Capital Intelligence Ratings has upgraded Hellenic Bank’s foreign currency long-term rating to “BBB-” from “BB”, citing significant improvements in financial stability and capitalisation.
This took place on the same day when S&P Global Ratings upgraded Cyprus’ long-term credit rating to “A-” from “BBB+” with a stable outlook.
Regarding Hellenic Bank, the agency also upgraded its Standalone Rating (BSR) to “bbb-” from “bb” and the Core Financial Strength (CFS) rating to “bbb” from “bb+”. The outlooks for both the LT FCR and BSR were revised to Stable from Positive.
According to the agency, the two-notch upgrade of the Bank’s LT FCR and BSR was driven by the improved CFS rating to “bbb” and the higher OPERA (Operating Environment Risk Anchor) rating to “bb+”.
The CFS rating reflects the improved asset quality and capitalisation metrics of the bank, alongside a significantly enhanced ability to absorb potential future shocks.
These gains are further supported by increased profitability, high liquidity, and a stable, diversified funding base in the Bank’s domestic market.
It was further noted that Hellenic’s ratings could be upgraded again if there are improvements in asset quality and capitalisation or in the quality of earnings.
Additionally, the “timely realisation of significant benefits following the merger with Eurobank Cyprus, if substantial enough, could justify an increase in the CFS rating and a concurrent one-notch rise in the OPERA rating”.
Conversely, despite low probabilities, it was noted that the “outlook for the Bank’s LT FCR or BSR could be revised to Negative (or the ratings downgraded) if the bank’s financial metrics were to weaken significantly or if the OPERA rating were downgraded”, CI concluded.
Regarding the Cyprus’ upgrde by S&P, the agency said that its decision reflects the country’s balanced economic risks over the next 24 months.
While geopolitical tensions pose challenges, the nation’s reduced reliance on short-term external financing and increasing economic resilience were key factors.
Cyprus’ GDP growth is projected at 3.7 per cent in 2024, driven by strong service exports in technology and tourism, despite regional instability.
Growth is expected to moderate to 3 per cent from 2025 to 2027, supported by investment, private consumption, and NextGenEU funding.
The LNG terminal, anticipated to begin operations in 2026, could lower energy costs by 30 per cent, while ongoing natural gas exploration offers long-term potential.
S&P also forecasts Cyprus’ public debt-to-GDP ratio will fall below 60 per cent by 2026, meeting Maastricht Treaty criteria for the first time since 2010.
However, risks include delayed reforms affecting NextGenEU funding and prolonged economic shocks.
Further rating upgrades depend on addressing external debt vulnerabilities and surpassing expectations in public debt reduction.
