19/12/2005 14:50
International Credit Rating Agency, Fitch Ratings changed the Bank of Cyprus’ outlook to stable from Negative and affirmed the bank’s ratings at Long-term A-, Short-term F2, Individual C/D and Support 2.
According to the announcement released on December 16, the Bank of Cyprus’ improvement is attributable to a number of factors.
“The rating action reflects Fitch’s acknowledgement of the slow but steady improvement of BOC’s management of its high stock of non-performing loans, improving profitability and strengthened capitalization”, the announcement reported.
“BOC reported a loss in 2002 and 2003 because of heavy loan loss provisions, due to a stricter definition of NPLs and the weak economic environment”, the announcement added.
However, “although still affected by high loan loss provisions, the bank has since 2004 returned to profit. At end-September 2005 it boosted its profitability by increasing revenues and continuing its cost controls, which allowed it to reach a good 58% cost-to-income ratio”.
According to Fitch Ratings “in BOC’s staff costs remain hampered by a large pension scheme funding shortfall (2004: £104 mln)”.
“Following the introduction since 2003 of more stringent criteria in defining NPLs by the Central Bank of Cyprus the BOC’s stock of NPLs has sharply increased. Although in January 2006 the CBC will apply a 90-day definition, which will increase further the bank’s NPLs, Fitch understands that the improvements of BOC’s credit risk management and procedures of collection of its loans in arrears should help the bank address its asset quality weaknesses”, the announcement said.
As for the rights issue, which will be completed in December 2005, it is expected to improve the capital ratios. “Fitch expects the bank will maintain its capital ratios at this level to keep the ratings at the current levels”, the announcement concluded.
According to the announcement released on December 16, the Bank of Cyprus’ improvement is attributable to a number of factors.
“The rating action reflects Fitch’s acknowledgement of the slow but steady improvement of BOC’s management of its high stock of non-performing loans, improving profitability and strengthened capitalization”, the announcement reported.
“BOC reported a loss in 2002 and 2003 because of heavy loan loss provisions, due to a stricter definition of NPLs and the weak economic environment”, the announcement added.
However, “although still affected by high loan loss provisions, the bank has since 2004 returned to profit. At end-September 2005 it boosted its profitability by increasing revenues and continuing its cost controls, which allowed it to reach a good 58% cost-to-income ratio”.
According to Fitch Ratings “in BOC’s staff costs remain hampered by a large pension scheme funding shortfall (2004: £104 mln)”.
“Following the introduction since 2003 of more stringent criteria in defining NPLs by the Central Bank of Cyprus the BOC’s stock of NPLs has sharply increased. Although in January 2006 the CBC will apply a 90-day definition, which will increase further the bank’s NPLs, Fitch understands that the improvements of BOC’s credit risk management and procedures of collection of its loans in arrears should help the bank address its asset quality weaknesses”, the announcement said.
As for the rights issue, which will be completed in December 2005, it is expected to improve the capital ratios. “Fitch expects the bank will maintain its capital ratios at this level to keep the ratings at the current levels”, the announcement concluded.
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