08.08.2022
Debt restructuring in Cyprus fell to €545 million in the first half of 2022 as loan renegotiation slowed after a record year due to the Covid-19 pandemic and NPLs fell to their lowest level since the 2013 financial crisis.
According to data published by the Central Bank of Cyprus and analyzed by CNA, debt restructuring between January and June 2022 was down by 59% compared to the first half of 2021, when loan renegotiations amounted to 1.42 billion euros.
The past year was marked by a record debt restructuring in Cyprus, with Cypriot banks picking up pace after the crisis caused by the Covid-19 pandemic, and especially after the end of the biggest payment holiday in the EU in December 2020. Restructuring during 2021 amounted to €2.32 billion from €0.75 billion in 2020 and €0.57 billion in 2019, before the Covid crisis.
Restructurings in the first half of this year remain elevated at 18.4% compared to the corresponding period in 2020.
Large corporate loans lead the way
Large corporate loans over € 1m had the largest share of restructurings in the first half of this year, with €467m, or 85% of total restructurings, according to CBC data. The restructuring of housing loans amounted to EUR 58 million , followed by the restructuring of corporate loans to EUR 1 million by EUR 39 million, other loans by EUR 10 million and consumer loans by EUR 9.8 million. Large corporate loan restructurings have historically taken the largest share, while in 2021 large corporate debt rescheduling totaled $1.78 billion , representing almost 77% of total restructurings.
Restructuring affected by NPL sales
The debt restructuring in the first half of 2022 was also affected by the sale of non-performing loans, concluded by the two largest banks in Cyprus. Bank of Cyprus in November 2021 sold a portfolio of problem loans with a contract value of 0.99 billion (spiral 3), while Hellenic Bank completed its first major sale of problem loans in April 2022, getting rid of problem loans with a contract value of 1. 32 billion euros.
These loans were cut out of the banking system for credit acquiring companies and debt service companies, with banks reducing risk on their balance sheets and therefore reducing the pressure on their capital.
According to the latest data published by the CBC, the ratio of non-performing loans to total loans in the banking system of Cyprus at the end of March 2022 was 11.4% (according to the EBA directive), and the total amount of non-performing loans was 2.92 billion euros.
However, in its 2021 Financial Stability Report, CBK warned that while there has not been much growth in non-performing loans due to the Covid pandemic, the new geopolitical crisis due to the war in Ukraine “brings back the risk of an increase in non-performing loans to the fore.”
