30/03/2017 09:49
After reaching a peak at the beginning of 2015, the stock of non-performing exposures (NPEs) in Cyprus continues to decline, according to DBRS agency.
The agency says in a note that Cyprus’ NPE ratio remains high the highest in Europe, but between February 2015 and December 2016, NPEs decreased by 16%.
DBRS expects this improvement to continue, supported by ongoing economic recovery. NPEs for the entire banking system were 46.2% of total outstanding loans in December 2016, compared to 49% in May 2016. The ratio of loans 90-days past due was 33.9%, down from 37.5% for the same period.
“The steady recovery of the economy, which posted growth for a second consecutive year in 2016, and a recovery of the housing market should contribute to further reduction of NPEs. DBRS expects the clean up of Cypriot bank balance sheets to continue, supported by the comprehensive framework of measures now in place», says Adriana Alvarado, DBRS Global Sovereign Ratings.
The adoption of the insolvency framework in 2015 has supported the restructuring of delinquent loans. Restructured loans increased in December 2016 to 26% of total loans, up from 22% at the beginning of 2015. According to the Central Bank of Cyprus, several restructured loans are now classified as performing, following the 12-month probation period of no past due amounts. The framework aimed at the reduction of NPEs also includes the legislation to accelerate the transfer of title deeds, the legislation to allow banks to sell loans to third parties adopted in November 2015 and pending legislation on loan securitization.
According to the agency, the Cypriot economy continued to recover for a second year in a row in 2016 with steady growth expected in 2017. This sustained growth is a major turnaround from the cumulative fall in gross domestic product (GDP) of 10.6% from 2012 to 2014. Helped by tourism, real GDP growth is estimated at 2.8% for the full year in 2016, above the euro area average of 1.7% and slightly below that of Spain. As a large portion of NPEs stem from the real estate market, the recovery of the housing market will be key to the ongoing reduction in NPEs.
The agency says in a note that Cyprus’ NPE ratio remains high the highest in Europe, but between February 2015 and December 2016, NPEs decreased by 16%.
DBRS expects this improvement to continue, supported by ongoing economic recovery. NPEs for the entire banking system were 46.2% of total outstanding loans in December 2016, compared to 49% in May 2016. The ratio of loans 90-days past due was 33.9%, down from 37.5% for the same period.
“The steady recovery of the economy, which posted growth for a second consecutive year in 2016, and a recovery of the housing market should contribute to further reduction of NPEs. DBRS expects the clean up of Cypriot bank balance sheets to continue, supported by the comprehensive framework of measures now in place», says Adriana Alvarado, DBRS Global Sovereign Ratings.
The adoption of the insolvency framework in 2015 has supported the restructuring of delinquent loans. Restructured loans increased in December 2016 to 26% of total loans, up from 22% at the beginning of 2015. According to the Central Bank of Cyprus, several restructured loans are now classified as performing, following the 12-month probation period of no past due amounts. The framework aimed at the reduction of NPEs also includes the legislation to accelerate the transfer of title deeds, the legislation to allow banks to sell loans to third parties adopted in November 2015 and pending legislation on loan securitization.
According to the agency, the Cypriot economy continued to recover for a second year in a row in 2016 with steady growth expected in 2017. This sustained growth is a major turnaround from the cumulative fall in gross domestic product (GDP) of 10.6% from 2012 to 2014. Helped by tourism, real GDP growth is estimated at 2.8% for the full year in 2016, above the euro area average of 1.7% and slightly below that of Spain. As a large portion of NPEs stem from the real estate market, the recovery of the housing market will be key to the ongoing reduction in NPEs.
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