Moody’s assign C- rating on Bank of Cyprus

Moody’s has assigned a C- Bank financial strength rating (BFSR) for Bank of Cyprus (BOCY). According to Moody’s, the BFSR reflects the increasingly competitive conditions in BOCY’s primary markets that are pressuring interest margins and its high credit expansion, suggesting that the credit portfolio remains relative unseasoned and untested by any economic slowdown.

The credit rating agency notes that BOCY's C- BFSR could be pressured by a number of issues going forward, including: (a) unforeseen problems and challenges related to the acquisition and integration process of a relatively large organisation, (b) Uniastrum Bank's rapid expansion and its unseasoned loan portfolio, which may contain hidden risks, and (c) Uniastrum Bank's current weak financial performance, suggesting that a quick turnaround is necessary to prevent a dilution of BOCY's overall financial performance.

According to Moody’s, the C- BFSR reflects BOCY's strong position in its domestic market, its dynamic and increasingly valuable franchise in Greece and its relatively good financial metrics – primarily its growing earning power and bottom line profitability, its satisfactory capitalisation and liquidity, and its adequate provisioning level.
Overall the credit rating agency expects the upward trend in BOCY's profitability to continue, underpinned by higher business volumes in the Bank's domestic operations, the ongoing maturing of the branch operations in Greece and declining loan-loss provisioning requirements.

Finally, given the Bank's risk appetite, Moody’s considers BOCY’s overall capital adequacy ratio of 12.7% and Tier 1 ratio of 9.7% to be satisfactory. The other ratings are for local currency deposits (A1/Prime-1), for senior debt (A2) and for subordinated debt (A3).