According to new data released by the Central Bank of Cyprus (CBK) on Tuesday 23rd July, the volume of non-performing bank loans (NPLs) in the island nation declined slightly.
Specifically, the figure fell from €1.78 billion in April to €1.766 billion in May 2024.
In other words, non-performing loans in the Cypriot banking system fell by €14m.
According to the European Banking Authority directive, problem loans include restructured loans that have been treated as non-performing for at least one year.
Loans more than 90 days past due, which do not include restructured loans, remained stable at € 1.39 billion, representing 5.8% of total loans. The MEX coverage ratio was 54.4%, up slightly from 54.2% in the previous month. At the same time, cumulative MEX provisions totalled € 786 million. The total amount of restructured loans at the end of May was € 1.42 billion, of which € 0.79 billion were still classified as non-performing. Overdue loans to households totalled €971 million (54% of the total) and to enterprises €760 million.
In turn, loans to households overdue by more than 90 days, excluding restructured loans, increased slightly to € 824 million from € 822 million in the previous month, while bad loans to enterprises decreased slightly to € 536 million from € 538 million in April. The coverage index for red loans to enterprises reached 69%, the corresponding index for loans to SMEs was 70% and the coverage index for loans to individuals was 42%.
As a reminder, problem loans are loans that are more than 90 days past due and classified as unsatisfactory, doubtful and uncollectible.
Typically, the European Central Bank forces banks that have a lot of bad loans to hold more capital, which ends up slowing 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.