The Central Bank of Cyprus (CBC) has released its latest analysis of data on non-performing loans in the Cyprus banking sector, covering the period to August 31 2017. The analysis shows aggregate non-performing facilities (NPFs) and related indicators for the domestic operations of credit institutions operating in Cyprus. During the month of August NPFs fell by €497 million ($598 million), a reduction of 2.2%, to €21.9 billion, against a backdrop of a smaller (1.1%) reduction in total facilities, from €49.5 billion to €48.9 billion, over the same period. As a result, the percentage of facilities classified as non-performing fell to 44.7% at the end of August 2017. Total impairment provisions made against NPFs totalled €10 billion as at August 31 2017, accounting for 45.9% of aggregate NPFs.
Since the end of 2014 banks have succeeded in reducing aggregate NPFs by 20%, from €27.3 billion to €21.9 million. Total facilities fell from €57.2 million to €48.9 million in the same period, which meant that 44.7% of total facilities were classified as underperforming at the end of the period, compared with 47.8% at the beginning. While the improvement in the quality of debt appears to be marginal, the improvement in coverage by impairment provisions is more marked, with 45.9% of NPFs covered by provisions as at March 31 2017, compared with only 32.8% at the beginning of the period. Non-financial corporations (particularly SMEs) and households account for the lion (39%) share of non-performing debt.
The CBC attributes the reduction in NPFs to increased repayments, restructurings successfully completed and reclassified as performing facilities, write-offs and settlement of debt through swaps with immovable property intended to be sold with the aim of faster cash collection.
Recognising the effect that wholesale foreclosure and forced sale of assets pledged as security may have on the property market, the CBC continues to encourage credit institutions to make intensive efforts to restructure NPFs in cases where viable settlements are possible.