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BCB responds to Fitch downgrade

Bermuda Commercial Bank: downgraded by Fitch

Bermuda Commercial Bank has defended its standing after it was downgraded by a ratings agency.

Debra Shields, BCB’s interim chief executive officer, said the bank had been strengthened by its acquisition of UK-based Private & Commercial Finance Group,

She was speaking after Fitch lowered ratings in two areas to reflect an increase in the bank’s risk profile and weakened capital position in the wake of its shift in its business mix.

Ms Shields said: “BCB remains convinced that it has been strengthened by the combination of buying PCFG and reducing exposure to the bank’s bond portfolio and to commercial property.

“We look forward to our future meetings with Fitch, at which time we hope to show how strategic measures such as these have diversified BCB’s risk profile and strengthened its balance sheet.

“We are delighted by PCFG’s strong results since acquisition. Other investors seem to share our confidence in PCFG — its share price has gone up by 74 per cent since our investment.”

Fitch downgraded BCB’s long tern issuer default ratings from BBB+ to BB+, while its short term issuer default rating dropped from F3 to B.

And the viability rating was reduced to bb+ from bbb-.

Fitch said the acquisition of more than three-quarters of PCFG was “a positive”, but added that the move was offset by capital dilution and a “riskier overall BCB asset mix” as a result of the acquisition.

The acquisition of PCFG was accompanied by a sell-off of BCB’s stake in Bermudian property development firm West Hamilton Holdings, which Fitch said had reduced liquid property holdings by $19.4 million, but that the new investment had added $163 million of consumer and business finance loans to the BCB balance sheet, which comprised 21 per cent of the bank’s total assets at year end 2015.