Loan restructurings skyrocket in 2023, new loans slightly down

New borrowing remained unchanged in Cypriot banks in 2023, despite the high-interest rate environment that has propelled loan restructurings to historically high levels.

According to data released by the Central Bank of Cyprus (CBC), net new borrowing in 2023 amounted to €3.269 billion, compared to €3.272 billion the previous year, indicating a marginal decrease of 0.1%.

In contrast, loan restructuring skyrocketed to €4.489 billion, showing an almost 245% increase. This marks the highest level since the Central Bank of Cyprus began publishing data in December 2014.

New borrowing stable

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The net new borrowing in 2023 stood at €3.269 billion, essentially unchanged compared to the previous year.

Corporate loans over €1 million constituted the largest share of total loans, reaching €1.4 billion and presenting a 5% annual increase. Corporate loans exceeding €1 million accounted for 43% of the total.

High-interest rates, combined with elevated construction costs, affected housing loans, which amounted to €1.01 billion in 2023, representing a 14% annual decrease compared to €1.2 billion in 2022. Housing loans in 2023 constituted 31% of the total.

Small-scale corporate loans up to €1 million experienced a slight annual decrease of 1%, amounting to €0.52 billion, representing 16% of the total new borrowing in 2023.

Despite high-interest rates, consumer loans increased to €230 million in 2023, up from €155 million in 2022, showing a 48% annual increase and accounting for 7% of the total net new loans.

Additionally, other loans increased by 23%, amounting to €102 million, representing 3% of the total new borrowing.

Surge in restructuring

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High-interest rates prompted borrowers and banks to engage in loan restructuring efforts to prevent credit deterioration and the increase of non-performing loans. The total loan restructuring surged to almost €4.5 billion, marking a 245% increase on an annual basis.

Traditionally, loans exceeding €1 million constituted the lion's share of loan restructuringιλα, accounting for 68% of the total and reaching €3 billion. Compared to 2022, restructuring of these loans saw an increase of 183%.

There was a significant surge of 761% in the restructuring of housing loans, amounting to €0.92 billion in 2023, compared to just €107 million in 2022. Regarding the total restructuring, housing loan settlements reached 20%.

Restructuring of corporate loans up to €1 million increased by 417% compared to 2022, reaching €380 million and accounting for 8.5% of the total. Restructuring of other loans amounted to €90 million, up from €24 million in 2022, representing a 272% increase and accounting for 2% of the total.

Consumer loan restructuring in 2023 increased by 111%, amounting to €39 million, compared to €19 million in 2022, constituting 0.9% of the total loans that underwent restructuring in 2023.

(Source: CNA)