CORPORATE FORTUNES

NPLS Decline To Record Low In Emerging Europe

Walking people blur. Lots of people walking in the City of London. Wide panoramic view of people crossing the road.
50views

By Svitlana  Pyrkalo @pyrkalo

Non-performing loan (NPL) stocks have hit their lowest levels since the global financial crisis of 2008-09 in central, eastern and south-eastern Europe (CESEE), according to the latest NPL Monitor published Tuesday.

“Bad loans” fell across the region to 2.6 per cent since the last NPL Monitor was published six months ago, and by 6.9 per cent in the 12 months leading up to 30 June 2022, to €32.2 billion(US$33.77billion), their lowest level in recent years. However, both the war on Ukraine and inflation will continue to put pressure on the asset quality.

In relative terms, the decline in NPL stocks was most significant in Estonia, Latvia and Lithuania. The largest contributor in absolute terms was Poland, where “bad loans” declined by almost €1.24 billion. The NPL ratio decreased in all countries that are covered in the report with the exception of Montenegro, where the ratio increased by 0.6 percentage points. The decreasing trend also continued in Greece, Cyprus and Ukraine. In Ukraine, NPLs declined by nearly 9 per cent in the year to June 2022, although it is expected that asset deterioration may show up in later assessments. 

The report also warns that a 0.9 percentage point increase in “stage 2 loans”, that is, assets which may later deteriorate into NPLs, have been reported in the EU CEE1 countries. This raises further concerns that NPLs may increase in the near future as most COVID-19-related support measures have been phased out, with borrowers now also being stressed by surging inflation and sharply rising interest rates.  

Meanwhile, the region’s financial institutions are preparing for future risks by increasing provisioning levels. The average NPL coverage ratio increased by 1.8 percentage points during the period. 

The new report also includes a summary of recent decisions by Vienna Initiative stakeholders and EU regulators to support economies of central, eastern and south-eastern Europe with instruments such as loans, grants and targeted support schemes.

The half-yearly report tracking NPLs has been prepared by the EBRD as part of the Vienna Initiative framework. NPL Monitor is published on the Vienna Initiative website, alongside two other reports prepared by international financial institutions (IFIs): the Deleveraging and Credit Monitor by the IMF and the Bank Lending Survey by the EIB, which are also being issued today.

The Vienna Initiative framework was established during the global financial crisis to safeguard the financial stability of emerging Europe by bringing together banks, governments, regulators and IFIs.

Leave a Response

bahis canlı casino siteleri canlı bahis siteleri