Nicosia: Morningstar DBRS Ratings has released a detailed analysis of the performance of nonperforming loan (NPL) transactions in Spain, Portugal, and Cyprus, highlighting the continued upward trend in the Cypriot market into 2024. This report sheds light on how the Cypriot market has managed to maintain stability despite several challenges.
According to Cyprus News Agency, the report includes data on three Cypriot projects-Hestia Financing, Titan Financing, and Capella Financing-which have all shown significant progress compared to earlier projections. The latest performance data indicate an overall improvement in collections, even though initial results fell short of business plan targets. Notably, Capella Financing increased its annual collection rate (CCR) by 5.8%, while Titan and Hestia recorded increases of 1.7% and 3.8% respectively.
DBRS notes that Cyprus’ banking sector has successfully reduced its non-performing loan ratios, particularly in the mortgage sector, achieving a decrease of 254 basis po
ints, one of the largest reductions in Europe. This improvement is attributed to effective deleveraging strategies and enhanced collateral quality.
The report also discusses the positive influence of external factors such as demand for foreign labor and lower interest rates, which have bolstered the real estate market in Cyprus. These factors have enabled NPLs to perform better than initially anticipated, prompting rating agencies to revise their forecasts positively for Hestia and Capella.
DBRS analysts anticipate further credit rating improvements if this stabilization trend persists. However, they caution that projects like Titan could face challenges due to relatively lower collateralization of senior securities, which may lead to pressures if receipt levels fall below expectations.