Record arrival figures a credit positive for banks, Moody’s says

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By Stelios Orphanides

The record-high tourist arrivals, which rose an annual 15 per cent over the past 7-month period edging 2 million is a credit positive for Cypriot lenders, Moody’s Investors Service said.

The increase in tourist arrivals this year, accompanied by a 22 per cent rise in revenue in January to May, helps Cypriot banks, plagued with a mountain of non-performing loans, improve their asset quality and find new lending opportunities, the rating company said in an emailed statement on Sunday.

“Bank of Cyprus, for instance, disbursed €39m of new loans to hotels and restaurants in the first quarter of 2017, accounting for 8 per cent of new lending, and sold €1m of hotel property over the same quarter, generating net proceeds 17 per cent above book value”.

The largest Cypriot lender’s real estate management unit is likely to find better opportunities to sell five foreclosed hotels worth €73m in the current industry environment, Moody’s said, adding that “the tourism industry’s revival is having positive ripple effects across the economy”.

With tourism’s contribution to employment seen at around 7 per cent of the workforce and loans to companies of the hospitality sector accounting for 10 per cent of total credit, the improved performance of the tourism sector helped boost cashflows, reduce the unemployment rate to 10.8 per cent in June, and a second quarter growth rate of 3.5 per cent, the rating company said.

Still, as the tourism sector is booming, non-performing loans in the accommodation and food services sector dropped 33 per cent to €1bn in March, compared to May 2014, accounting for 48 per cent of total exposures, Moody’s said.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Barry White

    Let’s take a look at the level and repayment rate of the Tourist Industry NPL’s and tax and electricity payments and arrears from “all this revenue” shall we?

    A simple and good story for the CM Journalists to inform the rest of the taxpayers and Bank depositors that are carrying the smart asses in the Hospitality ” industry”.

  • Bruce

    Moody’s is completely overestimating the benefits of booming tourist arrivals and receipts to the Cyprus economy.Figures on tourism receipts for the ROC are based on surveys at airports on how much tourists spend for their trip to and stay in Cyprus.No deductions are made for the considerable expenditures of many tourists in the T-occupied area of Cyprus.Also hoteliers helped by agents keep a significant part of their accrued income abroad.Furthermore, hotels with their all-inclusive packages and greed in limiting payments and benefits to employees do not plough much funds back to the local economy.Also as Barry White states hoteliers are not repaying their loans and other obligations.They along with developers are among the most prolific tax evaders and were largely responsible for the abolition of the progressive property tax.

    • Vlora

      I have the same observation.They have picked up the gross figures which can not reflect the exact earning .

      • Bruce

        And if you really want to calculate NET receipt figures for the tourist industry you could argue that the lack of accommodation capacity at decent prices in summer in Cyprus is driving more residents to holiday abroad; their outlays on travel somewhat offsetting the receipts.
        Also hoteliers will have to invest in expanding capacity and renovations in order to SUSTAIN the considerable growth in tourist numbers.

  • AnalogMind

    Great news!