11th Nov 2020 06:59
(Alliance News) - Moody's Investor Service on Tuesday affirmed all ratings and assessments of Bank of Cyprus Holdings PLC, including its B3 long-term deposit ratings.
"The affirmation of the banks' ratings reflects their improved funding and liquidity profiles, and strengthened capital levels compared to a few years ago, counterbalanced by the downside risks stemming from the negative effects of the coronavirus on the Cypriot economy," the credit ratings agency said.
Moody's noted the lender's outlook remains Positive.
The positive outlook reflects Moody's expectations that the bank will be able to navigate the more challenging environment while maintaining capital and liquidity buffers well above regulatory minimums.
Moody's added: "While Moody's acknowledges that the relative strengthening in the bank's solvency profiles is already placing upward pressure on the ratings, in the context of their relatively low levels, the coronavirus pandemic continues to lead to material uncertainty."
Bank of Cyprus B3 deposit ratings are driven by its caa1 baseline credit assessment, Moody's said, and a one-notch uplift that results from the "protection afforded to depositors from more loss-absorbing junior securities".
"The affirmation of Bank of Cyprus' ratings captures the bank's strengthened deposit-based funding, liquidity and capital buffers, that makes it well-positioned to withstand the negative effects of the current coronavirus pandemic," Moody's continued.
Bank of Cyprus reported a Common Equity Tier 1 capital ratio of 14.3% as of the end of June 2020, which is well above the bank's CET1 regulatory minimum of 9.7%.
The rating agency expects the pandemic will lead to "higher problem loan formation" and "weaker recoveries" that will continue to strain the bank's asset quality, profitability and capital despite its strengthened solvency profile.
"Nonperforming exposure, as per the European Banking Authority, remains high at 22% of gross loans as of the end of June 2020, despite the drop following the NPE sale agreement," Moody's noted.
By Paul McGowan; [email protected]
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