By Stelios Orphanides
Non-performing loans in the Cypriot banking system dropped in March by almost €2.1bn to €19.9bn in a month, which is the lowest since December 2014, the Central Bank of Cyprus said.
The non-performing loans ratio in the system fell in March from 45.3 per cent in February and 46 per cent in March 2017, to 43 per cent which is also the lowest rate since the introduction of the current classification methodology which also provides for a minimum 12-month probation period for restructured facilities, the central bank said in a statement on its website on Wednesday. Compared to March 2017, total non-performing loans fell by €3.3bn.
At the end of March, the amount of corporate non-performing loans fell in a month by €1.5bn to €8.7bn while that of households fell by €556.4m to €10.8bn, the central bank said. Total exposures showing arrears for more than 90 days fell by €1.9bn to €15.3bn while those restructured fell by €625.8m to €11.4bn. The amount of restructured loans showing no arrears fell by €612.8m to €8.3bn.
“The downward trend in NPFs (non-performing facilities) can be attributed to write-offs, increased restructurings successfully completed by the end of the observance period and reclassified as performing facilities, repayments as well as settlement of debt through swaps with immovable property that is expected to be sold with the aim of a faster cash collection,” the central bank said. The bank supervisor added that write-offs are part of loan restructurings usually concerning “amounts that already form part of credit institutions’ loan loss provisions,” which fell by €2.2bn in a month to €9.7bn in March.
Non-performing loans are considered the main challenge the island’s economy is facing. In March, the Cyprus Cooperative Bank’s failure to reduce its stock of delinquent loans and the subsequent need to further increase its provisions for loan impairments prompted the bank to initiate the sale of its operations.
The implementation of international financial reporting standard (IFRS) 9 in January led then to an increase in the amount of non-performing loans.