Non-performing exposures (NPEs) in the Cypriot banking system declined to 40.3% of total loans in the end of June 2018, marking a reduction of €3.28 billion compared to end-March 2018 and €10.7 billion or 39.1% since end-December 2014, the Central Bank of Cyprus (CBC) said on Monday.
On a quarterly basis, the reduction in the stock of NPEs is mainly attributed to the sale of an NPE portfolio amounting to €2.8 billion by Bank of Cyprus, the island’s largest lender.
The coverage ratio declined marginally to 48.3% in end-June 2018 compared with 48.6% in end of March, the CBC said.
“The downward trend in NPFs can be attributed mainly to the sale of loans, the reclassification of loans as debt instruments held for sale, the successful completion of the probation period of restructured loans and their reclassification as performing, write-offs, repayments and settlement of debt through swaps with immovable property that is expected to be sold with the aim of a faster cash collection,” the CBC said in a commentary.
The analysis of additional data with respect to fixed-term loans, the CBC added, shows that there has been an improvement in the factors contributing to the reduction of NPFs e.g. collections on restructured facilities and amounts transferred to performing facilities due to successful completion of restructurings by the end of the observance period.
Households loans the majority of NPEs
According to CBC, household NPES amounted to €10.21 billion or 61.41% of total NPEs in the end of June, while corporate NPEs amounted to €6.41 billion or 36.9%, whereas €5.20 stem from the SME from the SME portfolio.
Total restructured facilities at end-June 2018 amounted to €9.363 million, of which €6.444 million continue to be classified as NPFs, partly due to the definition of NPFs, the CBC said.
According to the CBC, a net reduction in restructured facilities of €2.033 million has been exhibited at the end of June 2018 compared with end-March 2018, which was due to the sale of non-performing loans, the reclassification of loans as debt instruments held for sale, increased migrations out of the restructured loans category following the successful completion of restructurings by the end of the observance period, write-offs, repayments and settlement of debt through swaps with immovable property.
Total facilities declined by €5.051 million or 10,9% from €46.332 million at end-March 2018 to €41.281 million at the end of June 2018, the CBC said.