Panayiotis Rougalas
Cypriot banking institutions have lately been taking drastic measures to reduce their non-performing loans. After the separation of the Cyprus Cooperative Bank in a good and bad bank and the sale of part of the Bank of Cyprus NPLs to the American investment fund Apollo Global Management, it was time for Alpha Bank to address its NPL problem.
Kathimerini sources report that the bank created a special purpose vehicle (SPV) and transferred part of its NPLs to it. On this special purpose vehicle that will be managed by the parent company Alpha Bank of Greece, Alpha Bank Cyprus has unloaded 400m euros worth of non-performing loans. This model is also being used to address NPLs by the National Bank of Greece (Cyprus) whereby the result will be the sale of the healthy portfolio that will remain.
Alpha Bank Cyprus NPLs at the end of 2017 amounted to € 1.72 billion, which is estimated to be 65.6% of the bank’s total loans, compared to 64.3% in 2016. Interestingly, in 2017, the forecast for NPLs was 51.8% compared to 47.5% in 2016.
Following this action it is estimated that Alpha Bank Cyprus NPLs will be € 1.32 billion (50.3 %).
The European Banking Authority notes that the ratio of non-performing loans to total borrowing decreased in Cyprus from 38.9% in March 2018 to 34.1% in June 2018. Forecasts dropped from 46.1% in March, to 44.2% in June. In the banking sector - as noted by the Central Bank of Cyprus - NPLs remain the biggest challenge, despite the progress made in recent years.
From the first quarter of 2017 to March 2018, there was a reduction of € 3.5 billion worth of NPLs on the balance sheet of the Cypriot banking sector. The banks are supervised by the Central Bank of Cyprus which is turn supervised by the European Central Bank. Cyprus banks have already submitted their strategic plans to reduce NPLs over the next three years.
