Moody’s upgraded Bank of Cyprus’ key ratings

Moody’s has upgraded Bank of Cyprus key ratings citing “significant improvement” in asset quality following an agreement on non-performing loans that would drop the bank’s NPL ratio to single digits.

Moody’s said it upgraded Bank of Cyprus’ long-term bank deposits to Ba3 from B1, its senior unsecured and subordinated ratings to B3 from Caa1, its long-term Counterparty Risk Ratings (CRRs) to Ba2 from Ba3, its long-term Counterparty Risk Assessment (CRAs) to Ba2(cr) from Ba3(cr) and its Baseline Credit Assessment (BCA) and Adjusted BCA to b2 from b3.

The outlook on the bank`s long-term deposit and senior unsecured ratings is positive.

“The upgrade of Bank of Cyprus` ratings and assessments reflects significant ongoing improvement in the bank`s asset quality following its agreement to sell a portfolio of nonperforming loans (in a transaction termed Helix 3) with a gross book value of €568 million, as well as real estate properties with a book value of around €120 million,” the agency said.
 
“The NPE sale significantly reduces solvency risks for Bank of Cyprus, with the bank`s pro-forma NPEs net of total loan loss provisions dropping to 3.6% of gross loans as of September 2021,” the agency added.
 
According to Moody’s the positive outlook on the bank`s long-term deposit ratings and senior unsecured ratings “reflects Moody`s expectations that the bank will continue to improve its solvency profile, by further reducing NPEs and its foreclosed real estate assets, while gradually strengthening its profitability,” as well as the agency’s view that the impact of the coronavirus pandemic on the Cypriot economy is unlikely to leave any lasting damage.
 
Furthermore, the agency added that Bank of Cyprus` Ba3 deposit ratings continue to be placed two notches above its BCA, driven by the protection that the rating agency expects will be afforded to depositors from its upcoming MREL (minimum requirement for own funds and eligible liabilities) eligible debt issuances in the coming years.