According to new data released by the Central Bank of Cyprus (CBK) on Friday 20th September, the volume of non-performing loans (NPLs) in the country fell from €177.6 billion in May to €166.9 billion in June.
NPLs in the Cypriot banking system fell by €107.1 million compared to the previous month.
According to the European Banking Authority directive, problem loans include restructured loans that have been treated as non-performing for at least one year.
The ratio of problem loans to total loans decreased to 6.9%, or € 1.8 billion, at the end of June from 7.3%, or € 1.8 billion, at the end of March. The NPL coverage ratio increases from 53.3% or €0.9 billion at the end of March 2024 to 55% or €0.9 billion at the end of June 2024.
In wholesale and retail trade, problem loans decreased from €166.1 million to €150.8 million, while in transport and storage they increased from €232.7 million to €250.5 million at the end of December 2023.
In the construction sector, overdue loans decreased from €94.6 million to €57.7 million at the end of 2023, while in the hotels and restaurants sector they decreased from €52.4 million to €42.5 million. In real estate, problem loans totalled €92.2 million, compared with €102.1 million at the end of last year, and in professional, scientific and technical activities €50.8 million, compared with €46 million.
As a reminder, non-performing 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 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.
It is worth noting that de facto non-performing loans are a persistent weakness in the country's banking sector, although the situation is expected to improve gradually. 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.