Cyprus’ banking sector has seen a surge of activity in the last few years and new initiatives and reforms have set banks on a stronger course to tackle the alarmingly high number of red loans of the 2013 financial crisis.
Latest data released yesterday by the Central Bank of Cyprus shows that red loans have been cut in half within a year. And that six are the sectors of the economy with the highest number of non-performing loans.
Top-ranking is the wholesale and retail sector, even though compared to last year it has marked a sharp decline in red loans.
Specifically, the sector’s NPLs stood at €1.3 billion by end of June 2019, and make up 26.8% of the island’s total. Compared with the same period last year, NPLs are down by €278 million.
At the same time, NPLs seem to have shifted from banks’ balance sheets to those of KEDIPES state company that took over the red loans of collapsed Cyprus Co-operative Bank. Red loans have also been shifted to private funds such as Apollo which buys these from banks.
On the other hand, the growth of the economy and tourism’s positive path have also helped in the reduction of NPLs. Along with the granting of citizenship to luxury real estate investors mainly active in building towers with the prospect that proceeds from these operations will serve developers’ debts.
Specifically, the data shows that red loans have been cut in half within a year. And from €10.2 billion at the end of June 2018, they have fallen to €5 billion by end of June 2019.
The controversial citizenship by investment scheme has certainly helped construction companies bring down their red loans. However, this sector is second placed when it comes to red loans.
At the end of the first half of 2019, non-performing loans in construction were €1.1 billion from €1.8 billion at the end of the first half of 2018. The sector’s non-performing loans constitute 23% of last year’s total, and have been decreased by €617 million.
As for the real estate sector, it is third-placed with non-performing loans standing at €549.8 million and representing 11% of the total by end of June 2019. Industrial enterprises account for 6.8% of total non-performing loans.
The hotel and food sector are ranked sixth with non-performing loans standing at €252 million by end of June 2019 marking a decrease of €113 million from last year when they totaled €365.1 million. The hotel sector has 5% of all non-performing loans.