According to statistics published on Wednesday, July 16, by the Central Bank of Cyprus, the share of non-performing loans (NPLs) in Cyprus's banking sector continues to show positive dynamics. As of the end of March 2025, the ratio of problem loans had decreased to 6.1%, down from 6.2% at the end of December 2024. This indicates a gradual strengthening of the country's banking system's financial stability.
The state of non-performing loans and the measures taken by the banking sector
Despite the slight decrease in the NPL share, the total amount of non-performing loans remained stable at €1.5 billion, similar to the figure at the end of 2024. Meanwhile, banks are strengthening their protection against potential risks. The loan loss provision coverage ratio increased to 60.5%, up from 59.9% in the previous quarter. This is particularly true for loans to non-financial institutions, where protection against liabilities has become more reliable.
Financial Indicators of Banks as of Early 2025
The main reasons for the decline in non-performing loans (NPLs) in Cyprus during the first quarter of 2025 were active loan repayments, including debt-for-property exchange schemes; successful restructurings, which transferred debts to the “performing” category; debt write-offs, including previously provisioned amounts; and the impact of currency fluctuations. These measures allow banks to effectively manage the quality of their loan portfolios while maintaining macroeconomic stability.
According to the Central Bank, the total amount of restructured loans at the end of March was €1.3 billion. Around €700 million of these loans remain classified as non-performing assets, indicating the need for further work on debt obligations despite the progress made in improving banks' balance sheets.
Alongside the trends in non-performing loans, the Central Bank of Cyprus published summary data on the profitability and capital adequacy of financial institutions. In the first quarter of 2025, Cypriot banks recorded a profit of €264.1 million. This is less than the €345.6 million profit recorded in the same period of 2024, but it is still considered a good result given the changes in interest rate policy and the overall economic environment.
Net interest income decreased from €519.2 million in the first quarter of 2024 to €453.5 million in the first quarter of 2025. This decrease is due to changes in income structure and a slowdown in the growth of new loans amid a stabilization of market activity.
The capital and stability of the Cypriot banking system
Meanwhile, the Common Equity Tier 1 (CET1) ratio improved to 26% by the end of March 2025, up from 24.7% at the end of 2024. This ratio is one of the highest in the European Union, confirming the resilience and high capitalization of Cypriot banks.
Despite a moderate decline in profits and net interest income, the Cypriot banking sector demonstrates resilience, effective risk management, and stable growth in asset quality. The decline in the share of non-performing loans, the strengthening of reserve coverage, and the increase in capital adequacy indicate the system's healthy development. These factors create a reliable foundation for investors, businesses, and real estate buyers making long-term financial decisions in Cyprus.