According to data released by the Central Bank of Cyprus, non-performing loans (NPLs) saw a decrease of €105 million by the end of March 2023 compared to the end of December 2022, reaching a total of €2.2 billion. This resulted in a drop in the NPLs-to-total-loans ratio from 9.5% to 9% over the last quarter.

The Central Bank's data also revealed that total loans increased from €24.361 billion in December 2022 to €24.432 billion in March 2023, representing a rise of €71 million or 0.3%. Additionally, the index of the total coverage ratio improved to 48.8%, up from 47.5% at the end of December.

The Central Bank noted that between December 31, 2017, and March 31, 2023, there was a significant reduction in NPLs of authorized credit institutions amounting to €18.4 billion or 89.3%. This reduction was mainly due to the sale of loans to credit acquiring companies.

The decline in NPLs during the first quarter of 2023 can be attributed, in order of significance, to loan repayments (including debt-to-asset swaps), loan write-offs (mostly within the context of restructurings and involving amounts already accounted for as loan loss provisions), and positive migrations of loans that have been successfully restructured and reclassified as performing at the end of the probation period, as stated by the Central Bank.

As of March 2023, total restructured loans amounted to €2.43 billion, a decrease from €2.73 billion at the end of December 2022. Among these restructured loans, €991 million remained classified as non-performing.

NPLs in households reached €1.23 billion, representing 11.7% of total loans, with total accumulated provisions at 36.6%. The total loans in households amounted to €10.6 billion.

The Central Bank highlighted that credit institutions adhere to the definition of NPLs adopted by the European Banking Authority. According to this definition, even when an NPL is restructured, it remains classified as an NPL for at least 12 months, even if the borrower strictly adheres to the new repayment schedule. Hence, a portion of restructured loans continues to be classified as non-performing under this definition.

Meanwhile, the transfer of the Non-Performing Loans and real estate portfolio by the Alpha Bank Group has been successfully completed. The total gross accounting value of this transfer amounts to €2.3 billion. Alpha Services and Holdings S.A., in line with its strategy to reduce Non-Performing Loans, finalized the transfer of the so-called "Sky Portfolio."

On June 16, the Alpha Bank Group completed the transfer of the Sky Portfolio to SkyCAC Limited, a credit acquisition company within the group. This transfer included all shares of SkyCAC, both directly and indirectly owned by the Alpha Bank Group, which were then transferred to a company affiliated with Cerberus Capital Management, L.P.

The Alpha Bank Group highlighted that the Sky Project stands as the second largest transaction of Non-Performing Exposures in Cyprus and the largest definitive transfer of Non-Performing Exposures carried out by a Greek bank to date. They emphasized that the completion of the Sky Project has significantly reduced the Non-Performing Exposures Ratio of Alpha Bank Cyprus Ltd to approximately 5%. This achievement enables the bank to concentrate on its business strategy and pursue development opportunities within the Cyprus market.

The financial impact of the Sky Project has been fully incorporated into the pro forma financial results of the Alpha Bank Group for the first quarter of 2023. As a result of divesting the Sky Portfolio, there has been an improvement in the Total Capital Adequacy Ratio, estimated at approximately 15 basis points.