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Moody’s Elevates Bank of Cyprus to A3 Rating: A Testament to Financial Fortitude

In a significant financial milestone, Moody’s has elevated the long-term deposit ratings for the Bank of Cyprus from Baa1 to A3. This achievement underscores the bank’s ongoing enhancement of its financial health.

The outlook remains stable, reinforcing the bank’s position as a beacon of stability in Greece and Cyprus, a testament highlighted amidst challenges. Moody’s attributes this upgrade to the continuous improvement in the bank’s asset quality and risk management.

Breaking new ground, the Bank of Cyprus is now the highest-rated establishment among its regional peers, a clear message of reliability and financial robustness.

Crucial contributors to this new rating include an increase in the tangible common equity (TCE) ratio to 17.1% by the end of 2023, and a decrease in non-performing exposures (NPE) to 3.6% from 6.5% in 2021.

Moody’s also notes the bank’s strong profitability, marked by a 21.3% return on tangible equity in 2023, and a cost-to-income ratio that fell to 35%. This financial agility is expected to persist through 2025, even with possible interest rate reductions influencing net interest income.

The report also lauds the bank’s liquidity and robust deposit base, describing its funding as primarily backed by low-cost retail deposits, comprising 88% of total funding. With a liquidity coverage ratio (LCR) at an impressive 341%, the bank’s solid stance is further solidified.

Furthermore, the bank’s counterparty risk ratings have seen a boost, reflecting confidence in its future potential. While the bank’s subordinated debt rating remains unchanged at Ba2, the stable outlook signifies a predicted continuation of solid solvency and profitability over the next 18 months.

If the Bank of Cyprus sustains high profitability combined with low asset risk, it stands on the brink of further upgrades.

Middle East Tensions Cast Uncertainty Over Cyprus Tourism Sector

Cyprus’ tourism sector is entering a period of heightened uncertainty as regional tensions in the Middle East begin to affect travel sentiment. Although the country is not directly involved in the conflict, industry stakeholders report growing caution among travelers, tour operators and hospitality businesses.

Heightened Concern Across The Sector

Tourism officials and industry representatives are closely monitoring developments. While maintaining a measured public stance, they remain in contact with international partners and travel operators to assess potential changes in travel programs. Despite the uncertainty, many industry figures believe that once tensions ease, targeted marketing campaigns and competitive pricing could help restore Cyprus’ position as a preferred Mediterranean destination.

Operational Adaptations And Labour Considerations

According to reports by Philenews, hotel operators recently met with representatives of the Deputy Ministry of Tourism to discuss the operational challenges emerging from the situation. Labour issues were a central focus of the discussions. Many hotel businesses had originally planned to reopen in March to align with travel agents’ seasonal programs and extend the tourism season. Other establishments had scheduled openings in early April to capitalize on the Easter holiday period for both Catholic and Orthodox travelers.

Revised Timelines Amid Uncertainty

These plans are now being reassessed. Some hotel operators have proposed extending the full suspension of staff employment for up to two additional months, potentially until the end of April, while awaiting clearer developments in the region.

Such a decision would prolong the current period of unemployment for many tourism workers, highlighting the economic impact the crisis could have on the sector. An alternative proposal involves partial reopening, allowing hotels to operate with only essential personnel based on confirmed bookings. Industry representatives also discussed the possibility of requesting financial assistance from the European Union to offset potential losses.

Mixed Signals For The Summer Season

Despite the uncertainty, travel agents have so far maintained their scheduled flight programs to Cyprus for the summer period, including charter flights between May and October. This suggests that confidence in the destination remains relatively stable among some market segments.

At the same time, hotel operators report cancellations not only for the March–April period but also for certain summer bookings, while demand for new reservations has slowed. Industry stakeholders nevertheless remain hopeful that an easing of regional tensions would quickly restore traveler confidence.

Air Connectivity Gradually Restored

Air connectivity with key markets is also beginning to stabilize. Hermes Airports recently confirmed that several routes between Cyprus and European destinations have resumed. Emirates has restarted flights to Larnaca, strengthening connections with international markets. Haris Papacharalambous, president of the Association of Cyprus Travel and Tourism Agents (ACTTA), noted that the return of routes from the United Kingdom and airlines within the Lufthansa Group is gradually restoring Cyprus’ connectivity with major tourism markets.

While the tourism industry braces for continued volatility, the consensus remains that a swift end to the hostilities in the Middle East is essential for Cyprus to regain its historical vibrancy as a top tourist destination.

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