Fitch has upgraded the ratings of four leading banks in Cyprus

On Tuesday 1st April the international rating agency Fitch upgraded the ratings of four leading banks operating in Cyprus.

National Bank of Greece (NBG) and Eurobank were upgraded to investment grade (BBB-), while Piraeus Bank and Alpha Bank were upgraded by one notch to BB+ with a positive outlook.

The agency said the decision reflected the banks' improved credit profile, stable profitability and reduced non-performing loans (NPLs). More specifically:

1. National Bank of Greece's long-term rating was raised to BBB- from BB+. The main reasons for the upgrade were stable profitability, a reduction in NPLs and an improving business environment in Greece (BBB-). According to Fitch, the bank has a strong market position. This includes a large share of retail and commercial banking, stable deposit funding, and strong capital and liquidity. Financial ratios of the National Bank of Greece: RWA ratio of 4.1% in 2024 (2023: 3.9%), CET1 ratio of 18.3% (highest among Greek banks), deposit funding is stable and structured. The bank actively uses the capital market and already meets the minimum requirements for own funds and eligible liabilities.
2. Eurobank's rating was also upgraded to BBB-. The main reasons for the upgrade are: high profitability, growth in international revenues (Bulgaria, Cyprus), reduction in the proportion of problem loans. Eurobank's financial indicators: NPE ratio - 3.0% (lowest in 10 years), high capitalisation - exceeds regulatory requirements, stable deposits - significantly exceeds loan volume. A downgrade is possible in the event of a deterioration in the economic situation in the regions in which the bank operates, or if NPE growth exceeds 5%.
3. Piraeus Bank's rating has been upgraded from BB to BB+. This was a result of: reduction in the volume of problem assets, growth in profitability and capital reserves, improvement in the business environment in the regions where the bank operates. Piraeus Bank's financial ratios: NPE ratio - 3% (close to the EU average), CET1 ratio - 14.7% (the bank aims to remain above 13%), operating profit - increased to 4.2%. Fitch noted that the bank could only be downgraded if the NPE rises above 10% or if the capital position deteriorates.
4. Alpha Bank's rating was also raised to BB+ due to: lower NPE (NPE 4.3% vs. 7% in 2023), higher profitability, strong capital base. The bank's financials: CET1 ratio of 16.3%, operating profit growth of up to 3% (expected to stabilise), deposit funding is stable and structured. Alpha Bank could be downgraded if economic conditions deteriorate or if NPE grows above 4%.

Fitch expects the financial strength of all four banks to be maintained due to economic growth. General trends in the financial institutions include:

1. Improved asset quality;
2. Increasing profitability;
3. Sustainable capital positions;
4. stable deposit funding;
5. Access to international capital markets.