first_imgMoody’s ratings agency said Bank of Cyprus (BoC) will have to include the sale of its non-performing loans (NPLs) in its toolkit if it wants to attain its target of halving the ratio to 20 per cent by 2019.In a report on BoC, the agency said BoC’s continued recovery after the bail-in four years ago will depend on its ability to significantly clean up its loan book from legacy bad loans.“Non-performing loans fell to 40 per cent, or €8 billion, of the loan book in March 2017, from a peak of 53 per cent in December 2014, driven by loan restructurings, debt for asset swaps and write-offs,” Moody’s said in the report.According to the agency, “management has set ambitious targets to halve the ratio to 20 per cent by 2019,” adding that “we consider the target attainable only if the bank also includes NPL sales in its toolkit.”The report adds that “progress on restructuring has led to large volumes of performing loans,” and that management “expects another €1.6 billion loans approximately to be reclassified as performing by 2019.”“Since 2014, BoC`s dedicated restructuring unit has handled close to €10 billion of non-performing and under-performing loans out of a total loan stock of €20 billion as of March 2017,” the report said.Around 91 per cent of corporate restructured loans have no arrears.At the same time Moody’s notes that “the strengthening economy will support improved loan performance.”“We expect the economy to post solid GDP growth of 2.7 per cent in 2017, supporting borrowers’ debt repayment capacity,” the credit agency says.The bank has made regular use of debt for asset swaps, which give it control of assets put up as collateral, allowing it to set more realistic sale prices and to benefit from income generated by these assets.However, Moody’s said, “although assets are taken onboard at a 25 per cent-30 per cent discount to current prices, the bank is exposed to the risk of losses if it is unable to sell the assets at the on-boarded price.”Since 2014, BoC has written off €1.6 billion of bad debts.“Management expects around one-third of its targeted NPL decline to be driven by write-offs,” it said, adding that “accounting write-offs of bad loans do not constrain a bank from pursuing debt recovery. However, we expect limited reversals of these write-offs in the future.”According to Moody`s, around 77 per cent of restructured loans currently have no arrears. The figure excludes €420 million of loans which were restructured in the first quarter of 2017 and for which it is too early to judge their performance.Corporate loans perform best, with 91 per cent of restructured loans now performing in line with the terms of their revised contract.On the contrary, retail loans are the weakest performers with 65 per cent of restructured loans not having arrears while SMEs perform slightly better with 67 per cent of restructured loans not having arrears.You May LikeCity BeautyDo This To Fix Sagging Jowls Without SurgeryCity BeautyUndoHearClearRowland Heights Seniors With Hearing Loss Are In For a Big SurpriseHearClearUndoSolar SolutionsCalifornia Will Pay Homeowners to Install SolarSolar SolutionsUndo Pensioner dies after crash on Paphos-Polis roadUndoTurkish Cypriot actions in Varosha ‘a clear violation’ of UN resolutions, Nicosia saysUndoRemand for pair in alleged property fraud (Updated)Undoby Taboolaby Taboolalast_img

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