The Central Bank of Cyprus (CBC) has recently published its latest analysis of data on non-performing loans in the Cyprus banking sector, covering the period to 31 January 2018, showing aggregate non-performing facilities (NPFs) and related indicators for the domestic operations of credit institutions operating in Cyprus. Overseas operations are excluded. The figures for total facilities, non-performing facilities and accumulated impairment provisions at 31 January 2018 all show an increase compared with the previous month-end, which the CBC explains as being due to the fact that the January figures are the first to be produced under the new International Financial Reporting Standard, IFRS 9.
During the month of January 2018, reported non-performing facilities rose from €20,572 million to €22,114 million, an increase of 7.5 per cent, against a backdrop of a 2.8 per cent increase in total facilities over the same period, from €47,081 million to €48,413 million. As a result, the percentage of facilities classified as non-performing rose from 43.7 per cent at the end of December 2017 to 45.7 per cent at the end of January 2018. Total impairment provisions made against non-performing debt rose to €11,657 million at the end of January 2018, compared with €9,637 million a month earlier, resulting in a substantial increase in the percentage of non-performing debt covered by provisions, to 52.7 per cent at the end of January, compared with 46.8 per cent at the end of the preceding month.
Two sectors, non-financial corporations and households, continue to account for the lion’s share of non-performing debt. Non-performing debts owed by non-financial corporations amounted to €10,163 million at the end of January 2018, representing 52.8 per cent of total advances to the sector. Within the sector, small and medium-sized enterprises (SMEs) showed an even higher proportion of non-performing debt, with 58.2 per cent of advances to SMEs being classified as non-performing. In the household sector, non-performing debts amounted to €11,471 million, representing 58.2 per cent of total advances.
Since the end of 2014, banks have succeeded in reducing aggregate non-performing debt by almost a fifth, from €27,328 million to €22,114 million. Total facilities fell from €57,224 million to €48,413 million in the same period, which meant that 45.6 per cent of total facilities were classified as underperforming at the end of the period, compared with 47.8 per cent at the beginning. In addition, there has been a marked improvement in coverage by impairment provisions, with 52.7 per cent of non-performing debt covered by provisions at 30 November 2017, compared with only 32.8 per cent at the beginning of the period.
While the headline figures show an apparent setback in reducing NPFs, the increase in the percentage of NPFs covered by impairment provisions appears to bear out the CBC’s contention that the reduction of the banking system’s exposure to non-performing debt is still on course.