S&P’s Credit Rating Upgrade Highlights Strengthened Position Of Bank Of Cyprus

In a significant development for Cyprus’ financial sector, Standard & Poor’s (S&P) has upgraded the long-term credit rating of the Bank of Cyprus to BB+, just one notch below investment grade, with a positive outlook. This upgrade reflects the bank’s enhanced capital position and robust profit-generation capacity, coupled with a reduction in economic risks within Cyprus.

Strengthened Capitalisation and Profitability

S&P’s upgrade follows a similar improvement in Cyprus’ sovereign credit rating, signifying broader economic stability. The agency cited the bank’s strengthened capitalisation and its ability to maintain solid profitability, even in a challenging economic environment. Despite the anticipated decline in favourable conditions due to high interest rates, S&P expects the Bank of Cyprus to sustain a resilient net interest margin of 350-400 basis points in 2024 and 2025.

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Cost Control and Sustainable Profitability

S&P also highlighted the importance of strict cost control measures in maintaining sustainable profitability. The bank’s cost-to-income ratio is projected to move towards 44-46% by the end of 2026, a significant improvement from the high of 66% observed between 2018 and 2022. This reflects the bank’s strategic focus on efficiency and cost management.

Risk Normalisation and Asset Quality

The agency noted an ongoing normalisation of risk costs, including provisions for recovered real estate assets, which are expected to drop below 80 basis points. This decline is set to further fortify profitability as interest rates stabilise. S&P anticipates the bank will maintain a return on tangible equity above 16% for 2024, and around 12-13% from 2025 to 2026.

Broad Sectoral Recovery

The upgrade also reflects a broader recovery within the Cypriot banking sector. Following years of significant non-performing loan (NPL) sales, securitisations, write-offs, and recoveries, the sector has largely absorbed the impact of the 2012 financial crisis. Although the NPL ratio remains higher compared to other European banks, it continues to decline, reaching 7.3% at the end of March 2024, with a coverage ratio of 53.3%.

Future Prospects

Looking ahead, S&P expects Cypriot banks to gradually expand their operations as legacy issues from problematic loans diminish. The sector is projected to see an average lending growth of 2.5% from 2024 to 2027, marking a shift from the deleveraging trend observed in recent years.

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Cyprus Hits Historic Tourism Peak As Overtourism Risks Mount

by THEFUTURE.TEAM

February 13, 2026

Record-Breaking Performance In Tourism

Cyprus’ tourism sector achieved unprecedented success in 2025 with record-breaking arrivals and revenues. According to Eurobank analyst Konstantinos Vrachimis, the island’s performance was underpinned by solid real income growth and enhanced market diversification.

Robust Growth In Arrivals And Revenues

Total tourist arrivals reached 4.5 million in 2025, rising 12.2% from 4 million in 2024, with momentum sustained through the final quarter. Tourism receipts for the January–November period climbed to €3.6 billion, marking a 15.3% year-on-year increase that exceeded inflation. The improvement was not driven by volume alone. Average expenditure per visitor increased by 4.6%, while daily spending rose by 9.2%, indicating stronger purchasing power and higher-value tourism activity.

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Economic Impact And Diversification Of Source Markets

The stronger performance translated into tangible gains for the broader services economy, lifting real tourism-related income and overall sector turnover. Demand patterns are also shifting. While the United Kingdom remains Cyprus’ largest source market, its relative share has moderated as arrivals from Israel, Germany, Italy, the Czech Republic, the Netherlands, Austria, and Poland have expanded. This gradual diversification reduces dependency on a single market and strengthens resilience against external shocks.

Enhanced Air Connectivity And Seasonal Dynamics

Air connectivity has improved markedly in 2025, with flight volumes expanding substantially compared to 2019. This expansion is driven by increased airline capacity, enhanced route coverage, and more frequent flights, supporting demand during shoulder seasons and reducing overreliance on peak-month flows. Seasonal patterns remain prominent, with arrivals building through the spring and peaking in summer, thereby bolstering employment, fiscal receipts, and corporate earnings across hospitality, transport, and retail sectors.

Structural Risks And Future Considerations

Despite strong headline figures, structural challenges remain. The European Commission’s EU Tourism Dashboard highlights tourism intensity, seasonality, and market concentration as key risk indicators. Cyprus records a high ratio of overnight stays relative to its resident population, signalling potential overtourism pressures. Continued reliance on a limited group of origin markets also exposes the sector to geopolitical uncertainty and sudden demand swings. Seasonal peaks place additional strain on infrastructure, housing availability, labour supply, and natural resources, particularly water.

Strategic Investment And Market Resilience

Vrachimis concludes that sustained growth will depend on targeted investment, product upgrading, and continued market diversification. Strengthening year-round offerings, improving infrastructure capacity, and promoting higher-value experiences can help balance demand while preserving long-term competitiveness. These measures are essential not only to manage overtourism risks but also to ensure tourism remains a stable pillar of Cyprus’ economic development.

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