Loan restructurings drop by over 30 per cent

New business and household loans in Cyprus reached a record high of €3.9 billion in 2024, up from €3.3 billion in 2023, according to the Central Bank of Cyprus (CBC).

This total represents the highest level since the central bank began recording data in 2014.

According to the CBC, the surge was driven primarily by increased borrowing from businesses, marking the largest annual growth in this segment since 2017.

Meanwhile, household loans recorded their most significant annual increase in the past three years.

Notably, the €3.9 billion total reflects an 18 per cent increase from the previous year, the highest annual rise since 2021.

The figures account for all new loans issued by banks to households and businesses, excluding restructurings.

The CBC reported that business lending saw a substantial increase, exceeding €2 billion for the first time.

Net new loans to businesses reached €2.44 billion in 2024, up from €1.92 billion in the previous year, marking a 27 per cent rise.

The last time such a sharp increase was recorded was in 2017, when business lending grew by 43.6 per cent.

Household borrowing also expanded, though at a slower pace.

Net new loans to households totalled €1.42 billion, compared to €1.35 billion in 2023, reflecting a 5.2 per cent increase.

In contrast, loan restructurings experienced a sharp decline, dropping by 30.6 per cent in 2024.

The total value of restructured loans fell to €2.46 billion, down from €3.55 billion in 2023.

Household loan restructurings saw an even steeper decrease of 36 per cent, declining from €826.5 million in 2023 to €529.6 million in 2024.

Restructured business loans also fell by 29 per cent, reaching €1.93 billion compared to €2.73 billion the previous year.

A significant portion of the annual increase in net new lending was concentrated in December.

During the final month of 2024, net new loans granted to businesses and households totalled €598 million, a sharp rise from the €320.5 million issued in December 2023.

This represents an increase of €277.5 million, corresponding to a rise of 86.6 per cent.

Business lending was the main driver of this surge, with new business loans in December reaching €401.9 million, compared to just €150.2 million in the same month of 2023.

The lending environment in 2024 marked a stark contrast to the previous year.

In 2023, business lending had grown only slightly, while household borrowing had declined due to rising interest rates.

However, the second half of 2024 saw a shift, with lending rates decreasing following monetary policy decisions by the European Central Bank.

The increase in new loans also reflects ongoing liquidity challenges, prompting households and businesses to turn to the financial sector for funding.

Concerns have been raised over the rapid increase in household borrowing.

The Fiscal Council has previously warned of the growing reliance on consumer loans, which has coincided with a decline in demand for mortgage lending.

This trend, according to the council’s final 2024 report, suggests mounting financial pressure on households.

Meanwhile, CBC data indicates a shift in bank lending priorities, with a growing emphasis on financing large businesses.

The Fiscal Council also highlighted that beyond the increase in business loans exceeding €1 million, corporate leverage has been gradually declining.

This, it argued, supports the view that the economy’s growth momentum is not merely temporary.

However, the council also noted that smaller loans are seeing fewer restructurings, which suggests that growth is increasingly skewed in favour of larger firms at the expense of small and medium-sized enterprises (SMEs).

The perception that SMEs are facing financial strain appears to be justified, the council added, suggesting that policy measures could be considered to address the growing imbalance in lending patterns.