Fitch Affirms Commercial Bank Rating
Fitch Ratings today (Dec.23) affirmed the Individual Rating of Bermuda Commercial Bank (BCB) at ‘C’, downgraded the short-term Issuer Default Rating to ‘F3′ from ‘F2′ and assigned a long-term IDR of ‘BBB-’. The rating outlook is stable. A complete list of ratings is shown below.
The downgrade of the short-term IDR stems from a moderate shift in the Commerical Bank’s balance sheet mix towards higher-risk investment securities from low-risk liquid assets. However, Fitch recognises the bank’s liquidity remains comfortable in many international comparisons.
Fitch believes the Commercial Bank’s small size and limited diversity necessitate the maintenance of strong liquidity and capital. The bank’s capital measures remain solid with a Tier I ratio of 27 percent at the end of the 2010 financial year. Going forward, this ratio is anticipated to gradually decline yet remain over 20 percent by the 2011 financial year end.
The bank’s ownership issues were resolved in April, 2010 after a few years of uncertainty. Following approval by the Bermuda Monetary Authority, Permanent Investments Limited bought 54 percent of the shares and subsequently increased its ownership to 78 percent.
The board has been reorganised with the addition of new members who have considerable banking expertise. Since the ownership change, deposit and customer flows have turned positive. However, significant work still needs to be done in terms of diversifying bank’s product offering and building up its core profitability.
The bank’s small size and limited diversity are expected to constrain any upside to ratings at least for the foreseeable future. A rating downgrade could occur in the event of the following: any considerable reduction in liquidity or capital ratios, significant increases in credit or market risks and/or any acquisition which results in a shift towards a riskier business mix.
Established in 1969 as the Bermuda Provident Bank, the Bermuda Commercial Bank focuses on corporate and private banking services including deposits, cash management, trust, fund administration and corporate services. The bank’s business focus was reaffirmed by the board following a recent strategic review.
