Filenews 27 October 2021 - by Theano Thiopoulou
Most loans that cannot be paid to banks are more than 3 months late, with the amount amounting to €3.83 billion. out of a total of €4.97 billion in distressed loans. by the end of July 2021.
Essentially nine out of ten red loans have been unpaid for more than 90 days. According to central bank data, the percentage of loans with arrears of more than 90 days was 13.4% on 31-7-2021 from 13.6% on 31-12-2020. In 2017 the percentage was even higher and reached 33.4% and gradually began to decrease due to the solutions that banks began to implement and mainly due to the sale of problematic portfolios. The percentage of distressed loans in the system is 17.4% at the end of July 2021, up from 17.7% in 2020, highlighting the problem that banks have with the non-performing loans that have been left in their portfolio.
Most of the bad loans that exist in the banking system have been restructured, namely from €4.97 billion NEDls, €4.13 billion are loans that have been restructured. However, they continue to remain in the category of non-performing loans of €2.38 billion based on the definition of the European Banking Authority. The total accumulated forecasts at the end of July 2021 were €2.50 billion of which €2.34 billion related to non-performing loans.
The banks want to pass on to single digits of problematic loans mainly through their sale and this is the goal set by their administrations. Today, when the index of bad loans in Europe is below 2.5%, the Cypriot banking system has a rate of 17.4%. The Bank of Cyprus aims for the NPRA rate (based on the European Banking Authority) to be less than 10% in 2022 and approximately 5% in the medium term. In June 2021, the bank completed Project Helix 2, which involves the sale of loan portfolios with a total gross book value of €1.331 million upon completion (of which €1,305 million relates to non-performing loans), which are secured by real estate, to investment funds affiliated with Pacific Investment Management Company (Pimco) whose agreements were announced on August 3, 2020 and January 18, 2021. Bank of Cyprus' NPLs represent 14.6% of total loans as at 30 June 2021, compared to 24.5% on 31 March 2021 and 25.2% on 31 December 2020, down by approximately 10 percentage points in the second quarter, mainly as a result of the completion of Project Helix 2.
Hellenic Bank's management is also working on a single-digit percentage of non-performing loans and this is a target in the medium term. The bank is working closely with its advisors to sell a significant portfolio of distressed loans (Project Starlight), which will accelerate the reduction of old NRLs and accelerate the cleaning of the Bank's balance sheet. The transaction is proceeding according to a scheduled schedule where the signing of the transaction is expected by the end of 2021 and is expected to be completed in 2022.
