Newsroom
While non-performing loans (NPLs) in Cypriot banks are gradually declining, the situation remains dire for "red loans" held by loan acquisition companies, or "servicers."
According to Panayiotis Rougalas' article published in Kathimerini Cyprus in Greek, despite progress, these loans continue to be a substantial challenge, with issues dating back to 2014 now threatening to extend into 2024 and possibly beyond.
According to data from the Central Bank of Cyprus (CBC), total loan balances across the eight licensed credit acquisition companies, including state-owned KEDIPES, amounted to €21.2 billion by March 2024. Of this, KEDIPES holds €6.4 billion, while the overall sum reflects approximately 76,000 loan agreements. Of the €21.2 billion, €10.7 billion are linked to households, and €10.5 billion to businesses.
Strikingly, €19.9 billion of these loans are classified as non-performing. This slow progress in reducing bad loans is creating concerns that European institutions may eventually impose deadlines for their resolution. The companies tasked with managing these loans face significant challenges, including legal barriers and ongoing economic crises. Some argue that servicers might need to reconsider their profitability expectations, given the stagnant secondary loan market.
Conversely, Cypriot banks have made notable progress. As of June 2024, non-performing loans in the banking sector dropped to €1.7 billion, a further reduction from €1.8 billion in March 2024. The coverage ratio for NPLs also improved, reaching 55%, up from 53.3% in March.
This divergence between the performance of banks and loan servicers highlights a critical issue: while banks have successfully reduced NPLs through restructurings, loan sales, and write-offs, servicers continue to grapple with a growing mountain of debt.
