The Central Bank of Cyprus (CBC) has released its latest
analysis of data on non-performing loans in the Cyprus banking
sector, covering the period to August 31 2017. The analysis
shows aggregate non-performing facilities (NPFs) and related
indicators for the domestic operations of credit institutions
operating in Cyprus. During the month of August NPFs fell by
€497 million ($598 million), a reduction of 2.2%, to
€21.9 billion, against a backdrop of a smaller (1.1%)
reduction in total facilities, from €49.5 billion to
€48.9 billion, over the same period. As a result, the
percentage of facilities classified as non-performing fell to
44.7% at the end of August 2017. Total impairment provisions
made against NPFs totalled €10 billion as at August 31
2017, accounting for 45.9% of aggregate NPFs.
Since the end of 2014 banks have succeeded in reducing
aggregate NPFs by 20%, from €27.3 billion to €21.9
million. Total facilities fell from €57.2 million to
€48.9 million in the same period, which meant that 44.7%
of total facilities were classified as underperforming at the
end of the period, compared with 47.8% at the beginning. While
the improvement in the quality of debt appears to be marginal,
the improvement in coverage by impairment provisions is more
marked, with 45.9% of NPFs covered by provisions as at March 31
2017, compared with only 32.8% at the beginning of the period.
Non-financial corporations (particularly SMEs) and households
account for the lion (39%) share of non-performing debt.
The CBC attributes the reduction in NPFs to increased
repayments, restructurings successfully completed and
reclassified as performing facilities, write-offs and
settlement of debt through swaps with immovable property
intended to be sold with the aim of faster cash collection.
Recognising the effect that wholesale foreclosure and forced
sale of assets pledged as security may have on the property
market, the CBC continues to encourage credit institutions to
make intensive efforts to restructure NPFs in cases where
viable settlements are possible.