FINANCE: Cyprus has second highest NPL ratio in the EU

Cyprus banks are burdened with the second highest Non-Performing Loan (NPL) ratio in the European Union after Greece, according to the European Banking Authority (EBA).

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The EBA’s risk dashboard for Q1 2019 shows that NPLs (90 days past due definition) in Cyprus’ three systemic banks amounted to 34.1% compared with the EU average of just 3.1% of total loans.

In absolute terms, bad loans amounted to €6.9 bln. Greece holds the top spot with an NPL ratio of 41.4% or €84.3 bln.  Portugal posted the third highest NPL rate with just 9.57% and Italy the fourth highest with 8.25%.

However, the EBA noted that NPLS continued their declining trend albeit at a slower pace in the first quarter of the year.

Cyprus NPL coverage ratio was however slightly above the EU average with 45.9% compared with 45.1%.

Cyprus banking system capital ratios were below the EU average in Q1 2019. The CET1 capital ratio for the Cypriot banks amounted to 13.7%, compared with the EU average of 14.7%, while total capital ratio reached 17.4% compared with the EU average of 18.9%.

Cyprus’ ratio of net interest income (NII) amounted to 2.16% compared with the EU average of 1.41%, while the Cypriot banks return on equity climbed to 13.6% compared with the EU average of 6.8%.

Furthermore, Cyprus posted the fifth highest NII to total operating income indicator which in Q1 amounted to 72.4% compared to the EU average of 59%.

According to EBA data, Cyprus posted the fifth highest cost-to-income ratio which amounted to 70.8% compared with the EU average of just 6.63%.

Cyprus’ loan to deposit ratio amounted to 60.1% compared with the EU average of 116%.

Moreover, Cyprus continues to post high liquidity ratios, recording the third highest Liquidity Coverage Ratio (LCR) with 326% compared with the EU average of 153%.