On January 11 2019 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 ended September 30 2018, showing aggregate non-performing facilities and related indicators for the domestic operations of credit institutions operating in Cyprus. Overseas operations are excluded.
During the month of September 2018, non-performing facilities fell by more than one-third, from €16.59 billion ($18.9 billion) to €11.02 billion, against a backdrop of a 16% reduction in total facilities over the same period, from €41.05 billion to €34.65 billion. The percentage of facilities classified as non-performing fell from 40.4% at the end of August to 31.8% at the end of September. Total impairment provisions held against non-performing debt fell to €5.71 billion at the end of September, compared with €7.95 billion a month earlier, resulting in the percentage of non-performing debt covered by provisions at the end of September improving to 51.9%, compared with 47.9% at the end of the preceding month.
Two sectors, namely non-financial corporations and households, accounted for the lion's share of non-performing debt at September 30 2018. Non-performing debts owed by non-financial corporations amounted to €5.35 billion, representing 36.2% 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 41.3% of advances to SMEs being classified as non-performing. In the household sector, which accounted for 40.4% of total advances, 38% of debt was classified as non performing.
The largest factor in the substantial improvement in the figures over the month of September 2018 was the transfer of the impaired loan portfolio of the former Cooperative Bank to the Cyprus Asset Management Company, known by the acronym KEDIPES. KEDIPES is tasked with achieving viable restructuring in cooperation with borrowers and, where this is not feasible, disposing of assets at maximum values. In addition to this one-off boost, the CBC reports that the figures have benefited from 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 loans, write-offs, repayments and settlement of debt through swaps with immovable property that is expected to be sold with the aim of faster cash collection.
Since the end of 2014, banks have succeeded in reducing aggregate non-performing debt by almost 60%, from €27.33 billion to €11.02 billion. Total facilities fell from €57.22 billion to €34.65 billion in the same period, and 31.8% of total facilities were classified as underperforming at the end of the period, compared with 47.8% at the beginning, a reduction of more than one-third. In addition, there has been a marked improvement in coverage by impairment provisions, with more than one-half of non-performing debt covered by provisions at September 30 2018, compared with less than one-third at the end of 2014.
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Elias Neocleous |