Fitch Affirms Bermuda Commercial Bank At BBB
Fitch Ratings has affirmed the Long- and Short-term Issuer Default Ratings [IDRs] of Bermuda Commercial Bank [BCB] at ‘BBB-/F3′. The Ratings Outlook is Stable.
The ratings agency said, “The affirmation of BCB’s IDRs, VR and Stable Outlook reflects the company’s liquid balance sheet and its strong capital position. The company’s unusually strong liquidity profile and capital levels have a high influence on BCB’s investment grade rating.
“BCB’s IDRs and VR reflect the company’s very liquid balance sheet relative to its bank peers in Bermuda and the community bank peer group in the U.S. With average cash on hand averaging 44% of total assets over the last five years, Fitch views BCB’s balance sheet as sufficient to weather through a liquidity crisis, although such an event is considered unlikely.
“BCB’s capital levels, on a tangible and risk adjusted basis, continue to be strong. Fitch Core Capital relative to risk-weighted assets was 27.43% at Sept. 30, 2014, and much higher than most banks in Fitch’s rated universe. In Fitch’s view, the company should maintain high levels of capital due to BCB’s limited business diversity, large investment portfolio and customer concentrations in its deposits profile.
“Offsetting these positive factors, Fitch views the company’s investment securities book as high risk and concentrated. The company securities book accounted for 45% of total assets. Although Fitch believes that the company has taken steps to improve its risk management related to the investment portfolio, enhancements should continue in order to support the current ratings and Outlook.
“Positively, the company has made efforts to reduce its level of concentration risk in the securities portfolio. The largest 20 investment holdings account for 50% as of period Dec. 31, 2014. Further, BCB has continued to sell certain securities as it repositions the portfolio for better credit quality, liquidity and risk adjusted yields. Due to new global liquidity requirements, it is anticipated that the bank will continue reviewing its securities holdings.
“Management has been proactive in improving its non-interest revenue stream demonstrated by the company’s acquisitions of trust and corporate administration service companies over the last two years. This strategy has resulted in a 12% revenue increase year-over-year. Nonetheless, Fitch believes that despite the strong momentum, BCB will face challenges to significantly grow this business given its small market share relative to its competitors on the island.”
