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CB: 7 in 10 restructurings viable

05/01/2016 19:06
Seven in ten loans that have been restructured during the last two years are being properly serviced, the central bank announced today, expressing its optimism for the gradual reduction of non-performing loans.

Despite the continuing increase in the level of problematic loans, the CB points out that the increased loan restructurings being done lately, will positively contribute to the improvement of the banks' balance sheets.

According to the CB, 72% of the restructured loans during the period of January 1, 2014 to October 31, 2015, are properly serviced as the agreed payment terms are maintained.

The new CB data show that the total amount of restructured loans up to October 2015 reached €14.242 mn up by €287 mn compared to September 2015.

From these, a total of €10.727 mn continues to be included in the non-performing loans due to the definition of NPLs. Restructured loans remain as NPLs for at least twelve months after restructuring.

According to the CB data the pace of restructurings is accelerating. A total of €1 bn were restructured during the first quarter of 2015, €1,2 bn in the second and €1,4 bn in the third, while in October they reached €657 mn.

During October 2015, there were 12.839 applications for restructurings out of which for 2.534 cases (20%) a restructuring was agreed with the loan holders, 9.637 cases or 75% were moved for examination in the next month, and 658 cases (5%) have been rejected either by the bank or the loan holder.

Red loans increase

In spite of the banks' efforts for restructuring problematic loans, such loans continue to increase.

The increase occurs despite the bills adopted in April of 2015 aiming at limiting problems with the banks' balance sheets.

According to the CB data non-performing exposures increased in October by €101 mn reaching €27,4 bn constituting 48% of total outstanding loans.

By the end of 2014 they represented 47,9% of total loans.

NPLs in households amounted to €12,8 bn the same as in September representing 56,5% of total loans to households compared to 56,1% the previous month.

In non-financial businesses NPLs stood at €13,8 bn or 57,2% of the total loans of €24,1 bn.

The accumulated NPL provisions reached €9,3 bn or 34% of total NPLs.

Due to the relatively low provisioning ratio, the European supervisory body asked the three systemic Cypriot banks to increase their provisions something that will negatively affect their capital base.

The CB points out that despite the increase in NPLs in October, based on preliminary data a small decrease is expected in November 2015.