Moody’s: Cyprus property market remains a risk area

INTERNATIONAL ratings agency Moody’s said on Wednesday that the outlook for the banking system in Cyprus is “negative” due to slow growth and repercussions from the financial crisis in Greece.

Moody’s believes that asset quality and earnings for the rated Cypriot banks will remain under pressure in the near to medium term, given the muted economic growth in Cyprus and the anticipated economic contraction in Greece stemming from the Greek government’s austerity measures,” according to the author of the report, Christos Theofilou.

Moody’s said that its rated banks in the eastern Mediterranean island of Cyprus have “direct and sizeable exposures in Greece through branches or subsidiaries, accounting for 41 percent of total loans as of June 2010.

The Greek exposures of Cypriot banks are affected by weak corporate earnings (due to the economic contraction) and reduced household disposable income (due to rising unemployment rates, additional tax measures and enforcement, and salary cuts).

These factors will likely lead to substantially higher non-performing loans in Cypriot banks’ loan books,” it warned.

According to the report Cyprus’ once booming property market, which is a significant component of the banks’ loan books and which represents the majority of collateral for loans, “remains a risk area with weak demand and unclear growth prospects.

Bottom-line profitability for Cypriot banks will likely remain modest, slightly below 2009 levels, as it continues to be negatively affected by the weak macro-economic conditions in Cyprus and Greece, with elevated loan-loss provisions over the next 12 to 18 months,” the report added.

4 COMMENTS

  1. Why are the banks in Cyprus allowed to ignore the. “Best principles of Accountancy”. A requirement in industry is that each company MUST have a bad debt provision in place for “Bad and doubtful debts”.

    Debts that are 12 months overdue must be placed on the bad debt provision, and yet some of the debts of the developers have not been serviced for at least 12 months and in some cases, years. And yet the account is still shown as active and being serviced.

    This is done by ignoring the rules of accountancy or in some by rescheduling the loan, adding compound interest to the original loan even though it is clear the debtor has never made a single payment and never intends to be bound by the terms of the loan.

    Any attempt for a bank now to enforce any developer’s loan could be met by the in-action on the bank’s part, which will negate their right of vacant possession of the land and property.

    The Doctrine of Part Performance will also force the bank to acknowledge they are no longer the rightful owners of the property. For any individual in danger of losing their home this may be the only option available, and can be done if there is a threat to sell the property by auction.

  2. We could have told Moodys that.

    As for the Banks , they will not have too much of a problem if they manage to force the sale of all the homes of innocent people who have been ensnared in this web of deceit. People who have already paid for their homes in good faith.

    We have all been let down by those who we put our trust in.

    The government should give us indemnity against the morally bankrupt Banks

  3. What good news to read.

    Now is an excellent time to move all your money out of Cyprus and if you are living their keep the bare minimum you need to live on.

    And if you have time to read this, you have time to do some thing . Not doing any thing is no longer an option. Remember it,s your money your family’s wealth look after it. Before some corrupt person or organisation takes it off you.

  4. You will never return to selling house until you give ownership at the same time.

    The title deeds fiasco has killed the market, and it will never recover.

    Well done Conor O’Dwyer in winning your case.

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