* S&P raises rating on Cyprus by one notch, to 'B'
* Fitch revises outlook to "stable" from "negative"
ATHENS, April 25 (Reuters) - Credit agency Standard and Poor's on Friday raised its rating on Cyprus to "B" from "B-", saying the bailed-out Mediterranean island was meeting the terms set by its foreign lenders and citing reduced risk to its debt repayments.
It is the agency's second upgrade of Cyprus since it came to the brink of financial collapse last year, with a banking system crippled by its exposure to debt-laden Greece and after it was shut out of international financial markets.
Standard and Poor's said it could raise Cyprus' rating again within the next 12 months if it continued to comply with the measures outlined in a bailout plan agreed with the European Union and the International Monetary Fund.
"Cyprus appears to be meeting the terms of the Economic Adjustment Program financed by the European Stability Mechanism and International Monetary Fund, suggesting reduced risk to Cyprus' full and timely payment of its debt service," S&P said in a statement.
Seperately, Fitch ratings revised its outlook on Cyprus to stable from negative earlier on Friday, citing better-than-expected economic performance and progress in reform implementation.
Fitch rates Cyprus B-, and Moody's Investors' Service at Caa3.
Just a year ago, Cyprus, one of the smallest countries in the euro zone, teetered on the brink of default and became the first nation in the history of the euro zone to impose capital controls to prevent a collapse of its banking system.
Cyprus signed up to a 10 billion euro bailout programme with the EU and the IMF, on condition that it shut a major bank and recapitalised a second lender with its clients' deposits.
Cyprus expects to return to international markets late next year and may even test the waters earlier to gauge the appetite for Cypriot debt, Cypriot President Nicos Anastasiades told Reuters in an interview this month. (Reporting by Renee Maltezou; Editing by Alison Williams)