S&P Raises Bermuda’s Outlook To Stable
Last night credit ratings agency Standards and Poor’s raised the island creditworthiness to stable from negative. Calling our debt level “low although increasing” S&P said:
The ratings on Bermuda reflect our assessment of one of the highest income levels among rated sovereigns alongside the government’s low, although increasing, indebtedness. In our view, the risk that deterioration in the financial sector could cause balance-of-payments problems or require substantial government support has receded. At the same time, the economy has proven more resilient to the financial crisis than we had previously forecast. We expect the deterioration in the general government balance to be gradually reversed from this year.
On Bermuda’s Gross Domestic Product [GDP] they said:
Standard & Poor’s estimates Bermuda’s per capita GDP at US$97,000 in 2010, more than twice the ‘AA’ median. We now believe that the downturn in the Bermudian economy was less sharp than we previously expected, as the island’s large insurance and reinsurance sector held up well through recent market turmoil. We estimate that GDP fell only 2.5% in real terms in 2009, noticeably better than the 4.0% decline we had previously forecast. In our view, the economy depends largely on the strength of demand from the U.S.; we therefore expect only a gradual recovery in Bermuda, with GDP increasing 0.5% in 2010.
Addressing the circumstances around Butterfield Bank’s recent financial woes, S&P said:
In 2008, one of Bermuda’s two largest banks, Bank of N.T. Butterfield & Son, Ltd. (BNTB; A-/Negative/A-2), suffered substantial losses, prompting the government to support the bank’s capital-raising efforts by guaranteeing the principal and dividends on US$200 million of BNTB’s preferred share issuance in 2009. The bank raised a further US$550 million in equity in first-quarter 2010, without financial assistance from government. Standard & Poor’s believes BNTB’s credit quality could still weaken in the medium term, but the bank’s capital position has improved and we do not expect any further government support to its banking system
Calling us one of the “least-indebted sovereigns” they rate S&P said:
We expect Bermuda’s net general government debt will rise as shrinking fiscal deficits continue, but will not exceed 4% of GDP by 2013. The island will thus remain one of the least-indebted sovereigns we rate.
The irony of such standards but yet most remain poor…..struggling…….