09/06/2004 12:44
The improvement in the Bank of Cyprus and the Cyprus Popular Bank results did not dissuade Moody’s from placing BOC on review and downgrading CPB.
BOC on review
Despite the fact that the Bank of Cyprus C- Financial Strength Rating has remained stable, Moody’s Investors Service placed on review for possible downgrade the A3 long-term foreign currency debt and the Baa1 foreign currency subordinated debt ratings. The Bank’s prospects on the Prime-2 foreign currency short-term deposit rating have remained stable.
According to Moody’s, “this rating action reflects the weakening in the bank's financial fundamentals. In the past 18 months the bank has experienced a significant increase in problematic loans, following stricter central bank criteria for classifying loans coupled with weak economic and operating conditions in its domestic market. This led to a sharp increase in loan-loss provisioning requirements, especially in 2003, exerting significant pressure on the bank's bottom-line profitability”. Moody’s also reported that “although the expansion in its operations in Greece is viewed positively, the rapid pace of such expansion, taken together with the weak internal capital-generating performance of the Group's operations in Cyprus in the past two years, led to a decline in the bank's overall equity position.” “Although Moody's views positively the fact that Bank of Cyprus reported increased profits for the first quarter of 2004, the rating agency feels that the bank faces challenges in meeting its provisioning requirements and restoring its profitability to prior levels, to support the bank's future business expansion. The rating review will focus on these financial challenges that the bank faces”.
Yiannis Kypris: We work hard for improvement
Problematic loans have become a serious problem for the Bank due to the stricter Central Bank criteria and the ongoing weak economic conditions, BOC Financial Manager, Yiannis Kypris told StockWatch on Wednesday. “Moody’s decision to place the Bank of Cyprus on review is related to its reservations on the Group’s capability to strengthen its profitability, despite the improvement in its first quarter results. BOC will continue its efforts for the improvement of its profitability. It will proceed to all necessary acts in order to avoid the impacts from external factors”, Mr. Kypris noted.
Popular Bank: Downgrading from C- to D+
Although Moody’s confirmed the Popular Bank Baa1 long term foreign currency deposit rating, the Baa2 foreign currency subordinated debt rating and the short-term foreign currency deposit rating to Prime-2, it has downgraded the Financial Strength Rating (FSR) from C- to D+. “This downgrade reflects the weakening in the bank’s financial fundamentals, driven primarily by the deterioration in its credit portfolio quality”.
According to Moody’s, “the introduction by the Central Bank of Cyprus of stricter criteria for classifying problematic loans, in tandem with weak economic and operating conditions in Laiki Bank's domestic market, have resulted in a material increase in the level of reported problem loans”. “Although the bank's recurring earning power remains at satisfactory levels and compares well with that of its peers, the bank's bottom-line profitability was dented by high credit costs, needed to cover the problem loans increase”. “Further provisions may be needed in the future to improve the bank' s loan-loss reserve coverage to more adequate levels, in light of stricter criteria to be introduced by the central bank in the coming years”, Moody’s reported.
According to a CPB announcement, if the Bank takes into account the stricter Central Bank criteria and the low possibility of improving the operating cost, the Group’s profitability will remain under pressure in the middle term.
Stylianides: Moody’s reported the improvements
Despite the downgrading of the Financial Strength Rating from C- to D+, CPB General Manager, Christos Stylianides sees positively the fact that Moody’s eliminated the negative prospects of the three indices relating to the foreign currency credit rating. “This reflects the improvement in the Bank’s rating by Moody’s, who reported that the Bank’s profitability has remained in satisfactory levels and compares favourably with the competitor banks”.
Mr. Stylianides also said that the Popular Bank was the only profitable Cyprus bank in 2003. “Nevertheless, Moody’s decided to downgrade its FSR and eliminate the prospects in the remaining foreign currency credit rating indices”.
“The Bank will continue to boost the quality of its loan portfolio, improve its productivity and competitiveness and restrict the cost, so as to be able to deal with the changes in the environment.
BOC on review
Despite the fact that the Bank of Cyprus C- Financial Strength Rating has remained stable, Moody’s Investors Service placed on review for possible downgrade the A3 long-term foreign currency debt and the Baa1 foreign currency subordinated debt ratings. The Bank’s prospects on the Prime-2 foreign currency short-term deposit rating have remained stable.
According to Moody’s, “this rating action reflects the weakening in the bank's financial fundamentals. In the past 18 months the bank has experienced a significant increase in problematic loans, following stricter central bank criteria for classifying loans coupled with weak economic and operating conditions in its domestic market. This led to a sharp increase in loan-loss provisioning requirements, especially in 2003, exerting significant pressure on the bank's bottom-line profitability”. Moody’s also reported that “although the expansion in its operations in Greece is viewed positively, the rapid pace of such expansion, taken together with the weak internal capital-generating performance of the Group's operations in Cyprus in the past two years, led to a decline in the bank's overall equity position.” “Although Moody's views positively the fact that Bank of Cyprus reported increased profits for the first quarter of 2004, the rating agency feels that the bank faces challenges in meeting its provisioning requirements and restoring its profitability to prior levels, to support the bank's future business expansion. The rating review will focus on these financial challenges that the bank faces”.
Yiannis Kypris: We work hard for improvement
Problematic loans have become a serious problem for the Bank due to the stricter Central Bank criteria and the ongoing weak economic conditions, BOC Financial Manager, Yiannis Kypris told StockWatch on Wednesday. “Moody’s decision to place the Bank of Cyprus on review is related to its reservations on the Group’s capability to strengthen its profitability, despite the improvement in its first quarter results. BOC will continue its efforts for the improvement of its profitability. It will proceed to all necessary acts in order to avoid the impacts from external factors”, Mr. Kypris noted.
Popular Bank: Downgrading from C- to D+
Although Moody’s confirmed the Popular Bank Baa1 long term foreign currency deposit rating, the Baa2 foreign currency subordinated debt rating and the short-term foreign currency deposit rating to Prime-2, it has downgraded the Financial Strength Rating (FSR) from C- to D+. “This downgrade reflects the weakening in the bank’s financial fundamentals, driven primarily by the deterioration in its credit portfolio quality”.
According to Moody’s, “the introduction by the Central Bank of Cyprus of stricter criteria for classifying problematic loans, in tandem with weak economic and operating conditions in Laiki Bank's domestic market, have resulted in a material increase in the level of reported problem loans”. “Although the bank's recurring earning power remains at satisfactory levels and compares well with that of its peers, the bank's bottom-line profitability was dented by high credit costs, needed to cover the problem loans increase”. “Further provisions may be needed in the future to improve the bank' s loan-loss reserve coverage to more adequate levels, in light of stricter criteria to be introduced by the central bank in the coming years”, Moody’s reported.
According to a CPB announcement, if the Bank takes into account the stricter Central Bank criteria and the low possibility of improving the operating cost, the Group’s profitability will remain under pressure in the middle term.
Stylianides: Moody’s reported the improvements
Despite the downgrading of the Financial Strength Rating from C- to D+, CPB General Manager, Christos Stylianides sees positively the fact that Moody’s eliminated the negative prospects of the three indices relating to the foreign currency credit rating. “This reflects the improvement in the Bank’s rating by Moody’s, who reported that the Bank’s profitability has remained in satisfactory levels and compares favourably with the competitor banks”.
Mr. Stylianides also said that the Popular Bank was the only profitable Cyprus bank in 2003. “Nevertheless, Moody’s decided to downgrade its FSR and eliminate the prospects in the remaining foreign currency credit rating indices”.
“The Bank will continue to boost the quality of its loan portfolio, improve its productivity and competitiveness and restrict the cost, so as to be able to deal with the changes in the environment.
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