Moody’s Upgrades Bank of Cyprus’s deposit ratings

Moodys Investors Service has today upgraded Bank of Cyprus Public Company Limiteds (BoCs) long-term local and foreign currency deposit ratings to Caa1 from Caa2 and its Provisional Senior Unsecured EMTN ratings to (P)Caa1.

The banks Not Prime short term ratings have been affirmed. The rating action is driven by the upgrade of BoCs Baseline Credit Assessment (BCA) to caa1 from caa2. The outlook on the long-term deposit ratings remains positive.

The upgrade of BoCs ratings reflects the improvement in the banks financial fundamentals- mainly profitability, asset quality, capitalization and its funding position. Moodys expects BoC to remain modestly profitable in 2017, following its return to profitable performance in 2016 after five years of losses. The rating agency also expects further improvement in the banks asset quality metrics as ongoing loan work-outs and collateral sales are supported by the strong economic recovery.

The positive outlook reflects Moodys expectations of changes over the next 12 to 18 months in the banks liability structure, mainly the issuance of debt.

The positive outlook reflects Moodys expectations of changes in the banks liability structure. An increased cushion to depositors against potential losses, such as through an issuance of EUR500 million of senior debt, would result in one notch uplift in the banks deposit ratings.

Upward pressure could develop on the ratings following further improvements in BoCs financial performance, mainly a further reduction in the volume of NPLs and/or improvement in the coverage ratio. A change in the banks liabilities waterfall through the issuance of senior or additional subordinated debt may also positively affect its deposit ratings.

The outlook could stabilise if the banks progress with loan restructurings stagnates or if economic growth falters leading to a reversal in the recent improvement to the banks asset quality metrics. The outlook may also stabilise if the changes Moodys expects in the banks liability structure do not materialise.

Although not currently anticipated given the positive outlook, BoCs ratings may be downgraded if the banks financial fundamentals, mainly asset quality and capital weaken, while at the same time the changes Moodys expects in the banks liability structure do not materialise.

Source: Cyprus News Agency