Non-Performing Loans down by €105 million in Q1 2023

Non-performing loans decreased by €105 million end of March 2023, compared to the end of December 2022, reaching €2.2 billion, according to data published by 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.

According to CBCs data, total loans increased from €24,361 million at the end of December 2022 to €24,432 million at the end of March 2023, increased by €71 million or 0.3%, while the index of total coverage ratio went up to 48.8%, from 47.5% at the end of December.

CBC notes that during the period between 31.12.2017-31.03.2023, mainly due to the sale of loans to credit acquiring companies, an overall reduction in NPLs of Authorised Credit Institutions of €18.4 billion or 89.3% was recorded.

The continuous downward trend in NPLs within 2023 Q1 is attributed, by order of significance, to loan repayments (including debt-to-asset swaps), to loan write-offs (write-offs take place either in the context of restructurings and usually concern amounts that already form part of credit institutions’ loan loss provisions or to non-contractual or "accounting" set-offs made against amounts already provided, aimed at a more representative depiction of loan portfolios) and to positive migrations of loans which have been successfully restructured and reclassified as performing (cured) at the end of the probation period, according to CBC.

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

Total restructured loans at the end of March 2023 were recorded at €2.43 billion, compared to €2.73 billion at the end of December 2022, of which €991 million continue to be classified as non-performing loans.

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

Non-financial corporations' NPLs were at €923 million in March 2023, or 7.6% of total loans, with total accumulated provisions at 63.5%. Total loans of non-financial corporations at the end of March 2023 stood at €12.07 billion.

CBC notes that credit institutions apply the definition for NPLs adopted by the European Banking Authority. Based on this definition, when an NPL is restructured it is not immediately reclassified as a performing facility but remains under observation within the NPL category for a further period of at least 12 months, even if the borrower strictly adheres to the new agreed repayment schedule. Therefore, according to this definition, a part of the restructured loans remains non-performing, even if the borrower adheres to the new repayment schedule.

(Source: CNA)