The Cypriot banking system has been upgraded to a positive rating by Moody`s Investors Service as was stated in a press release on Monday the 1st of August 2016.
ServPRO reports, еhe upgrade is an indication of how the rating agency expects bank creditworthiness to evolve in Cyprus over the next 12-18 months and reflects its view that the country`s economic recovery will restore banks to profitability and improve their weak asset quality.
Assistant Vice President at Moody`s and author of the report, Ms. Melina Skouridou noted that:
“After five years of losses, we expect banks in Cyprus to be profitable in 2016 and foresee a modest 0.3% – 0.5% return on assets,”
Ms. Skouridou further noted that:
“Cyprus` accelerating economic recovery, driven by a revival of tourism, the strengthening business services sector and increased consumer spending, will support momentum in banks` loan restructurings and generate some new business for the banks,”
The biggest challenge that is faced by domestic banks is issue of non-performing loans. The ratio of problem to gross loans will continue to decline to 43%-45% by year-end 2016 which shows a significant decrease from their peak of 55% in September 2015.
Funding conditions are expected to improve in Cyprus with domestic deposits continuing to grow, which highlights the improving economic conditions of the country.
It is also important to be noted that the Bank Of Cyprus Public Company Limited has reduced its ELA to 2.0 billion as of July 2016, down from 9.4 billion in April 2013 and it is expected that the bank will fully repay ELA during 2017.
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