NPLs decline but still 45% of total loans

Non- performing exposures (NPEs) in the Cypriot banking system declined below EUR 22 bln in February but remain at 45.3% of total loans, according to the latest data published by the Central Bank of Cyprus (CBC).

In January, NPEs spiked by almost EUR 2 bln compared with December 2017, this was due to the i mpact of the International Financial Reporting Standard 9 which forces banks to recognise expected losses.

Owing to the IFRS 9, accumulated provisions for credit losses reached a new high since 2014, amounting to EUR 11.84 bln which corresponds to a coverage ratio of 54% of total NPEs, the CBC said.

In absolute terms, NPES declined in February by EUR 120 mln or 0.55% to EUR 21.99 bln compared with EUR 22.11 bln in January.

Total loans in February registered an increase of EUR 99 mln amounting to EUR 48.51 bln from EUR 48.41 bln.

Restructured facilities declined

to EUR 12.02 billion in February marking an increase of EUR 61 mln compared with the previous month. Restructured facilities that continue to be classified as non-performing crept up by EUR 11 million amounting to EUR 8.87 bln in February.

In February, Household NPEs accounted for 52% of total NPEs reaching EUR 11.36 bln while corporate non-performing loans accounted for 46% of total NPEs amounting to EUR 10.15 bln, the CBC said.

An IMF country report on Cyprus issued last week signalled a warning about the island’s stubborn debt mountain saying: “Public and private sector debt remained extremely high with a large volume of nonperforming loans (NPLs), leaving the economy vulnerable to potential adverse shocks.”

It said a tougher banking sector strategy to reduce loans is needed but “could inadvertently intensify financial stability risks if investor and creditor confidence is eroded, resulting in additional fiscal costs”.