The international rating agency Moody's has announced an upgrade of Bank of Cyprus' long-term deposit rating from Baa1 to A3.
The rating outlook has changed from 'positive' to 'stable'.
Other indicators have also been upgraded, including the credit risk assessment, the baseline and adjusted credit assessments, and the ratings of bond programmes and debt obligations in the national currency. The Bank of Cyprus is now the best-rated bank in Cyprus and Greece, which shows that it is stable and reliable.
The rating was raised for a number of reasons, including:
- The quality of assets has improved — the share of non-performing loans (NPLs) at the end of 2024 was 1.9%, which is much lower than in previous periods. Moody's expects this level to stay the same because the economy is stable and the bank is careful with its lending.
- The bank has also reduced the number of foreclosed properties, going from €764 million in the third quarter of 2024 to €660 million by the end of the year. The goal is to reach €500 million by the end of 2025. This is possible thanks to the fact that the property market in Cyprus is stable.
- The Bank of Cyprus made a profit of 1.8% of its assets in 2024 (compared to 1.7% in 2023). Even when interest rates are normal, profits are still expected to stay high.
- The bank had a strong capital base, with the Common Equity Tier 1 (CET1) ratio reaching 19.2% at the end of 2024, compared to 17.4% a year earlier. Moody's predicts that the company's financial health will stay strong, thanks to steady growth and smart dividend management.
- The bank is well-funded and has plenty of liquidity — most of its funding comes from people's deposits, which makes it stable and less affected by external risks.
Moody's also did a full analysis of possible losses if there was a default. They decided that the risk of losses on deposits and liabilities to other parties is very low. This helped to raise the ratings by three levels above the adjusted credit rating.
However, the ratings for unsecured and subordinated debt did not receive the same support. The agency said there was a medium or high risk of loss on these investments, so they stayed at lower levels. The 'stable' outlook is based on Moody's belief that the good financial performance will continue and risks will drop even more, if the economy in Cyprus stays stable.
The Bank of Cyprus' rating could be upgraded if it continues to show strong financial performance and fewer risks remain. The rating could go down if the way the bank operates gets worse, if it makes less profit or if its capital (the money it has available to meet its debts) goes down. If there are fewer instruments designed to cover losses, this could also have a negative impact.