Cyprus’ NPL ratio continued to decline in Q2

13:59 - 20 September 2024

Financial Services

At the end of June 2024, the non-performing loan (NPL) ratio in the Cypriot banking sector decreased further to 6.9%, representing €1.7 billion, down from 7.3% or €1.8 billion at the end of March 2024.

The coverage ratio of NPLs with provisions also improved, reaching 55.0% (€0.9 billion) compared to 53.3% (€0.9 billion) at the end of March 2024.

This decline in NPLs during the second quarter of 2024 is attributed primarily to loan write-offs, which are typically tied to restructurings and involve amounts already covered by credit institutions' provisions for loan losses. Other factors include the sale of small NPL portfolios and loan repayments, such as debt-to-asset swaps. Additionally, loans that underwent successful restructurings and have since met the requirements of their probationary period were reclassified as performing, further contributing to the reduction.

As of the end of June 2024, the total restructured loans of authorized credit institutions stood at €1.4 billion, with €0.7 billion still classified as non-performing.

Cypriot credit institutions follow the European Banking Authority's (EBA) definition for NPLs, which requires that restructured loans remain under observation as non-performing for at least 12 months, even if borrowers comply fully with the new repayment terms. As a result, a portion of restructured loans continues to be categorized as non-performing until this observation period is completed.

(Source: Central Bank of Cyprus)

Cyprus’ NPL ratio continued to decline in Q2

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