BCB CEO: “We Do Not Share Moody’s View”

February 11, 2016

Following the statement from Moody’s saying they revised the credit rating of Bermuda Commercial Bank following the acquisition of Private & Commercial Finance Group PLC, Peter Horton, BCB Chief Executive Officer, said: “We do not share Moody’s view that our acquisition of a majority stake in PCFG warrants a downgrade of BCB.

“On the contrary, our well-researched assessment is that this acquisition significantly strengthens and diversifies BCB’s asset base and revenue activities.

In isolation, we consider PCFG a particularly attractive investment and note that:

  • PCFG is a UK based finance house quoted on the AIM stock exchange. It has been tested in diverse and sometimes challenging market environments for roughly two decades;
  • PCFG focuses on providing finance for motor vehicles, plants and equipment. The loans are small and diverse, with PCFG having over 16,000 customers spread across the UK. A number of highly rated banks have been confident enough to lend to PCFG for many years;
  • It is a profitable business, having grown by a combination of acquisitions and organic growth. The company currently commands a small market share, allowing the scope for very material growth, especially now that PCFG has the support of a bank;
  • The PCFG management team is experienced, capable, and supported by the strong UK legal and financial systems;
  • As a longstanding holding within the Somers Group, PCFG was already well known to BCB. Despite this, we undertook extensive due diligence prior to the acquisition and, of course, secured the consent of the Bermuda and UK regulators; and
  • The transaction also offers synergies. Examples are the opportunity for BCB to build a diverse loan book without over-reliance on the Bermuda market; the potential to serve 16,000 new customers; and opportunities to share costs with PCFG. We are actively working on these opportunities.

However, we also consider PCFG an ideal strategic fit for BCB:

  • The BASEL III rules represent a fundamental challenge to the entire Banking Industry, prompting many Banks to review their asset and capital allocation policies. BCB was no exception. The 5 year strategic plan we adopted in February 2015 identified the need for us to diversify earnings and our balance sheet ahead of the BASEL III implementation;
  • Acquiring PCFG was a major step towards balance sheet diversification. It allowed us to reduce our reliance on relatively “capital expensive” assets, including some in our bond portfolio, which was timely ahead of the current turbulence in world investment markets;
  • The PCFG transaction similarly introduces greater earnings diversification; and
  • The Bank is acutely aware that it needs to maintain a pristine balance sheet. In considering this transaction we satisfied ourselves that BCB’s asset quality, capital adequacy and liquidity would remain strong after the PCFG acquisition.

“In short, we consider PCFG a sustainably attractive and low risk investment. We are confident that time will prove the benefits of the acquisition. Encouragingly, early signs are that other investors share our confidence: since our acquisition the PCFG share price on the London Stock Exchange has already increased by 20%.”

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Comments (1)

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  1. Cranberry says:

    It is incumbent on the CEO (of any institution) to not share negative views put forward by any rating agency… If he/she supported these downgrades and negative reviews he/she would have difficulty keeping their jobs…