12° Nicosia,
25 May, 2024

Business loans drop, home loans steady

Central Bank report reveals changes in borrowing habits and economic outlook

Newsroom / CNA

The Central Bank of Cyprus reported on Wednesday that the net demand for corporate loans continued to decrease in the last quarter of 2023, marking a consistent downward trend since the first quarter of 2022, although at a slower pace than anticipated earlier in the year.

According to the bank's lending survey for the fourth quarter of 2023, there was a steady net demand for housing loans, breaking a streak of consecutive declines seen since early 2022. The Central Bank attributed this negative trend in loan demand primarily to the persistently high interest rates.

However, the survey also indicated an increase in net demand for corporate loans related to financing fixed investments. This rise may indicate an anticipated expansion in domestic consumption and an increased need for debt restructuring, which helped offset the overall reduction in corporate lending demand.

The decline in total demand for corporate loans in the fourth quarter of 2023 was predominantly driven by small and medium-sized corporations, while demand from larger firms remained unchanged, the Central Bank noted.

Regarding housing loans, the survey revealed that the downward trend in net demand was halted in the fourth quarter of 2023. Net demand had been steadily declining since the beginning of 2022, but this was offset by increased demand resulting from banks offering competitive interest rates to bolster their share of total lending.

Consumer lending saw a continuation of its downward trajectory in the last quarter of 2023, surpassing expectations from the previous quarter. Factors such as deteriorating consumer confidence, higher interest rates, and decreased demand for durable consumer goods contributed to the decline in consumer lending demand.

Furthermore, the survey indicated that loan provision criteria remained unchanged for businesses but became stricter for household loans. Participating banks cited concerns over credit risk as the reason for the stricter criteria, although borrowers' ability to repay their loans did not significantly affect lending criteria for households compared to previous surveys.

Cyprus  |  economy  |  banks  |  loans

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