Toronto-based ratings agency DBRS gave on Tuesday a positive view of the ongoing reduction in the nonperforming loans of Cypriot banks that has amounted to nearly a quarter from their peak in early 2015.
It noted in a statement that the NPL stock has been declining mostly driven by the non-financial corporations (NFCs) sector.
Largely helped by loan restructurings of large firms, NPLs for NFCs fell 29 percent from February 2015 to August 2017, while NPLs for households declined 12 percent, the agency pointed out. Overall, total NPLs in Cyprus have fallen by 23 percent from their February 2015 peak.
“Nevertheless, the NPL ratio remains high, as total loans continue to decline, reflecting the ongoing deleveraging of the economy. NPLs for the banking system were 43.8 percent of total outstanding loans in August 2017, compared with 49 percent in May 2016,” said DBRS.
It added that at the same time, important efforts to speed the resolution of legacy NPLs remain ongoing and DBRS expects further progress. A comprehensive framework of measures is in place, including the sale of loans legislation, while the housing market is gradually recovering as property sales are increasing.
These efforts, together with the recovery of the Cypriot economy and the declining unemployment bode well for the reduction in NPLs, concluded the Canadian agency.