Cyprus banks’ non-performing loan ratio remained at 1.6 per cent at the end of May 2026, according to the Central Bank of Cyprus (CBC), leaving the sector’s asset quality significantly better than the EU-wide average recorded two months earlier.

The CBC reported that its updated aggregate banking sector data showed the NPL ratio was unchanged from the end of April, while the proportion of bad loans covered by provisions edged higher.

The latest Cyprus figure compares with an EU banking sector NPL ratio of 1.98 per cent at the end of March, according to consolidated banking data published by the European Central Bank (ECB).

The EU-wide ratio increased by 0.02 percentage points year on year, meaning Cyprus’ May figure was 0.38 percentage points lower than the EU aggregate, although the two figures refer to different reporting dates.

The CBC’s figures also showed a slight improvement in banks’ ability to absorb losses associated with non-performing loans.

The NPL coverage ratio rose to 63.0 per cent at the end of May, from 62.9 per cent a month earlier.

The measure indicates the proportion of non-performing loans covered by provisions held by banks against potential losses.

The stock of restructured loans also remained relatively limited compared with the size of the wider banking system.

Total restructured loans stood at €800 million at the end of May, with €300 million of that amount continuing to be classified as non-performing.

The latest data come as the wider European banking sector continues to report relatively strong capitalisation, profitability and asset quality, despite differences between individual national banking systems.

The ECB’s consolidated banking data for the end of March covered 335 banking groups and 2,284 stand-alone credit institutions, as well as non-EU-controlled subsidiaries and branches operating in the EU.

Together, the institutions accounted for nearly 100 per cent of the EU banking sector’s balance sheet, according to the ECB.

The aggregate total assets of EU-headquartered credit institutions increased by 3.63 per cent year on year, rising from €33.13 trillion in March 2025 to €34.33 trillion in March 2026.

The ECB dataset covers a broad range of indicators, including profitability and efficiency, balance sheet composition, liquidity and funding, asset quality, asset encumbrance, capital adequacy and solvency.

The data are compiled on a consolidated group basis and are intended to provide a quarterly picture of the EU banking system, although they represent a subset of the more extensive information contained in the ECB’s year-end dataset.

The figures generally rely on International Financial Reporting Standards and the European Banking Authority’s implementing technical standards for supervisory reporting.

However, the ECB said some small and medium-sized reporting institutions may use national accounting standards, meaning that some of the EU aggregates and indicators can include figures based on national accounting rules where the relevant underlying data are available.

Cyprus also compared favourably with the wider EU banking sector on profitability in the first quarter of the year.

The return on equity for domestic banks in Cyprus was 3.6973 per cent in the first quarter of 2026, according to the ECB data.

That was higher than the 2.44 per cent return on equity recorded across EU credit institutions in March 2026.

Return on equity is a measure of how effectively banks generate profits from shareholders’ capital, with the higher Cyprus figure indicating stronger profitability than the EU aggregate during the period covered.

At the same time, EU banks maintained substantial capital buffers, with their Common Equity Tier 1 ratio standing at 16.27 per cent in March 2026.

The capital ratio is a key measure of banks’ ability to absorb losses and remain financially sound.

For Cyprus, the latest CBC figures continue to point to a banking sector with a relatively low level of non-performing exposures, while the modest increase in NPL coverage provides an additional buffer against potential losses.

The figures also show that, although restructured lending remains part of the banking sector’s legacy problem-loan stock, only €300m of the €800m in restructured loans remained classified as non-performing at the end of May.

The combination of a stable 1.6 per cent NPL ratio, a 63 per cent coverage ratio and stronger profitability than the EU average places Cyprus among the banking systems with comparatively contained asset-quality pressures, although the CBC and ECB figures are based on different reporting dates and methodologies.