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Fitch downgrades three Cypriot banks

Fitch Ratings has downgraded three Cypriot banks by one notch saying that finding private capital to cover their capital needs until June will be “difficult”. Fitch downgraded the three banks to BB+ from BBB- with negative outlook.

YESTERDAY, Fitch announced that it downgraded the Long-term and Short-term Issuer Default Ratings (IDR), the Support Rating Floors (SRF), the Support Ratings and Viability Ratings (VR) of the Bank of Cyprus, the Marfin Popular Bank and the Hellenic Bank.

In its press release Fitch said “It is Fitch’s view that while the Cypriot government’s propensity to support banks remains unchanged, its ability to do so has been reduced as reflected in the downgrade of Cyprus’ rating.

As a result, Fitch has downgraded the Cypriot banks’ Support Rating to ‘3’ from ‘2’, revised their SRF to ‘BB+’ from ‘BBB- and removed them from RWN.

However, Fitch continues to consider in its judgement of support the fact that Cypriot banks could receive support from international authorities in case of need.

The Negative Outlook on the banks’ Long-term IDRs indicates that any further downgrade of Cyprus’ sovereign rating and/or any change that reduced the likelihood of international support could lead to a further downgrade of the banks’ Long-term IDRs and SRFs.”

Fitch expects pressure on the major Cypriot banks’ profitability to continue in 2012, largely driven by higher loan impairment charges, notably in Greece, and subdued business volumes and credit growth. However, Fitch expects banks to be marginally profitable. Asset quality indicators will continue to deteriorate as Greece slides further into recession and the Cypriot economy decelerates due to austerity measures to adjust the country’s fiscal imbalances.

Fitch’s ratings actions were as follows:

Bank of Cyprus

Long-term IDR downgraded to ‘BB+’ from ‘BBB-‘; placed on Negative Outlook; removed from Risk Watch Negative (RWN)
Short-term IDR downgraded to ‘B’ from ‘F3’; removed from RWN
Viability Rating downgraded to ‘bb-‘from ‘bb’
Support Rating downgraded to ‘3’ from ‘2’, removed from RWN
Support Rating Floor revised to ‘BB+’ from ‘BBB-‘, removed from RWN
Senior notes downgraded to ‘BB+’ from ‘BBB-‘, removed from RWN
Commercial Paper downgraded to ‘B’ from ‘F3’, removed from RWN

Marfin Popular Bank

Long-term IDR downgraded to ‘BB+’ from ‘BBB-‘; placed on Negative Outlook; removed from RWN
Short-term IDR downgraded to ‘B’ from ‘F3’; removed from RWN
Viability Rating downgraded to ‘b-‘from ‘b+’
Support Rating downgraded to ‘3’ from ‘2’, removed from RWN
Support Rating Floor revised to ‘BB+’ from ‘BBB-‘, removed from RWN
Senior notes downgraded to ‘BB+’ from ‘BBB-‘, removed from RWN

Hellenic Bank

Long-term IDR downgraded to ‘BB+’ from ‘BBB-‘; placed on Negative Outlook; removed from RWN
Short-term IDR downgraded to ‘B’ from ‘F3’; removed from RWN
Viability Rating downgraded to ‘bb-‘from ‘bb’
Support Rating downgraded to ‘3’ from ‘2’, removed from RWN
Support Rating Floor revised to ‘BB+’ from ‘BBB-‘, removed from RWN

Readers' comments

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  • Costas Apacket says:

    Could the Cypriot Banks be taken over by other multi-national Banks or are there restrictions in Cyprus against this kind of free market activity where Banks and Financial Services are concerned?

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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