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

by THEFUTURE.TEAM

June 19, 2024

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 Construction Trends: Permit Count Slips While Value and Scale Surge in 2025

by THEFUTURE.TEAM

July 11, 2025

The Cyprus Statistical Service (Cystat) has reported a notable shift in the construction landscape for 2025. The latest figures reveal a modest 1.9% decline in building permits issued in March compared to the same month last year, signaling a nuanced trend in the nation’s developmental activities.

Permit Count Decline in March

In March 2025, authorities authorised 572 building permits—down from 583 in March 2024. The permits, which total a value of €361.5 million and cover 296,900 square metres of construction, underscore a cautious pace in permit approval despite ongoing projects. Notably, these permits are set to facilitate the construction of 1,480 dwelling units, reflecting an underlying demand in the housing sector.

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Q1 2025: Growth in Value, Construction Area, and Dwelling Units

While the number of permits in the first quarter (January to March) decreased by 15.8% from 1,876 to 1,580, more significant, economically relevant metrics saw robust growth. Total permit value surged by 21.7%, and the authorised construction area expanded by 15.6%. Additionally, the number of prospective dwelling units increased by 16.7% compared to the corresponding period last year. This divergence suggests that although fewer permits were issued, the scale and ambition of the approved projects have intensified.

New Regulatory Framework and the Ippodamos System

Since 1 July 2024, a pivotal transition has taken place in permit administration. The responsibility for issuing permits has moved from municipalities and district administration offices to the newly established local government organisations (EOAs). The integrated information system, Ippodamos, now oversees the licensing process, streamlining data collection on both residential and non-residential projects across urban and rural areas.

Comprehensive Data Collection for Enhanced Oversight

The Ippodamos system categorises construction projects using the EU Classification of Types of Construction (CC). This platform gathers extensive data on the number of permits authorised, project area and value, and the expected number of dwelling units. It covers a broad spectrum of construction activities—from new builds and civil engineering projects to plot divisions and road construction—while excluding renewals and building divisions. The thoroughness of this new regulatory structure promises greater operational transparency and more informed decision-making for policymakers and industry stakeholders.