New lending in Cyprus stable at €3.26 billion, restructured loans surge to €4.48 billion

New lending in Cyprus remained stable during 2023, a reflection of an economic environment dominated by high interest rates, which also pushed loan restructurings to historically unprecedented levels.

According to a report released this week by th eCentral Bank of Cyprus (CBC), net new loans in 2023 amounted to €3.26 billion, a marginal 0.1 per cent decrease from the previous year’s €3.27 billion.

In contrast, loan restructurings soared to €4.48 billion, marking an almost 245 per cent increase.

This represents the highest level since the CBC began publishing data in December 2014.

Moreover, loan restructurings, involving extensions or modifications of other loan terms, are undertaken in an effort to prevent credit deterioration and the rise of non-performing loans.

Net new loans in 2023 remained virtually unchanged at €3.26 billion compared to the previous year.

Corporate loans exceeding €1 million constituted the majority of total loans, amounting to €1.4 billion, reflecting a 5 per cent annual increase.

In addition, corporate loans exceeding €1 million accounted for 43 per cent of the total.

Furthermore, the high-interest environment and elevated construction costs resulted in housing loans for property purchases decreasing to €1.01 billion, representing a 14 per cent annual decline from the €1.2 billion recorded in 2022. Housing loans in 2023 constituted 31 per cent of the total.

Corporate loans up to €1 million experienced a modest 1 per cent annual decrease, amounting to €0.52 billion compared to €0.53 billion in 2022, representing 16 per cent of the total new loans in 2023.

Despite high interest rates, consumer loans surged to €230 million in 2023, compared to €155 million in 2022, marking a 48 per cent annual increase and accounting for 7 per cent of the total net new loans.

Other loans increased by 23 per cent, totalling €102 million and representing 3 per cent of the total.

What is more, high interest rates prompted borrowers and banks to engage in loan restructurings, aiming to prevent credit deterioration and mitigate the increase of non-performing loans. The total value of loan restructurings skyrocketed to nearly €4.5 billion, reflecting a 245 per cent annual increase.

As has been the case in the past, corporate loans exceeding €1 million constituted the lion’s share of restructurings, representing 68 per cent of the total and reaching €3 billion.

When compared to 2022, the restructuring of such loans increased by 183 per cent.

Restructurings of housing loans experienced an extraordinary 761 per cent surge, totalling €0.92 billion in 2023, compared to just €107 million in 2022.

Overall, housing loan settlements accounted for 20 per cent of all restructurings.

Corporate loan restructurings up to €1 million increased by 417 per cent compared to 2022, reaching €380 million and accounting for 8.5 per cent of the total.

Additionally, restructurings of other loans amounted to €90 million, representing a 272 per cent increase and constituting 2 per cent of the total.

Consumer loan restructurings increased by 111 per cent on an annual basis in 2023, totalling €39 million compared to €19 million in 2022, constituting 0.9 per cent of the total loans that underwent restructuring in 2023.