According to data from the Central Bank of Cyprus, by the end of July 2025, the share of non-performing loans (NPLs) in the country’s banking sector dropped to 5.5%, compared to 5.6% in June. In December 2024, the NPL ratio stood at 6.2%, confirming a consistent improvement in the quality of loan portfolios.
This trend reflects the sustained recovery of the Cypriot banking system after several years of active debt restructuring and the introduction of more effective risk management mechanisms.
Growth in total lending
Amid the decline in problematic loans, the total volume of loans issued by banks reached €26.02 billion in July 2025, slightly higher than €25.84 billion in June. Loans overdue by more than 90 days remained stable at around €1.15 billion, representing 4.4% of all credit.
For comparison, in December 2024, this figure was 4.8%, confirming the positive trend.
Improved coverage ratios and outlook
The coverage ratio of non-performing loans by loss provisions increased from 62% in June to 62.2% in July.
The total banking reserves reached €982 million, of which €895 million are allocated specifically to cover NPL risks.
This indicates that the banking system remains well-prepared for potential shocks and maintains financial resilience amid global volatility.
Restructuring and borrower adaptation
By the end of July, the volume of restructured loans amounted to €1.21 billion, or 4.6% of all loans, slightly below 4.8% in June. Of this amount, €640 million remain classified as non-performing.
The decline in restructured loans demonstrates the effectiveness of new credit support tools introduced in 2025, including digital services and flexible refinancing programs for businesses and households.
Business and household lending
Loans to non-financial corporations totaled €12.98 billion, of which €613 million remain problematic (4.7%).
The small and medium-sized enterprise (SME) sector is particularly vulnerable — accounting for €8.14 billion in loans, of which €578 million are non-performing (7.1%).
Households make up a significant part of the credit portfolio, with total loans of €10.76 billion, including €794 million in non-performing loans (7.4%).
The coverage ratio for household loans stands at 48.7%, indicating a gradual recovery of household solvency following a period of high inflation and rising living costs.
Banking sector outlook
The steady decline in NPLs from 6.2% in December 2024 to 5.5% in July 2025 highlights the strengthening financial stability of Cypriot banks.
This progress is driven by strict regulatory standards, active participation in debt restructuring programs, and improvements in credit monitoring efficiency.
By the end of 2025, the NPL ratio is expected to continue decreasing, enabling banks to expand lending to the real economy — particularly in the areas of green investments, technology, and real estate.