Cyprus banks continued to report relatively strong asset quality in May, with the non-performing loan (NPL) ratio holding steady at 1.6%, according to the Central Bank of Cyprus (CBC).
The figure remained unchanged from April and was below the EU-wide NPL ratio of 1.98% recorded in March, based on consolidated banking data from the European Central Bank (ECB). While the reporting dates differ, Cyprus’ ratio was 0.38 percentage points lower than the EU average.
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NPL Coverage Edges Higher
Banks also slightly strengthened their protection against potential losses. The NPL coverage ratio increased to 63.0% at the end of May, from 62.9% a month earlier, meaning that provisions covered nearly two-thirds of non-performing loans.
Meanwhile, the stock of restructured loans remained relatively contained. Total restructured loans stood at €800 million, of which €300 million were still classified as non-performing.
Cyprus Banks Show Strong Profitability
Cyprus also compared favourably with the wider EU banking sector on profitability during the first quarter of 2026.
Domestic banks recorded a return on equity of 3.6973%, compared with 2.44% across EU credit institutions in March. The measure indicates how effectively banks generate profits from shareholders’ capital.
Across the EU, banks continued to maintain substantial capital buffers. The Common Equity Tier 1 ratio stood at 16.27% in March, providing an important cushion against potential losses.
EU Banking Sector Remains Resilient
The ECB’s March data covered 335 banking groups and 2,284 stand-alone credit institutions, alongside non-EU-controlled subsidiaries and branches operating within the bloc. Together, these institutions represented almost the entire EU banking sector by balance sheet.
Aggregate assets of EU-headquartered credit institutions rose 3.63% year on year, reaching €34.33 trillion in March 2026, up from €33.13 trillion a year earlier.
Overall, Cyprus’ latest figures point to a banking sector with relatively contained asset-quality pressures, supported by a stable 1.6% NPL ratio, 63% coverage and profitability above the EU average. The comparison should be viewed with some caution, however, as the CBC and ECB figures cover different reporting periods and datasets.
