Cyprus Business Now

Cyprus’ non-performing loan (NPL) ratio rose to 11.4 per cent in the first quarter of 2022, according to a report released this week by the Central Bank of Cyprus.

The NPL ratio previously stood at 11.1 per cent at the end of the fourth quarter of the previous year.

There was a fall of €77 million in aggregate NPLs at the end of Μarch 2022, a decline of 2.6 per cent when compared to the overall value at the end of December 2021.

However, total loans also decreased, falling by €1.45 billion (5.4 per cent) from the previous figure of €27.01 billion at the end of December 2021 to €25.55 billion at the end of March 2022.

This has been primarily attributed to deleveraging initiatives, mainly from performing exposures.

As a result, although the NPLs decreased, the ratio of NPLs to total loans marginally increased from 11.1 per cent in end-December 2021 to 11.4 per cent at the end of March 2022.

The coverage ratio stood at 45.7 per cent at the end of March 2022, compared with 43.1 per cent at the end of December 2021.

Furthermore, the central bank noted that between December 31, 2017, and March 31 2022, the total value of non-performing loans was reduced by €17.7 billion or 85.8 per cent of the original amount.

The downward trend in NPLs observed during the first quarter of 2022 can be attributed to loan repayments (including debt-to-asset swaps), as well as the positive migrations of loans that were successfully restructured and reclassified as performing at the end of their probation period.

The Cypriot real estate sector will fare well in the short term but not without creating certain imbalances in the long term, WiRE FS chairman Pavlos Loizou said earlier this week.

“I have been asked about where the property market is heading countless times in recent months, mostly by foreign investors who are trying to gauge how rising inflation, rising interest rates, and the war in Ukraine will affect local market dynamics,” Loizou said.

“Things will be better than most expect in terms of demand and prices, but worse in terms of increasing income inequality and creating future imbalances, something which no one seems to care about,” he added.

Moreover, Loizou explained that the domestic real estate market can be divided into a number of groups, with each group having its own attributes and tendencies.

“The Nicosia property market is less likely to be affected by the above-mentioned external factors, although there is some reduction in investment due to the increase in interest rates and in relation to the construction of large-sized main residences due to the increase in construction costs,” he said.

The market in Limassol, and to a lesser extent Paphos and Larnaca, is more affected by people who have relocated to Cyprus over the past three to five years, from a number of countries.

“Residential rental prices in Limassol are at an all-time high, with those in Larnaca and Paphos also trending upward,” Loizou said.

“There is also a significant demand for office spaces of high specifications and construction quality, demand for higher quality and more luxurious products, as well as a demand for foreign language schools,” he added.

The Cyprus Stock Exchange (CSE) ended Friday, July 15 with losses.

The general Cyprus Stock Market Index was at 66.32 points at 12:36 during the day, reflecting a drop of 0.44 per cent over the previous day of trading.

The FTSE / CySE 20 Index was at 39.67 points, which represents a decrease of 0.48 per cent.

The total value of transactions came up to €93,136.

In terms of the sub-indexes, the main and alternative indexes fell by 0.17 per cent and 0.74 per cent respectively. The investment firm and hotel indexes remained stable.

The biggest investment interest was attracted by the Bank of Cyprus (-1.04 per cent), the Cyprus Cement Company (-1.61 per cent), Tsokkos Hotels (+7.14 per cent) and Cyprus Forest Industries (+10 per cent).