(The following statement was released by the rating agency)
NEW YORK, June 09 (Fitch) Fitch Ratings has affirmed the Long-
Issuer Default Ratings (IDRs) of Bermuda Commercial Bank (BCB)
at 'BBB-/F3'. The
Rating Outlook is Stable. A complete list of affirmations
follows at the end of
KEY RATING DRIVERS- IDRs & VR
The affirmation of BCB's IDRs and Stable Outlook reflects the
balance sheet and its strong capital position. The company's
liquidity profile and capital levels have a high influence on
grade rating for BCB.
BCB operates with a very liquid balance sheet relative to its
bank peers in
Bermuda and the community bank peer group in the U.S. With
averge cash on hand
averaging 44% of total assets over the last five years, Fitch
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
25.5% at Dec. 31, 2013, and much higher than most banks in
universe. In Fitch's view, the company should maintain high
levels of capital
due to BCB's limited business diversity, large investment
portfolio and large
customer concentrations in its deposits base.
Offsetting these positives, Fitch's views the company's
book as high risk and concentrated. Fitch believes that further
enhancements related to the investment portfolio are needed to
ratings and Outlook. Positively, the company has made efforts to
level of concentration risk in the securities portfolio. The
investment holdings account for 41% of the total portfolio
compared to 51% a
Fitch is also concerned with the level of related party
transactions at BCB,
which is not considered to be in line with Corporate Governance
Although currently not a significant rating driver or
sensitivity, Fitch would
view a continued increase of these transactions negatively.
Management has been proactive in improving its non-interest
revenue stream. In
late 2011, the company completed two acquisitions of trust and
administration service companies. This strategy has resulted in
a 28% 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.
RATING SENSITIVITIES - IDRs & Viability Rating (VR)
Fitch believes the current ratings are at the higher-end of
range given BCB's scale of operations and limited diversity. In
BCB's underlying fundamentals such as franchise value and
limited business model
are more reflective of a 'bb' range VR. Thus Fitch considers
BCB's high capital
and liquidity levels to offset what would otherwise suggest a
Fitch would consider a rating downgrade if average
liquidity, as defined as cash-to-total assets were to decline
below 30% and/or
if Fitch Core Capital-to-Risk Weighted Assets fell below 20%.
significant increase in credit or market risks including a rise
concentrations in the securities portfolio, and/or any
acquisition that results
in a shift toward a riskier business mix could also result in a
KEY RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING
BCB has a Support Ratings of '5' and Support Floor Rating of
'NF'. In Fitch's
view, BCB is not systemically important in the local Bermuda
therefore, believes the probability of support is unlikely. IDRs
and VRs do not
incorporate any support for BCB.
Fitch has affirmed the following ratings:
Bermuda Commercial Bank
--Long-term IDR at 'BBB-'; Outlook Stable
--Short-term IDR at `F3';
--Viability Rating at 'bbb-'
--Support at `5';
--Support Floor at `NF'.
Doriana Gamboa Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (January 31,
-- Fitch Downgrades Bermuda's Ratings to 'A+'; Outlook Stable
(May 30, 2014).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH