from August. This metric is significant because it represents a substantial 6.5 percent of the total loan portfolio, indicating a broader trend of improving payment timeliness among borrowers.
Ongoing Efforts and Results
The sustained improvement in NPLs can be largely attributed to the array of restructuring strategies employed by Cypriot banks. These strategies include loan write-offs within restructuring frameworks, whether they are unconventional or “accounting” write-offs, as well as loan repayments. Interestingly, these repayments include debt swap agreements that involve real estate assets, reflecting an innovative approach to managing credit risk.
Additionally, the reintegration of successfully restructured loans back into the performing loan category, post the monitoring period, has contributed to the decline. This is reflected in the statistics for restructured loans held by licensed credit institutions, which have decreased to €1.86 billion by the end of September from €1.92 billion the previous month.
Sectoral Insights
On a closer inspection of different sectors, household NPLs have shown a decrease from €1.18 billion in August to €1.12 billion in September. The provisions against these household NPLs stood at a significant 36.8 percent. In contrast, corporate NPLs have demonstrated stability, remaining at €0.86 billion, which is 7.2 percent of total corporate loans, backed by a robust 66.4 percent provision.
Comparatively, the European Union’s overall NPL ratio has remained stable according to the European Central Bank (ECB), with the second quarter of 2023 showing a slight variation at 2.26 percent, marginally shifting from the 2.24 percent in the preceding quarter.
The clear downward trend in Cyprus’s NPLs indicates an ongoing recovery and strengthening of the banking sector. This positive movement is essential not only for the stability of Cyprus’s financial system but also for its capacity to support economic growth and to withstand potential future shocks.
By observing and analyzing these metrics, investors, policymakers, and the public can gain insights into the health and direction of the Cypriot banking industry, which holds significant implications for the broader economy of the island nation.
What is the current status of non-performing loans in Cyprus as of September 2023?
As of September 2023, non-performing loans in Cyprus have seen a further reduction, decreasing to €2.02 billion from €2.08 billion in August. The NPL ratio has improved to 8.3 percent, indicating positive progress in the banking sector.
How has the decline in non-performing loans in Cyprus been trending?
The decline in non-performing loans (NPLs) in Cyprus has been consistent and positive. Over recent months, there has been a pattern of improvement, with a substantial reduction of €95 million in NPLs compared to the quarter ending in June. This decline in NPLs correlates with a reduction in total lending, leading to an improved NPL ratio of 8.3 percent.
Are there any other notable trends in the Cyprus banking sector?
Yes, there are other notable trends in the Cyprus banking sector. The coverage ratio of NPLs with impairment provisions has remained stable at 50.3 percent, suggesting that banks have adequately provisioned for potential losses. Additionally, there has been a decrease in loans with delays beyond 90 days, indicating improving payment timeliness among borrowers.
What efforts have contributed to the decline in non-performing loans in Cyprus?
The decline in non-performing loans in Cyprus can be attributed to various restructuring strategies employed by Cypriot banks. These strategies include loan write-offs within restructuring frameworks, loan repayments, and debt swap agreements involving real estate assets. The reintegration of successfully restructured loans back into the performing loan category has also contributed to the decline. These efforts reflect an innovative approach to managing credit risk.
