Cyprus housing finance body moves to sell €135 million NPL portfolio

The Housing Finance Corporation (HFC) has launched a tender for external advisory services to support the sale of a non-performing loan (NPL) portfolio estimated at around €135 million, a move its management says is essential to strengthen the organisation’s position within Cyprus’ financial system. According to the tender documents, the contract is valued at €1.3 million and will run for 20 months. Speaking to the Cyprus News Agency (CNA), HFC general manager Christoforos Kaplanis said the proposed portfolio was initially identified during the preparation of the organisation’s 2026 budget using three specific criteria. He explained that loans had to be classified as non-performing, while either the underlying property had to be valued at more than €250,000 or the borrower had to be in arrears for more than 96 instalments, equivalent to eight years. Kaplanis said that, based on those criteria, the portfolio earmarked for sale was estimated at around €135 million, out of a total non-performing loan portfolio of approximately €270 million at the time the 2026 budget was being prepared. He added that the organisation has already managed to reduce its stock of bad loans through its own efforts and by making use of government support schemes. As a result, non-performing loans fell to €257 million by the end of 2025, according to the organisation’s audited financial statements. “This measure is essential to strengthen the organisation’s position within Cyprus’ financial system so that it can continue fulfilling its mission under the law, which is primarily to finance home purchases, particularly for low and middle-income families,” Kaplanis said. He added that efforts to secure further solutions for borrowers remain ongoing. “As was also stated before parliament during the approval of the budget, the Housing Finance Corporation is moving forward with its strategic commitment to clean up its non-performing loan portfolio, which represents a significant share of its lending book and consists largely of older loans,” Kaplanis said. He explained that the organisation continues to hold discussions with customers in an effort to reach mutually acceptable solutions, either through full repayment or loan restructuring. Kaplanis said these efforts also include government-backed schemes as well as solutions developed by the organisation itself. “However, because of the size of the non-performing loan portfolio, the organisation must also implement solutions adopted by other banking institutions, such as the sale of loan portfolios,” Kaplanis stated. He added that the sale has already been incorporated into the organisation’s 2026 budget, which has been approved by the House of Representatives. Kaplanis also said the organisation continues to advance its broader strategic projects, including its programme for technological independence and upgrading. At the same time, he said the HFC continues to offer highly competitive housing loan and deposit products while maintaining a particularly strong liquidity position. The planned portfolio sale comes as non-performing loans across Cyprus’ banking sector continue to trend lower, reflecting the wider clean-up of lenders’ balance sheets. According to the Central Bank of Cyprus (CBC), total non-performing loans in the banking system fell to €830 million at the end of April 2026, down from €835 million in March, while the overall NPL ratio remained unchanged at 1.6 per cent. Total lending stood at €51.04 billion at the end of April, compared with €51.35 billion a month earlier. Loans that were more than 90 days overdue edged down to €633 million from €634 million in March, with their share of total lending remaining steady at 1.2 per cent. Compared with the end of 2025, total non-performing loans declined by €9 million, from €839 million. The value of restructured loans also fell, reaching €752 million, down from €777 million in March and €824 million at the end of 2025, although €319 million of those restructured loans remained classified as non-performing. The banking sector’s accumulated provisions decreased to €650 million from €659 million a month earlier, with €522 million relating specifically to non-performing loans. As a result, the coverage ratio for non-performing loans improved to 62.9 per cent, compared with 62.7 per cent in March and 62.1 per cent at the end of 2025. The CBC said households continued to record the highest NPL ratio among all institutional sectors. Household lending totalled €10.74 billion, of which €473 million was non-performing, representing 4.4 per cent of household loans, while loans more than 90 days overdue amounted to €377 million. Provisions for household non-performing loans reached €260 million, resulting in a coverage ratio of 55 per cent. Among non-financial corporations, lending stood at €13.66 billion, with €326 million classified as non-performing, corresponding to an NPL ratio of 2.4 per cent. Provisions covering corporate non-performing loans totalled €232 million, producing a coverage ratio of 71.2 per cent. Within the small and medium-sized enterprise (SME) segment, non-performing loans reached €303 million out of €8.47 billion in total lending, resulting in an NPL ratio of 3.6 per cent, above the banking sector average. The CBC also said provisions covered 71.7 per cent of SME non-performing loans. In the other financial corporations sector, non-performing loans amounted to €31 million against total lending of €2.94 billion, producing an NPL ratio of 1 per cent. That sector also recorded the highest coverage ratio, with provisions covering 96 per cent of non-performing loans.