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Capital Intelligence raises BOC’s financial strength rating to B+

Capital intelligence Ratings, the Limassol-based rating company, raised Bank of Cyprus’s financial strength rating a notch to B+ citing the lender’s better than expected performance.

Cyprus’s largest lender did better than expected to reduce its funding profile and decreasing its non-performing loan portfolio “which reflect effective management of two of the key challenges that confronted the bank following the crisis of 2013,” Capital Intelligence said in an emailed statement on Monday. “Sound capital ratios and the bank’s revitalised franchise, as well as the improving economy and operating environment, also support the bank’s financial strength rating”.

Still, the bank’s non-performing loan portfolio, which made up 57.8 per cent of total loans or €11.9bn in September, continues to constrain the bank’s financial strength which reflects “the excess of borrowing and oversupply of property in the market,” the rating company said.

“At the current level of rating, low profitability is the least important consideration,” it said. “However, although currently viewed as unlikely, on the downside there could still be net losses which would erode capital if they arise and that would be a concern”.

Capital Intelligence, which operates mainly in Asian and African emerging economies, said that for the same reasons it also raised Bank of Cyprus’s long-term foreign currency rating by a notch to B+, adding that it maintained the short-term foreign currency rating stable at B, “indicative of the bank’s low level of liquid assets, systemic risks derived from a dependence on non-resident deposits and still limited access to wholesale and debt capital markets”.

“The bank aims to re-establish its access to debt capital markets and this would facilitate raising its tier 2 capital,” Capital Intelligence said. The listing on the London Stock Exchange, expected to take place before April next year, “may be expected to facilitate capital market access and to broaden the bank’s investor base”.

The bank’s share, currently listed in the Nicosia and Athens exchanges, was traded on Monday noon at €0.123 which is an all-time low.

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