KEDIPES preps for major loan sell-off, boosting Cyprus banks

In a strategic move to streamline its assets, KEDIPES is gearing up to offload a second batch of performing loans, hot on the heels of its €58 million deal with the Bank of Cyprus. The upcoming sale, estimated to be worth between €50-100 million, is part of a broader trend in Cyprus's banking sector, where credit acquisition companies are increasingly selling quality loan packages to domestic banks.

Astrobank emerged as a notable contender in the initial sale, indicating that the acquisition of €50-60 million in performing loans could significantly bolster its financial standing. Despite the scale of these transactions, the Bank of Cyprus has confirmed that its recent purchase will not impact its financial statements or capital reserves.

The Competition Protection Commission has greenlit the sale to the Bank of Cyprus, ensuring it aligns with competitive market practices. This approval paves the way for the deal's conclusion in the coming weeks.

This pattern of loan sales is part of a larger shift observed by industry insiders, with credit repurchase firms periodically offering serviced loans to banks. Such deals are mutually beneficial: they provide banks with a new avenue for interest income while allowing credit buyback companies to capitalize on their restructuring efforts. While this practice is standard worldwide, it represents a new development for Cyprus, which lacked a secondary loan market until recently.

Amidst rising interest rates, the European Central Bank's tightening policy has led to a decrease in new lending. Banks are adapting by turning to credit buyback companies for performing loans. The Central Bank of Cyprus's January 2024 report shows a significant drop in new loans to €462.7 million from €725.4 million in December 2023. Consumer loans saw a slight uptick to €26.7 million, with €19.7 million in net new loans. However, loans for house purchases and to non-financial corporations have experienced a decline, reflecting the broader trend of cautious borrowing in the current economic climate.

[This article is a summary of the original in Greek published in Kathimerini's Wednesday edition]