Moody's warns Cypriot banks of non-performing loans

Source: Xinhua| 2017-11-15 00:42:06|Editor: huaxia
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NICOSIA, Nov. 14 (Xinhua) -- Moody's rating agency has warned that the Cypriot banks may need additional capital provisions as a result of the slow pace in restructuring non-performing loans, Cypriot media reported on Tuesday, citing a Moody's "Credit Outlook" report.

Non-serviced loans shot up to over 50 percent at the outset of the 2013 economic crisis and the resolution of the banking system as part of the eastern Mediterranean island's bailout.

Despite restructuring, non-performing loans still stand at 45 percent of the total bank portfolio, reaching over 21 billion euros.

Moody's report said that banks' restructured loan balance declined to its lowest level since December 2014.

The agency acknowledged that the lower balance reflects the larger amount of restructured loans that became performing and exited the restructured loan pool versus newly restructured loans entering the pool.

However, it warned that the banks may need additional provisions, "given that banks in Cyprus have large stocks of non-performing loans" and the pace of restructuring is slowing down.

Cypriot banks were recapitalized twice, initially after their resolution in 2013 and a year later when they needed additional capital to meet the European Central Bank stress tests.

The rate of loan restructuring fell to 25.7 percent as of July 2017, the lowest proportion since December 2015 and materially below the 27.5 percent peak in July 2016, the agency said.

It said the nationalized Cooperative Cyprus Bank reduced its non-performing loans by only 6 percent since they peaked in December 2015, versus 21 percent for Hellenic Bank Public, and 40 percent for Bank of Cyprus.

Hellenic Bank is considering establishing a joint venture with APS Holding base in the Czech Republic in a bid to handle its non-performing loans. (1 euro = 1.18 U.S. dollars)Enditem