Non-performing facilities down by Euros 750 million in Q2

? further decrease of Euros 750 million or 3.2% in aggregate non-performing facilities (NPFs) in the Cypriot banks was recorded during the second quarter of 2017, compared with the first quarter 2017,with the largest part of the fall totalling Euros 610 million exhibited in June 2017.

According to an announcement issued on Friday by the Central Bank of Cyprus (CBC), total facilities declined by Euros 582 million from Euros 50.401 million at end-March 2017 to Euros 49.820 million at the end of June 2017. This has resulted in a drop in the ratio of NPFs to total facilities from 46% at end-March 2017 to 45% at the end of June 2017. It must be noted that during the period between end-December 2014 and the end of March 2017, there has been an overall decrease in NPFs of Euros 4,9 billion or 18%. The coverage ratio rose to 46,7% at end-June 2017 compared with 42,6% at the end of March 2017.

According to CBC, the downward trend in NPFs can be attributed to increased restructurings successfully completed by the end of the observance period and reclassified as performing facilities, repayments, settlement of debt through swaps with immovable property that is expected to be sold with the aim of a faster cash collection as well as write-offs. The analysis of additional data collected by the CBC with respect to fixed-term loans shows that there has been an improvement in the factors contributing to the reduction of NPFs.

The reduction in NPFs is also due to the rise in loan write-offs, which take place in the context of restructurings and usually concern amounts that already form part of credit institutions’ loan loss provisions. However, non-contractual or “accounting” set-offs are also made against amounts already provided aimed at a more representative depiction of loan portfolios.

As regards repayments of NPFs through settlements that involve or include acquisition of real estate/shares against debt by the credit institutions, these are mainly implemented in the case of large corporate entities.

It should be noted that credit institutions apply the definition of NPFs adopted by the European Banking Authority. Based on this definition, when an NPF is restructured it is not immediately reclassified as a performing facility but remains under observation within the NPF category for a further period of at least 12 months, even if the customer follows without arrears the new agreed repayment schedule.

Total restructurings


Total restructured facilities at end-June 2017 amounted to Euros 12.818 million, of which Euros 8.911 million continue to be classified as NPFs, partly due to the definition of NPFs as explained above.

Credit institutions continue their intensive efforts towards restructuring NPFs in cases where viable settlements are possible. At the same time, the success of some restructurings depends on the prospect of disposing the collateral within the specified time frame. A net reduction in restructured facilities of Euros 225 million has been exhibited at the end of June 2017 compared with end-March 2017, which was due to increased repayments, write-offs, settlement of debt through swaps with immovable property and reclassifications out of the restructuring category following successful completion of restructurings by the end of the observance period.

At the end of the second quarter of 2017, out of the 20.148 accumulated applications for restructuring, agreements with the borrowers had been concluded in 3.587 cases (17.8%), 15.769 cases (78.3%) had been carried forward to be examined in the next quarter while 792 cases (3.9%) had been rejected either by the bank or the borrower.

Source: Cyprus News Agency