NPL ratio drops to 44% amid rising loans in arrears

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By Stelios Orphanides

The amount of non-performing loans in the Cypriot banking system fell in October by €51.7m to €21.4bn compared to September and by €2.7bn in a year, the Central Bank of Cyprus said.

Compared to the month before, the drop in delinquent loans in October was mainly on a €26.5m reduction of corporate bad loans which was accompanied by a €25.8m drop in household non-performing loans, the central bank said in a statement on its website on Wednesday. The reduction over the preceding 12-month period was mainly on €1.7bn drop in corporate non-performing loans combined with a €1bn drop of those of households.

On the other hand, the amount of 90-days-past-due loans in October rose by €103.3m in a month to €16.6bn, indicating that the reduction of non-performing loans in recent years continues to face risks, the central bank said. Compared to October 2016, loans in arrears for more than three months dropped by €1.4bn.

The ratio of non-performing loans fell in October to 44.1 per cent, the lowest since the introduction of the current classification methodology in December 2014, which provides for a minimum 12-month probation period of restructured loans before they are classified as performing, the bank supervisor said. In October 2016, it stood at 48.5 per cent.

The amount of restructured facilities dropped by €73bn to €12.3bn in October in a month and €1.3bn in a year, the supervisory authority added. Also, the amount of restructured loans regularly serviced by borrowers dropped by €44m compared to September and by €1.5bn compared to October 2016.

The cure ratio, i.e. the percentage of restructured loans showing no arrears stood in October at 70.3 per cent, down by 4 percentage points in a year, the Central Bank of Cyprus added.

Total provisions in the banking system rose in October by €11.9m to €10.1bn compared to September and by €829.1m compared to October 2016, the central bank said. The ratio of total provisions for loan impairments to total non-performing loans stood at 47 per cent in October.

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About Author

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

  • Kevin Ingham

    So NPL’s are “falling” whist more loans not classed as NPL’s become delinquent? Robbing Peter to pay Paul perhaps

    • Caulkhead

      I think we all knew the so called restructuring of loans was only happening in order to get a load of the NPLs off the books until after the election. They could I suppose in theory restructure all loans on a regular basis and then claim they have eliminated all NPLs!

    • Pc

      More likely former NPLs that were restructured and now face problems again. In other words, time to call in the loans.

      • Didier Ouzaid

        Or, and that would be the painful irony, NPLs are being quite successfully restructured while NEW loans arent being serviced.

      • Kevin Ingham

        They covered that in the article- about 30% of the NPL’s are falling behind again (the cure ratio is 70%) so a headline of NPL’s ratio falling to 44% is a pretty meaningless statistic because it won’t factor that failure rate in

        Banks have to work out who can actually pay a restructured loan and those who can’t, not just sit down and have a friendly chat with people not paying their loans and agreeing a repayment schedule that just defers the process

        Those who can pay have to be pressured into repaying, those who can’t have to be wound up and assets seized to cover the banks losses- given the number of people up to their eyeballs in debt that will be a brutal process

        Until you get such a system in place all we are witnessing is a silly accountancy game of financial pass the parcel, and until such time as the NPL’s are sorted Cyprus does not have a viable economy.

        Casinos, passport sales and marinas are not sustainable growth models- a modern economy needs functioning banks lending money to vibrant innovative local business creating valuable and productive jobs (even tourism is a bit “low rent”, particularly the mass end of the market)

        As long as the former are the main drivers of economic growth Cypriots will never be better off. These sort of schemes should be the last resort, not Plan A

    • Cydee

      Very confusing. Deliberately so?

  • Douglas

    Not to be trusted but Troika will swallow the bait 🙂