BCB: ‘Work Still Needs To Be Done’
Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings [IDR] of the Bermuda Commercial Bank [BCB] at BBB-/F3. The international financial research firm has also revised the rating outlook to Negative from Stable.
Fitch’s ratings continue to reflect BCB’s comfortable liquidity and strong capital position. Conversely, they remain constrained by the bank’s small size and limited diversity.
The Negative Outlook is driven by concerns regarding concentration risks principally in BCB’s investment portfolio.
“Other concerns include relatively high individual exposures as well as concentrations in Europe and the financial institution sector,” said the ratings agency. “While these risks still appear manageable in Fitch’s view, they also potentially subject BCB to higher relative risk versus prior years.
“Given BCB’s business focus on various private banking and corporate services, total loans remain a modest portion of total assets.”
After a change in ownership in mid-2010, BCB resumed normalised operations and since that time, BCB has posted considerable customer deposit growth, improved level of overall customer activity and higher core profitability.
“That said, work still needs to be done to build up BCB’s revenue stream and core earnings,” said Fitch. “The recent acquisitions of Paragon Trust and Charter Corporate Services have the potential to significantly increase fee income in the coming year.”
Fitch may downgrade BCB if concentration risks in the investment portfolio remain at current levels or increase.
Other potential rating drivers include: 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. Any upside to ratings is capped by BCB’s limited scale of operations.
Established in 1969, BCB focuses on corporate and private banking services including deposits, cash management, trust, fund administration and corporate services. BCB has no plans to significantly change its business mix.
Fitch has affirmed the following ratings with a Negative Rating Outlook:
Bermuda Commercial Bank
- Long-term IDR at ‘BBB-’;
- Short-term IDR at `F3′;
- Viability Rating at ‘bbb-’
- Individual at `C’;
- Support at `5′;
- Support Floor at `NF’.
