According to the results of the Bank Lending Survey (BLS) for July 2021, the lending criteria for both businesses and the population of Cyprus remained unchanged in the second quarter of 2021, but they are expected to become more stringent in the third quarter of this year.
The Central Bank of Cyprus noted that this trend is a consequence of the tightening of criteria that occurred in 2020 for all types of loans, as well as during the first quarter of 2021 for loans to households, mainly due to the coronavirus pandemic and, in particular, due to increased risk perception by local banks.
Net demand for business loans in the second quarter of 2021 did not change, while net demand for loans from households increased.
The ratio of rejected applications to the total number of applications changed slightly compared to the previous quarter for all types of loans, which, according to the country's Central Bank, is consistent with “unchanged lending criteria in the second quarter of 2021 and the perception that credit risks are generally stable".
The survey found that in the second quarter of 2021, “there were no further changes in risk perception, possibly reflecting an improved environment for the pandemic.”
In the second quarter of 2021, according to the banks that participated in the survey, the criteria for lending to businesses in Cyprus remained unchanged from the previous quarter, in line with expectations expressed in a survey conducted in April 2021.
By the way, even the conditions for home lending in the second quarter of 2021 remained unchanged, despite the estimates made in the review of the previous quarter, which implied a further tightening of requirements for loan applicants.
The criteria for consumer loans and other types of loans to households also remained unchanged in the second quarter of 2021, for the first time since the start of the pandemic.
According to banks' expectations, in the third quarter of 2021, the criteria for lending to businesses and individuals for all types of loans should become more stringent compared to the previous quarter.
Demand for loans
The study found that firms' net demand for loans in the second quarter of 2021 did not change.
The net demand for loans from the population increased compared to the previous quarter for all types of loans. According to the Central Bank, this is due to the general level of interest rates on loans to households, as well as to the government subsidizing the interest rate on new housing loans.
Banks are confident that the net demand for loans from both enterprises and the population for all types of loans will increase in the third quarter.
Meanwhile, local financial institutions are desperate to get rid of the collateral that has accumulated on their balance sheets. Many of them are now focusing on the sale of real estate as a result of debt-for-real estate swaps.
Thus, the Real Estate Management Department (REMU) of Bank of Cyprus managed to sell real estate worth 76 million euros in the first quarter of 2021 alone, compared to 24 million euros in the first quarter of 2020. At the same time, profit from the sale of real estate amounted to 7 million euros in the first half of 2021, compared with 3 million euros in the same period last year.
In the second quarter of 2021, housing was sold in the amount of 52 million, which is 28 million euros more than in the second quarter of 2020 and 42 million euros more than in the first quarter of 2020. Income from the sale of real estate was 4 million euros in the second quarter of 2021 (compared to 3 million euros in the first quarter of 2021).
It is noteworthy that asset sales refer to all categories of real estate, but the largest percentage (54%) falls on land. In addition, REMU's portfolio in the first half of 2021 was replenished with new real estate in the amount of € 21 million thanks to debt-to-real estate swap agreements.
As for Hellenic Bank, its portfolio consists of many assets of various categories of real estate in both Cyprus and Greece. The bank is also actively selling mortgaged housing, while often arranging good discounts on properties.
KEDIPES also continues to sell assets. KEDIPES properties operated by Altamira are for direct sale without restrictions, with the bank seeking to maximize value and repay government aid provided by the former SKT.
Since the inception of KEDIPES, real estate sales have already exceeded 384 million euros, of which properties worth 150 million euros were sold in less than 12 months from the receipt of objects in the company's portfolio. Of the 384 million euros, 194 million euros fell on land transactions, 90 million euros - with commercial real estate, the rest of the funds - with residential real estate, which is not the first home of borrowers.
Today, the real estate portfolio of KEDIPES is 620 million euros, of which in the near future, real estate worth 140 million euros will be transferred to the state in exchange for a corresponding agreement.