Fitch up­grades BOCY, HB

Financial Mirror (Cyprus) - - FRONT PAGE -

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”.

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