BANKING: Cyprus deposits stabilise after damaging Co-op bank run in June

Depositors seem to have regained trust in the Cyprus banking system as things appear to have calmed down after the bank run at the Co-op caused by panic-stricken depositors worried about another haircut.

 June alone saw withdrawals of over half a billion euros from the Cyprus Co-operative Bank as the government was in the process of selling it off to Hellenic Bank.

According to data released on Wednesday by the Central Bank of Cyprus, deposits in local banks recorded a €796.4 mln increase in July compared to the previous month, reaching 50.9 bln (after exchange rate adjustments).

In June, deposits were down by €745.2 mln compared to the previous month, due to uncertainty prevailing in connection with the approval of the agreement of Hellenic’s acquisition of the Co-op and beefing up the law on repossessions.

The Central Bank said that the increase recorded reflects the deposit of €0.8 bln made by the state in an attempt to buffer emptied accounts and allay fears that Co-op customers were at risk.

Without the state cash injection, deposits would have remained at the same levels as those in June 2018, said the Central Bank.

Deposits increased by 4.5% y-o-y in July, whereas the increase for June 2018 was 3.9% y-o-y.

Meanwhile, deposits belonging to Cypriots, including government deposits, amounted to €40.37 billion rising 2.3% from €39.45 bln the previous month. Deposits from foreigners dropped by €190 mln to €7.4 bln last month.

Decrease in Loans

Unlike deposits, loans saw a decrease of €74.7 mln in July compared to the previous month, whereas in June an increase of €305.2 mln in new loans was recorded.

Loans to Cyprus residents decreased by 0.6% last month compared to July 2017. Consumer loans grew by 2.2% y-o-y, while housing loans recorded a 0.2% decrease from the year before. Business loans increased by 2.4% in July compared to July 2017.