Reduction of non-performing loans in the Cyprus banking sector

On 11 December 2018 the Central Bank of Cyprus (CBC) published on its website its latest analysis of data on non-performing loans in the Cyprus banking sector, covering the period to 31 August 2018, showing aggregate non-performing facilities (NPFs) and related indicators for the domestic operations of credit institutions operating in Cyprus. Overseas operations are excluded.

During the month of August 2018, non-performing facilities fell by €15 million, from €16,610 million to €16,595 million, against a backdrop of a reduction in total facilities over the same period from €41,155 million to €41,048 million. The percentage of facilities classified as non-performing remained the same as at the end of the previous month, at 40.4 percent. Total impairment provisions held against non-performing debt fell to €7,952 million at the end of August, compared with €7,993  million a month earlier, resulting in the percentage of non-performing debt covered by provisions at the end of August decreasing to 47.9 percent, compared with 48.1 percent at the end of the preceding month.

Two sectors, namely non-financial corporations and households, account for the lion’s share of non-performing debt at 31 August 2018. Non-performing debts owed by non-financial corporations amounted to €6,106 million, representing 39.3 percent 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 45 percent of advances to SMEs being classified as non-performing. In the household sector, which accounted for 47.3 percent of total advances, 52.6 percent of debt was classified as non-performing.

Since the end of 2014, banks have succeeded in reducing aggregate non-performing debt by almost 40 percent, from €27,328 million to €16,595 million. Total facilities fell from €57,224 million to €41,048 million in the same period, and 40.4 percent of total facilities were classified as underperforming at the end of the period, compared with 47.8 percent at the beginning. In addition, there has been a marked improvement in coverage by impairment provisions, with 47.9 percent of non-performing debt covered by provisions at 31 August 2018, compared with only 32.8 percent at the end of 2014.