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Bank of Cyprus upgrades from Moody's and Fitch have arrived

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Bank of Cyprus upgrades by Moody’s and Fitch have arrived

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Moody's upgraded the rating of Bank of Cyprus's long-term deposits to Ba3 from B1, following yesterday's revision of the bank's outlook to positive by Fitch.

According to a statement from Bank of Cyprus, the American bank states that “the upgrade of Bank of Cyprus ratings reflects the significant continuous improvement in the quality of the bank's assets after its agreement to sell a non-performing loan portfolio with a gross book value of 568 million euros. as well as real estate with a book value of approximately 120 million euros (Helix 3) “

He adds that “the completion of Helix 3 reduced the non-performing loan stock of Bank of Cyprus to 8.6% in September 2021, while reference is also made to the Bank's target for further reduction of the percentage to 5% in the medium term.”

Moody's also states that “with the completion of the transaction, the funds of the Bank of Cyprus will be strengthened, a fact that will provide it with the opportunity to further reduce the NPEs and to undertake the cost of implementing its transformation as well as cost reduction plans”.

According to the Bank of Cyprus, the house talks about strong liquidity reserves and strengthening the financing profile of the organization after the banking crisis and adds that the liquidity coverage ratio in September 2021 reached 294% and the net fixed financing ratio at 148%.

Regarding the positive outlook of the Bank, the house states that it reflects the expectations that the bank will continue to improve its solvency profile, further reducing its non-performing loans and assets, gradually enhancing its profitability.

At the same time, Bank of Cyprus states that “the positive outlook reflects the view of Moody`s that the impact of the pandemic on the Cypriot economy is unlikely to cause permanent damage and that the operating conditions of Cypriot banks will continue to improve as the economy and important tourism sector are recovering “.

Upgrading the bank's perspective by Fitch

Fitch revised the Bank of Cyprus outlook from positive to negative, while also confirming to the “B-” the Bank's Sustainability rating.

The revision of the outlook, according to the house, follows the announcement of the Bank of Cyprus for an agreement for the sale of MEX amounting to € 0.6 billion as well as real estate that passed into the ownership of the Bank, amounting to € 121 million.

The completion of Helix3, according to the house, will improve the quality of the Bank's assets. Fitch states: “The positive outlook also reflects the significant progress made in the organic reduction of non-performing loans since the end of 2019 – despite the adverse operating environment in Cyprus – and we expect that the organic reduction will continue in the near future. future”.

Continuous improvement of the quality of the Bank's assets. Fitch reports that the quality of the bank's assets is constantly improving, noting that the share of NPLs that peaked in 2014 at 63%, decreased at the end of September 2021 to 8.6%.

No significant inflow of new NPLs is expected. The house states: “We do not expect significant inflows of new non-performing loans from the loans that were previously included in the moratorium on the suspension of installments, as the performance so far is positive and better than expected.

Profitability is expected to improve

There is talk of limited profitability due to the one-time charges associated with MEX sales. At the same time, he notes that net interest income remains under pressure due to low interest rates. The house notes that “We expect that profitability will improve while at the same time a reduction in the cost of restructuring is expected.” Improving profitability will also depend on the bank's ability to reduce costs and diversify revenue.

Source: www.philenews.com

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