Company liquidity suffers as NPLs drop, different picture with households

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By Stelios Orphanides

Cypriot companies were successful in reducing their non-performing loans in 2015 at the expense of their liquidity, while households saw their non-performing loans rise amid an increase in deposits against loans, an analysis of central bank figures shows.

The overall amount of non-performing loans of non-financial companies in the Cypriot banking system fell in December 2015 to €13.3bn, which was €400.9m less than a year before, the central bank figures show. Over the same period, the overall credit extended to companies rose by €590.8m to €26.4bn, while deposits rose by €114.6m to €10.1bn.

As a result, the gap between deposits held by companies and loans extended to companies narrowed in December 2015 by €476.2m to €16.2bn compared with December 2014, the data show.

Over the same 12-month period, while households allowed their non-performing loans increase by €111.2m to €12.7bn, they were able to increase their net savings, i.e. the difference between their deposits and loans, by €1.6bn to €4bn.

Overall household deposits rose in December 2015 by €545m to €27.7bn, while their overall loans fell by almost €1.1bn, the data shows.

The increase in household non-performing loans compared to the drop in the case of companies may reflect the efforts of banks to focus first on their larger corporate borrowers.

The director of the Association of Cyprus Banks Michalis Kammas said that last year’s modernisation of legislation on foreclosures and insolvencies will start to become effective as the economy gains momentum.

“Foreclosures are not a goal in themselves but instead a way to pressure those who can pay but opt not to,” he said. “There are no excuses any more. We will see a change in the mentality of borrowers”.

Kammas added that he expects restructurings to further pick up in the near future.

The amount of restructured loans of households rose by €149.4m to €5.6bn in December 2015 compared with the previous year, while in the case of companies it rose by €1.2bn to €7.9bn, according to the central bank data. Household loans in arrears for 90 days or more fell by €374m to below €10.2bn, while in the case of companies they dropped by €482.2m to over €10.2bn.

Restructured loans remain classified as non-performing for a twelve-month period before they are considered again as performing.

Households Companies
Deposits Loans Net (D-L) NPLs Deposits Loans Net (D-L) NPLs
Dec-14 27,183.3 24,824.7 2,358.6 12,579.4 10,013.9 25,772.6 -15,758.7 13,667.3
Jan-15 27,317.9 25,036.8 2,281.1 12,745.0 10,052.1 26,847.9 -16,795.9 13,914.7
Feb-15 27,332.8 24,922.1 2,410.6 12,852.1 10,048.0 26,919.0 -16,871.1 13,822.3
Mar-15 27,353.8 24,457.9 2,895.8 12,698.0 10,137.6 27,022.2 -16,884.6 13,812.8
Apr-15 27,299.8 24,340.9 2,959.0 12,747.9 9,935.3 26,798.2 -16,863.0 13,929.0
May-15 27,361.2 23,796.3 3,564.9 12,614.9 10,079.2 26,573.1 -16,493.9 13,403.2
Jun-15 27,402.6 23,885.4 3,517.2 12,602.3 9,680.8 26,641.9 -16,961.0 13,499.4
Jul-15 27,354.7 23,763.5 3,591.2 12,690.4 9,805.1 26,631.8 -16,826.7 13,728.3
Aug-15 27,328.6 23,642.4 3,686.2 12,733.9 9,908.9 26,681.6 -16,772.7 13,858.4
Sep-15 27,318.4 23,468.5 3,849.9 12,756.9 10,297.6 26,628.4 -16,330.8 13,799.6
Oct-15 27,421.1 23,417.5 4,003.6 12,827.8 10,750.7 26,575.7 -15,825.0 13,789.5
Nov-15 27,556.6 23,376.5 4,180.1 12,786.8 11,110.6 26,658.8 -15,548.1 13,775.1
Dec-15 27,728.3 23,734.6 3,993.7 12,690.6 10,128.5 26,363.4 -16,235.0 13,266.4
Change in Dec2014 – Dec2015 in 000 € 545.0 -1,090.1 1,635.1 111.2 114.6 590.8 -476.2 -400.9
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