Cyprus got its investment worthiness stripes back on Friday as Standard & Poor’s raised the country’s credit grade from BB+ to BBB- with a stable outlook, five years following a devastating financial collapse.
According to the international rating agency, the Cyprus government managed to reduce the banking sector’s bad loans burden from around half of all loans down to one third.
The upgrade was based on a number of recent moves, including a deal with Cyprus Cooperative Bank where second largest Cypriot lender Hellenic Bank absorbed the healthy portfolio of the defunct institution but not the bad loans.
Also, the sale of toxic assets by the top lending institution Bank of Cyprus coupled with new legislation that helps banks reduce their non performing exposures, all contributed to S&P raising the island-nation’s credit grade.
Hellenic Bank is also reportedly mulling over selling delinquent loans, with reports saying the lender is ready to launch a tender for the sale of a portfolio of non-performing exposures within the next six months.
Experts within the rating agency warn that high public and private debt has kept the rating from reaching even higher, but also noted that growth around 3% over the next three years would help reduce public debt.