Toxic bank loans drop to 9% of total  

Non-performing loans decreased by €105 mln at the end of March, compared to the end of December 2022, reaching €2.2 bln, according to the Central Bank of Cyprus.

The ratio of NPLs to total loans dropped to 9% from 9.5% at the end of the last quarter.

Total loans increased from €24.361 bln at the end of December to €24.432 bln in March, up €71 mln or 0.3%, while the index of total coverage ratio went up to 48.8%, from 47.5%.

CBC notes that during the period, mainly due to the sale of loans to credit acquiring companies, an overall reduction in NPLs of Authorised Credit Institutions of €18.4 bln or 89.3% was recorded.

The continuous downward trend in NPLs in Q1 is attributed to loan repayments (including debt-to-asset swaps), write-offs (restructurings and usually concern amounts that are already part of credit institutions’ loan loss provisions or non-contractual or “accounting” set-offs made against amounts provided) and positive migration of loans successfully restructured and reclassified as performing (cured).

Total loans with amounts past due over 90 days were €1.73 bln, or 7.1% of total loans, compared to €1.82 bln or 7.5% of total loans at the end of 2022.

Total restructured loans in March were €2.43 bln, compared to €2.73 bln in December, of which €991 mln continue to be classified as non-performing loans.

Households’ NPLs were €1.23 bln, or 11.7% of total loans, with accumulated provisions at 36.6%. Total households’ loans were €10.6 bln.

Non-financial corporations’ NPLs were €923 mln in March, or 7.6% of total loans, with accumulated provisions at 63.5%.

At the end of March, total loans of non-financial corporations stood at €12.07 bln.

When an NPL is restructured, it is not immediately reclassified as a performing facility but remains under observation within the NPL category for at least 12 months, even if the borrower strictly adheres to the newly agreed repayment schedule.

Therefore, according to this definition, some restructured loans remain non-performing, even if the borrower adheres to the repayment schedule.