Fitch lifts Bank of Cyprus, Hellenic Bank

Fitch Ratings said it upgraded Bank of Cyprus PCL’s long-term issuer default rating to B- from CCC and Hellenic Bank PCL’s long-term issuer default rating to B from B-.

The outlooks are stable.

Fitch said these actions reflect its expectation that some improvement in the economic environment in Cyprus and the implementation of reforms to its insolvency framework will support domestic banks' efforts to manage and reduce very high non-performing loan volumes and enhance recoveries, primarily via forbearance.

Investor confidence is also improving following the completion of the international bailout program in March 2016 and customer deposits in the system have remained broadly stable since capital controls were fully lifted in April 2015, the agency said.

Nevertheless, Fitch said the banks' ratings remain deeply sub-investment grade, in particular because their capitalization is still highly vulnerable to their very weak asset quality. Their internal capital generation capacity is also weak given that modest pre-impairment operating profits are eroded by impairment charges.

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