BANKING: Cyprus registers third largest NPLs reduction in Europe

Cyprus registered one of the largest quarterly non-performing loan sales in the EU during the second quarter of 2018, mainly down to Bank of Cyprus selling NPLs worth €2.8 billion.

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According to the European Banking Authority’s (EBA) risk dashboard for Q2, NPLs declined to €13.2 bln from €16.3 bln in the previous quarter marking a drop of 19%.

The quarterly reduction is the third largest in the EU but the highest among the banking systems with high NPL rates.

Despite the quarterly reduction, the NPL rate in Cyprus remains the second highest in the EU amounting to 34.1% of total loans from 39% in the first quarter, following Greece with 44.8%.

The average NPL rate in the EU stood at 3.6% which in absolute terms corresponds at €731 bln, the EBA said.

Cyprus coverage ratio amounted to 44.2% compared with the EU average of 46%.

According to EBA, Cyprus posted one of the lower capital ratios in the EU with common equity tier 1 capital (CET1) amounting to 13.6% just behind Portugal, Italy and Spain.

CET1 ratio follows a downward trend since December 2017, reflecting the increase in provisions against bad loans, and negative impact from the banks’ efforts to reduce NPLs.

Cyprus ranks second from the bottom in terms on return on assets ratio with just 0.1% compared with the EU average of 0.5%.

Greece is last as the country’s banking system registered negative return on assets, according to the EBA.