Bank of Cyprus sees bad loans rise sharply in Q3 as bailed-out economy shrinks

The number of bad loans held by Cyprus' largest bank rose sharply to 48 percent in the third quarter of this year from 36 percent at the end of the previous three-month period as the bailed-out country's battered economy continued to shrink.

Bank of Cyprus CEO John Hourican said Wednesday that bad loans will rise as the economy continues to whither in the wake of a financial rescue deal the country agreed with international creditors in March that gutted its banking sector. But he said there are indications that they're starting to stabilize.

Hourican said the bank will aggressively pursue what it's owed. Recovered money will enable new loans to jump start an economy projected to shrink a cumulative 13 percent this year and next.