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Bank of Cyprus Receives Notable Ratings Upgrade By Fitch

by News Editor

March 18, 2025

In a remarkable financial development, Fitch Ratings has elevated the ratings of the Bank of Cyprus Public Company Limited (BoC) from ‘BB+’ to ‘BBB-‘, indicating a strong positive outlook. This upgrade underscores the bank’s enhanced asset quality and robust capitalization.

The rating improvement is largely attributed to the bank’s strategic reduction in problematic legacy assets, such as non-performing exposures (NPEs) and net foreclosed properties. This has enabled a healthier capital structure with reduced encumbrance by unresolved problem assets.

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Fitch notes that despite lowering interest rates, BoC’s profitability remains solid thanks to its competence as the largest domestic bank in Cyprus. With consistent deleveraging, it is poised for ongoing financial stability.

Prospective Economic Growth For Cypriot Banks

The favorable outlook anticipates better business and financial prospects amidst Cyprus’s economic growth, with decreasing unemployment and lower private sector debt. BoC’s plans to expand into wealth management and insurance activities stand to gain from these economic trends.

Expectations are that the ratio of BoC’s problem assets will drop below 5% within two years, thanks to diminishing NPE portfolios and active disposals of foreclosed assets. Last year, the bank’s operating profit/risk-weighted assets (RWA) ratio was a robust 5.4%, indicating a sustainable path forward.

Financial Strength And Stability

By the end of 2024, BoC boasted a common equity Tier 1 (CET1) ratio of 19.2%, with a notable buffer over regulatory demands. The bank’s CET1 encumbrance by problem assets fell significantly owing to further disposals.

Supported by a strong Cypriot deposit base, BoC maintains excellent liquidity. Looking ahead, while a downgrade is improbable, Fitch warns that any economic downturn in Cyprus could impact ratings. However, further elevation of the operating environment for Cypriot banks could enhance BoC’s business profile.

If you’re curious about technological advancements in Cyprus, read AI At Work: Cyprus Among Europe’s Most AI-Skeptical Nations.

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Euro Area Inflation Rises To 1.9% In February

Headline Figures Signal Modest Acceleration

Euro area annual inflation rose to 1.9% in February 2026, up from 1.7% in January, according to Eurostat’s flash estimate. The increase marks a modest acceleration in headline inflation. Inflation trends, however, remain uneven across member states.

Notable Price Stability In Cyprus

Cyprus recorded an annual inflation rate of 0.9% in February, the lowest among euro area countries under the Harmonised Index of Consumer Prices (HICP). The figure continues a period of relatively stable price growth compared with other member states.

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Sectoral Insights: Services Lead The Climb

Services inflation accelerated to 3.4% in February from 3.2% in January, remaining the main contributor to overall price pressures in the euro area. Food, alcohol, and tobacco held steady at 2.6% year-over-year, suggesting stabilization in consumer staples. Non-energy industrial goods increased to 0.7% from 0.4%, indicating moderate pricing pressure outside the energy component.

Energy Prices And Economic Divergence

Energy prices remained in negative territory but declined at a slower pace, moving from -4.0% in January to -3.2% in February. The deceleration in energy deflation reduced the downward pressure on headline inflation. Among major euro area economies, Germany’s inflation rate eased to 2.0% from 2.6%, while Spain recorded 2.5% and Italy 1.6%, reflecting uneven price dynamics across core markets.

Regional Disparities In Eastern Europe

Inflation remained elevated in parts of Eastern Europe and the Baltics. Slovakia posted 4.0%, Croatia 3.9%, and Estonia 3.2%, all above the euro area average. Slovenia moved in the opposite direction, with inflation rising to 2.8% from 1.9% year-over-year.

Monthly Variability And Short-Term Movements

Month-on-month data highlight short-term volatility. Belgium recorded a 2.5% increase and the Netherlands 1.5%, while Cyprus showed no monthly change. Slovakia posted a modest 0.1% increase, indicating more stable short-term pricing compared with Western European peers. These snapshots provide crucial insights for policymakers and investors navigating the complex inflationary environment.