Toxic debt was 27.9% of Cyprus bank loans in 2019

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Non-performing loans (NPLs) in the Cyprus banking system declined to €8.97 bln in 2019 but the NPL rate was still 27.9% of all loans.

According to data released by the Central Bank of Cyprus, NPLs at end-December 2019 marked a reduction of €561 mln compared with end-September 2019 or 5.9%.

Furthermore, the coverage ratio rose slightly to 53.5% from 52.4% at the end of September.

Since the hight of the financial crisis at the end of 2014, NPLs in the Cyprus banking system has seen a reduction of €18.4 bln or 67.2%.

According to the CBC, total restructured loans at end-December amounted to €5.45 bln, of which €4 bln continue to be classified as non-performing, partly due to the definition of the European Banking Authority.

A net reduction in restructured facilities of €418 mln was recorded at the end of December 2019 compared with end-September 2019.

“The downward trend in NPFs exhibited in the fourth quarter of 2019 can be attributed mainly to the rise in loan write-offs, which take place in the context of restructurings and usually concern amounts that already form part of credit institutions’ loan loss provisions,” the CBC said.

It added that loan repayments, including debt-to-asset swaps, as well as positive migrations of loans which have been successfully restructured and reclassified as performing (cured) at the end of the probation period, contributed to the decrease in NPFs.

“The analysis of additional data collected by the CBC with respect to fixed-term loans shows that there has been an improvement in the factors contributing to the reduction of NPLs.”

Total loans at the end of 2019 amounted to €32.12 bln marking a reduction of €924 mln or 2.8% compared with end-September 2019.