The increase in tourist arrivals this year, accompanied by a 22% rise in revenue in January to May, helps Cypriot banks, plagued with a mountain of non-performing loans, improve their asset quality and find new lending opportunities, the rating company said in an emailed statement on Sunday.

“Bank of Cyprus, for instance, disbursed €39m of new loans to hotels and restaurants in the first quarter of 2017, accounting for 8% of new lending, and sold €1m of hotel property over the same quarter, generating net proceeds 17% above book value”.

The largest Cypriot lender’s real estate management unit is likely to find better opportunities to sell five foreclosed hotels worth €73m in the current industry environment, Moody’s said, adding that “the tourism industry’s revival is having positive ripple effects across the economy”.

With tourism’s contribution to employment seen at around 7% of the workforce and loans to companies of the hospitality sector accounting for 10% of total credit, the improved performance of the tourism sector helped boost cashflows, reduce the unemployment rate to 10.8% in June, and a second quarter growth rate of 3.5%, the rating company said.

Still, as the tourism sector is booming, non-performing loans in the accommodation and food services sector dropped 33% to €1bn in March, compared to May 2014, accounting for 48% of total exposures, Moody’s said.

Source: Cyprus Mail