S&P Global Ratings has just returned Bank of Cyprus’ investment grade, upgrading it to the BBB- level from BB+.
According to the rating agency’s report, the upgrade reflects the reduced reliance of Cypriot banks on non-resident deposits and the improvement in the loan-to-deposit ratio.
S&P notes that Cypriot banks have strong liquidity, with stable funding ratio reaching 188% in mid-2024, while the liquidity coverage ratio stood at 328%.
At the same time, it highlights that the decline in non-resident deposits continues, with their share dropping to 14.1% by the end of 2024, compared to 38% in 2012. This development is considered positive by the rating agency, as it reduces the risk of sudden capital outflows.
According to S&P, Bank of Cyprus has particularly high liquidity, with 29% of its assets in cash. Although declining interest rates may impact interest income, the report states that the bank has implemented risk-hedging strategies and efficiency improvements.
The bank’s loan-to-deposit ratio stood at 50% in September, while the cost of risk is expected to decrease to 65 basis points by 2026, from 83 basis points in 2024.