15/12/2016 10:09
Moody`s Investors Service, has Wednesday upgraded Bank of Cyprus Public Company Limited`s (BoC) long-term local and foreign currency deposit ratings to Caa2 from Caa3 and Hellenic Bank Public Company Ltd`s (Hellenic) to Caa1 from Caa2.
The banks` Not-Prime short-term local and foreign currency deposit and Commercial Paper ratings have been affirmed. The rating actions are driven by the upgrade of the banks` standalone Baseline Credit Assessments (BCA) to caa2 from caa3 reflecting the improvement in the operating environment, as well as the banks` improved profitability, asset quality, capitalisation and funding.
Moody`s notes that the ratings of these two banks remain at low levels, reflecting, in particular, the vulnerability of their capital buffers to the high stock of non-performing loans (NPLs).
The outlook on the long-term deposit ratings for both banks remains positive reflecting the rating agency`s view that the banks` asset quality and capitalisation will continue to improve, supported by the economic recovery in Cyprus.
BOCY
According to the rating agency, the upgrade of BoC`s BCA to caa2 and long-term deposit ratings to Caa2 reflects the improvement in the bank`s financial metrics, mainly asset quality, capitalisation and funding, as well as Moody`s expectation that the bank will be profitable in 2016 following five loss-making years. Nevertheless, given the large stock of problematic loans, Moody`s expects BoC`s asset quality metrics to remain weak for a prolonged period of time, weighing on the bank`s credit profile.
After five loss-making years, Moody`s expects that BoC will be profitable in 2016 supporting internal capital generation.
Moody`s expects BoC will repay its Emergency Liquidity Assistance (ELA) funding in the coming quarters.
HB
The upgrade of Hellenic`s BCA to caa2 and long-term deposit ratings to Caa1 reflects the improvement in the bank`s financial metrics, mainly asset quality and capitalisation as well as Moody`s expectations that the bank will continue to be profitable in 2016 following modest profits in 2015. Nevertheless, given the large stock of problem loans, Moody`s expects Hellenic`s asset quality to remain weak for a prolonged period of time, weighing on the bank`s credit profile.
Moody`s expects Hellenic Bank to maintain momentum in terms of loan restructurings, leading to further asset quality improvement in coming quarters.
As it is noted, Hellenic Bank`s core profitability will continue to be pressured by the low returns on its high liquidity buffers and sustained high operational costs.
Moody`s points out that upward pressure on the ratings of both banks could develop following improvements in their financial performance -- mainly further sustained reductions in the volume of NPLs and increased cash coverage of NPLs.
The outlook could be changed to stable if the banks` progress with restructurings stagnates or if economic growth falters, leading to a reversal in the recent improvement to the banks` asset-quality metrics.
The banks` Not-Prime short-term local and foreign currency deposit and Commercial Paper ratings have been affirmed. The rating actions are driven by the upgrade of the banks` standalone Baseline Credit Assessments (BCA) to caa2 from caa3 reflecting the improvement in the operating environment, as well as the banks` improved profitability, asset quality, capitalisation and funding.
Moody`s notes that the ratings of these two banks remain at low levels, reflecting, in particular, the vulnerability of their capital buffers to the high stock of non-performing loans (NPLs).
The outlook on the long-term deposit ratings for both banks remains positive reflecting the rating agency`s view that the banks` asset quality and capitalisation will continue to improve, supported by the economic recovery in Cyprus.
BOCY
According to the rating agency, the upgrade of BoC`s BCA to caa2 and long-term deposit ratings to Caa2 reflects the improvement in the bank`s financial metrics, mainly asset quality, capitalisation and funding, as well as Moody`s expectation that the bank will be profitable in 2016 following five loss-making years. Nevertheless, given the large stock of problematic loans, Moody`s expects BoC`s asset quality metrics to remain weak for a prolonged period of time, weighing on the bank`s credit profile.
After five loss-making years, Moody`s expects that BoC will be profitable in 2016 supporting internal capital generation.
Moody`s expects BoC will repay its Emergency Liquidity Assistance (ELA) funding in the coming quarters.
HB
The upgrade of Hellenic`s BCA to caa2 and long-term deposit ratings to Caa1 reflects the improvement in the bank`s financial metrics, mainly asset quality and capitalisation as well as Moody`s expectations that the bank will continue to be profitable in 2016 following modest profits in 2015. Nevertheless, given the large stock of problem loans, Moody`s expects Hellenic`s asset quality to remain weak for a prolonged period of time, weighing on the bank`s credit profile.
Moody`s expects Hellenic Bank to maintain momentum in terms of loan restructurings, leading to further asset quality improvement in coming quarters.
As it is noted, Hellenic Bank`s core profitability will continue to be pressured by the low returns on its high liquidity buffers and sustained high operational costs.
Moody`s points out that upward pressure on the ratings of both banks could develop following improvements in their financial performance -- mainly further sustained reductions in the volume of NPLs and increased cash coverage of NPLs.
The outlook could be changed to stable if the banks` progress with restructurings stagnates or if economic growth falters, leading to a reversal in the recent improvement to the banks` asset-quality metrics.
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