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Bank of Cyprus Receives Rating Boost from Moody’s

banking credit profile

Moody’s has upgraded Bank of Cyprus’ long-term deposit ratings to Baa1 from Baa3, signaling enhanced solvency and depositor protection for the bank. This upgrade reflects a stronger financial position, a stable outlook, and a promising direction for growth in the financial market.

What is the new Moody’s rating for the Bank of Cyprus and what does it mean?

Moody’s upgraded the Bank of Cyprus’ long-term deposit ratings to Baa1 from Baa3, indicating enhanced solvency and depositor protection. This upgrade reflects a stronger financial position, signaling a stable outlook and a promising direction for the bank’s growth and resilience in the financial market.

Moody’s Assessment Uplifts Bank’s Credit Profile

Moody’s Ratings agency recently upgraded the Bank of Cyprus’ long-term deposit ratings to Baa1 from Baa3. This significant elevation comes with a shift in outlook from positive to stable. The improvement in ratings is a reflection of the bank’s reinforced solvency profile. Furthermore, Moody’s acknowledged the increased protection for depositors owing to the bank’s strategic issuance of senior unsecured debt. This development marks a notable moment for the financial institution, signaling a robust financial position and a promising future trajectory.

The upgrade by Moody’s encompasses several aspects of the bank’s credit profile. The Baseline Credit Assessment (BCA) and Adjusted BCA now stand at ba1, escalated from ba2. Additionally, the bank’s long-term Counterparty Risk Assessment has been lifted to Baa1(cr) from Baa2(cr). This comprehensive upgrade extends to the bank’s long- and short-term deposit ratings, long-term Counterparty Risk Ratings, and long-term senior unsecured and junior senior unsecured Medium-Term Note (MTN) programme ratings.

Bank’s Solvency and Depositor Protection

The Bank of Cyprus has demonstrated a solid capital adequacy frame, with the regulatory CET1 capital ratio climbing to an impressive 17.1 percent in March 2024, up from 15.6 percent in June 2023. Moody’s expressed a positive outlook on the bank’s capital trajectory, which is expected to surge further backed by improved internal capital generation. Moreover, the risks to capital are on a downtrend as the bank continues to resolve legacy asset quality issues.

In the first quarter of 2024, the bank’s profitability metrics also painted a rosy picture. With higher interest rates, the bank reported a considerable net income to tangible assets ratio of 2.1 percent. Although a normalization of interest rates might see profitability decline from these highs, Moody’s anticipates the bank to sustain a strong bottom line. This will likely be supported by the bank’s cost-reduction strategies and ongoing digital transformation initiatives.

Green Bond Issuance and the Path Ahead

A key highlight in the bank’s recent financial maneuvers is the €300 million senior unsecured green bond issuance. Executed in the second quarter of 2024, this green bond boosts depositor protection. Incorporating this initiative with the bank’s anticipated debt maturities and refinancing plans, Moody’s projects an extremely low loss-given-failure for junior depositors. This is a significant enhancement from the previous two-notch uplift in Moody’s forward-looking LGF analysis.

The stable outlook for the long-term deposit and senior unsecured ratings juxtaposes the potential for further asset quality improvement against projected stability in profitability, operating environment, and funding, liquidity, and capital metrics. Moody’s also contemplates the bank’s capacity for addressing upcoming maturities and its refinancing strategies.

Factors that could lead to a further upgrade of the bank’s deposit ratings include improvements in the domestic operating environment, further reductions in non-performing assets, and the impact of successful digital transformation. Conversely, a downgrade could be triggered by a deteriorating operating environment, a regression in asset quality improvements, or profitability metrics falling below those of similarly rated peers.

A Steady Footing for Future Growth

The Bank of Cyprus stands at a pivotal point where its financial soundness has received a nod of approval from a prestigious rating agency. This upgrade not only instills confidence among depositors but also potentially opens up avenues for the bank to secure more favorable borrowing terms in the future. With a stabilized outlook and a fortified balance sheet, the Bank of Cyprus is poised to navigate the dynamic financial landscape with more resilience and agility.

What is the new Moody’s rating for the Bank of Cyprus and what does it mean?

Moody’s upgraded the Bank of Cyprus’ long-term deposit ratings to Baa1 from Baa3, indicating enhanced solvency and depositor protection. This upgrade reflects a stronger financial position, signaling a stable outlook and a promising direction for the bank’s growth and resilience in the financial market.

How has Moody’s assessment uplifted the Bank’s credit profile?

Moody’s recent upgrade of the Bank of Cyprus’ long-term deposit ratings to Baa1 from Baa3 signifies a significant improvement in the bank’s credit profile. The upgrade reflects reinforced solvency, increased depositor protection, and a shift in outlook from positive to stable. Moody’s also acknowledged the bank’s strategic issuance of senior unsecured debt, further boosting its credit profile.

How has the Bank of Cyprus demonstrated solvency and depositor protection?

The Bank of Cyprus has shown a solid capital adequacy framework, with the regulatory CET1 capital ratio increasing to 17.1 percent in March 2024. The bank’s profitability metrics have also been positive, with a considerable net income to tangible assets ratio of 2.1 percent in the first quarter of 2024. Additionally, the recent issuance of a senior unsecured green bond has further enhanced depositor protection.

What are the key factors contributing to the Bank of Cyprus’ promising future growth?

The Bank of Cyprus’ upgraded rating, solid capital position, profitability metrics, and recent green bond issuance all contribute to a promising future growth trajectory. Moody’s stable outlook for the bank’s long-term deposit and senior unsecured ratings reflects potential asset quality improvement, stable profitability, and strong funding, liquidity, and capital metrics. The bank’s strategic initiatives and capacity to address upcoming maturities and refinancing plans also bode well for its future growth.

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