Fitch Ratings has upgraded the Bank of Cyprus (BoC) to the investment grade. According to a press release by the Bank of Cyprus, the BoC now has an investment grade rating from all three rating agencies (Moody’s, S&P and Fitch).

"This is a significant milestone for the Bank and the Cypriot economy," it stresses.

Fitch Ratings has upgraded Bank of Cyprus Public Company Limited's (BoC) Long-Term Issuer Default Rating (IDR) to 'BBB-' from 'BB+' and Viability Rating (VR) to 'bbb-' from 'bb+'. The Outlook on the Long-Term IDR is Positive.

This upgrade, the Bank says, reflects the improved asset quality (NPE ratio of 1.9% as of December 31, 2024), the strong capital position (CET1 ratio of 19.2% as of December 31, 2024), the leading position in Cyprus and the healthy profitability, which Fitch expects to remain satisfactory despite the reduction in interest rates. 

"The positive outlook is due to the improved business and financial prospects for Cypriot banks amid continued economic growth," the Bank notes.

Meanwhile, Fitch notes that the upgrade mainly reflects BoC's improved asset quality from a reduced stock of legacy problem assets (which include non-performing exposures (NPEs) and net foreclosed properties) and strengthened capitalisation,which resulted in reduced and manageable capital encumbrance by unreserved problem assets. The upgrade also reflects structurally sound profitability,which we expect to remain satisfactory despite falling interest rates, it says.

"The Positive Outlook reflects the revision of the outlook on the 'bbb-1 Cypriot operating environment score to positive from stable, which in turn reflects our assessment of improving business and financial prospects for Cypriot banks amid continued economic growth and falling unemployment and private sector indebtedness" it adds.

Fitch says that BoC's ratings reflect its strong competitive position as the largest domestic bank in the small Cypriot market, and further progress with deleveraging legacy problem assets.

Furthermore, it says that we expect Cypriot banks to benefit from the continued growth of the local economy, which we expect to translate into good new business opportunities for banks, resilient asset quality and sustainably sound profitability.