New lending exceeds pre-pandemic levels

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New credit provided by Cypriot banks reached €3.23 bln in 2022, increasing 10% year-on-year despite the uncertainty driven by the war in Ukraine, according to the Central Bank of Cyprus (CBC).

Pure new loans last year exceeded 2019 (€3.2 bln), climbing (albeit slightly) to the highest level since 2015 when the CBC began recording data for pure new credit.

The annual rise was driven by corporate loans of over €1 mln, which amounted to 28% year-on-year.

Loans to non-financial corporations over €1 mln in 2022 amounted to €1.28 bln compared with €1 billion in 2021 and amounted to 40% of total new lending.

The CBC said that increased demand for corporate loans could be associated with increased financing needs for working capital due to the rising cost of energy and raw materials and supply chain disruptions that increase operating costs.

Loans for house purchases held the second-highest share of total new lending with 36.4%.

Housing loans were €1.18 bln marking a marginal increase of 0.30% compared with 2021.

However, housing loans in 2021 were boosted due to a government interest rate subsidy scheme which expired in December 2021.

Corporate loans up to €1 mln declined by 1.6% from 2021, amounting to €530.6 mln from €539 mln.

The share of these loans to total new lending was 16.4%.

Pure new consumer credit reached €155.4 mln, up by 4.15% and was 4.8% of total new loans granted in 2022.

Other new loans declined by 3.31% year-on-year reaching €83 mln.

Interest rates

Interest rates in the Cypriot banking system continued rising in December under the ECB’s monetary normalisation policy to tackle high inflation.

According to CBC, the interest rate on deposits from households with an agreed maturity of up to one year increased to 0.35%, compared with 0.12% in the previous month, an increase of 0.23 basis points.

The corresponding interest rate on deposits from non-financial corporations rose by 20 basis points, reaching 0.61%, compared with 0.41% in the previous month.

Interest rates for new loans continued rising, except for loans over €1 mln for non-financial corporations.

The interest rate on consumer credit increased to 4.21% from 3.84% in the previous month, whereas mortgage rates increased to 3.34% from 2.95%.

According to CBC, the interest rate on loans to non-financial corporations for up to €1 mln increased to 4.71%, compared with 4.52% in the previous month.

On the contrary, the interest rate on loans to non-financial corporations for over €1 mln registered a decrease to 3.52% from 4.35%.