BoC gets on course for upgrade
S&P Global Ratings (S&P) has revised the outlook for Bank of Cyprus to positive from stable, citing the easing of funding risks, a diversified business model and substantial progress in de-risking its balance sheet.
Furthermore, S&P affirmed the BB-/B long-term and short-term issuer ratings for Cyprus’ largest lender. It said the decision to revise the outlook to positive “reflects our belief that systemwide funding risks in Cyprus are easing.”
“Our ratings on the bank reflect its market-leading franchise in the country, benefiting from a diversified business model, and the substantial progress that it has made in reducing its stock of legacy NPLs over the last half decade,” S&P added, noting that at the same time, BoC has improved its capitalization on the back of easing economic risks and the offloading of highly risk-weighted assets, which should provide a buffer to absorb some expected asset quality deterioration.
However, the agency pointed out, “BoC still lags higher-rated peers in terms of profitability and efficiency, although we anticipate that it will be gradually closing this gap over the next 12-18 months.”
The positive outlook “reflects the likelihood that we could raise the long-term issuer credit ratings over the next 12 months.”
