Non-performing loans (NPLs) in the island nation rose again, according to new data released by the Central Bank of Cyprus (CBC).
Specifically, the figure rose by 6.6% to €1.61 billion in October 2024.
In other words, NPLs in the Cypriot banking system increased by €16m compared to September. The MEX coverage ratio increased to 56.1% or €993 mn at the end of October 2024, compared to 55.7% or €978 mn at the end of September 2024. The total amount of restructured loans at the end of October was € 1.33 billion, of which € 711 million are still included in non-performing loans. The amount of overdue loans to households decreased to € 898 million (8.5% of total loans) from € 900 million in the previous month, while loans to enterprises increased to € 676 million (5.8% of total loans) from € 658 million in the previous month.
Accumulated provisions for households reached 41.2% of total loans and for enterprises 74.3%. Total loans to households amounted to 10.6 billion euro in October 2024, while loans to enterprises amounted to 11.75 billion euro.
As a reminder, problem loans are loans that are more than 90 days past due and classified as unsatisfactory, doubtful and irrecoverable.
Typically, the European Central Bank forces banks that have a lot of bad loans to hold more capital, which ultimately slows the economy as banks have less money to lend.
Indeed, non-performing loans are a persistent weakness in the Cypriot banking sector, although the situation is expected to gradually improve. Non-performing loans continue to pose a risk to the stability of the island's financial system and remain the main obstacle to the strengthening of the banking sector.