Greek and Cypriot Banks capable of managing external risks says Fitch Ratings

The improved credit profiles of Greek and Cypriot banks position them to address the challenges posed by evolving US tariff policies and increased market volatility, says Fitch Ratings.

Fitch’s 1Q25 upgrade of Greek and Cypriot banks mainly reflects improvements in their standalone credit profiles, including a longer record of sound earnings generation, the near completion of their asset-quality clean-ups, satisfactory capital positions and stable deposit-based funding. The upgrades are also in the context of Greece’s and Cyprus’s improved operating environments, the agency notes.

Fitch highlights that the strength of the domestic recoveries counterbalances external risks. Greece and Cyprus have limited direct exposure to US tariffs, although second-round effects from a marked slowdown in the EU could weaken the countries’ growth prospects. Recent market volatility is likely to affect the banks’ capacity to grow their assets under management and could hamper lending opportunities in the short term. Lower-than-expected interest rates and higher asset-quality pressures on economic uncertainties are also risks to the agency's projections.

However, Fitch notes that Greek and Cypriot banks should maintain good operating profits in 2025–2026 due to continued lending and fee-generating business growth, good operating efficiency and the completion of asset-quality clean-ups. Capital buffers will remain satisfactory as improved earnings generation should absorb the impacts of loan growth, planned acquisitions and increased capital distributions.

The ratings of Eurobank S.A. and National Bank of Greece S.A. are in line with, and constrained by, Greece’s sovereign rating (BBB-/Stable) and Fitch's assessment of the country’s operating environment. The Positive Outlooks on Piraeus Bank S.A. and Alpha Bank S.A. reflect the agency's expectations that the two banks will continue reducing their capital encumbrance from unreserved problem assets as they refine their asset quality. Meanwhile, according to Fitch, the Positive Outlooks on Hellenic Bank Public Company Limited and Bank of Cyprus Public Company Limited reflect improving business and financial prospects for the Cypriot banking sector.

(Source: CNA)