Fitch upgrades BOCY, HB
Fitch Ratings upgraded the Bank of Cyprus Long-Term Issuer Default Rating (IDR) to ‘B-’ from ‘CCC’ on Monday and Hellenic Bank’s Long-Term IDR to ‘B’ from ‘B-’. The rating agency said the outlook for the two banks’ Long-Term IDRs is ‘stable’.
“These rating actions reflect Fitch’s expectation that some improvement in the economic environment in Cyprus and the implementation of reforms to its insolvency framework will support domestic banks’ efforts to manage and reduce very high non-performing loan volumes and enhance recoveries, primarily via forbearance” the rating agency said.
“Investor confidence is also improving following the completion of the international bailout programme in March 2016 and customer deposits in the system have remained broadly stable since capital controls were fully lifted in April 2015,” it added.
Fitch noted that “nevertheless these banks’ ratings remain deeply subinvestment grade, in particular because their capitalisation is still highly vulnerable to their very weak asset quality. Their internal capital generation capacity is also weak given that modest pre-impairment operating profits are eroded by impairment charges”.