Banks are mainly working with reliable customers, as seen in their non-performing loans. They have sold off loans from defaulters to credit acquisition companies. The Central Bank of Cyprus shared new data on non-performing exposures (NPEs) as of August 31, 2025, showing a better outlook for the financial system.
Total loans (excluding central banks and credit institutions) reached €25.97 billion at the end of August. This is up from €24.72 billion in 2024 and €24.07 billion in 2023. Total problematic loans are now €1.42 billion, down from €1.54 billion at the end of 2024 and €1.89 billion in 2023.
Compared to 2021 and 2022, the change is even bigger. Non-performing loans were €2.96 billion in 2021 and €2.29 billion in 2022. In 2019 and 2020, the problematic portfolio was even larger at €8.83 billion and €5.17 billion because some loans had not yet been sold to credit acquisition companies.
Households hold non-performing loans of €785 million, making them the sector with the highest non-performing loan ratio at 7.3%. Non-financial corporations follow with €608 million in NPEs and a ratio of 4.7%. Most defaulters are outside the banking system since about €19 billion in loans are with credit acquisition companies, where €18 billion are non-performing, and only €1.15 billion are being paid regularly.
At the end of August 2025, the non-performing loan ratio (NPE) for banks, excluding loans to central banks and credit institutions, stayed the same at 5.5%. The NPE ratio, according to the European Banking Authority’s method, including those loans, dropped to 2.8% at the end of August 2025 from 2.9% at the end of July 2025.
A key point is that the value of problematic loans overdue by more than three months has stayed steady since 2024. This shows that loans nearing ‘red loan’ status, with delays over 90 days, slightly decreased by the end of August compared to 2024. Loans with a three-month delay total €1.13 billion, down from €1.19 billion in 2024 and €1.47 billion in 2023.
Total restructured loans were €1.3 billion at the end of May 2025, with €0.7 billion still counted as NPEs. By the end of August 2025, total restructured loans were €1.2 billion, with €0.6 billion still included in NPEs. The coverage ratio for NPEs with impairment provisions rose to 62.6% at the end of August 2025 from 62.2% at the end of July 2025.
It’s important to note, as often stated by the Central Bank, that progress in reducing problematic loans is uneven. Smaller banks struggle more with these portfolios. In 2024, the NPE ratio for less significant credit institutions was at 21.0%, much higher than systemic banks’ ratio of 3%.
