KEY RATING DRIVERS- IDRs &
The affirmation of BCB's IDRs 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 Fitch's investment grade rating for BCB.
BCB operates with a very liquid balance sheet relative to its bank peers in
BCB's capital levels, on a tangible and risk adjusted basis, continue to be strong.
Offsetting these positives, Fitch's views the company's investment securities book as high risk and concentrated. Fitch believes that further risk management enhancements related to the investment portfolio are needed to support 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 41% of the total portfolio compared to 51% a year earlier.
Fitch is also concerned with the level of related party transactions at BCB, which is not considered to be in line with Corporate Governance best practices. 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 corporate 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 their potential range given BCB's scale of operations and limited diversity. In Fitch's view, BCB's underlying fundamentals such as franchise value and limited business model are more reflective of a 'bb' range
Fitch would consider a rating downgrade if average on-balance-sheet cash liquidity, as defined as cash-to-total assets were to decline below 30% and/or if
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
Fitch has affirmed the following ratings:
--Long-term IDR at 'BBB-'; Outlook Stable
--Short-term IDR at `F3';
--Viability Rating at 'bbb-'
--Support at `5';
--Support Floor at `NF'.
Additional information is available at 'www.fitchratings.com.
--'Global Financial Institutions Rating Criteria' (
-- Fitch Downgrades Bermuda's Ratings to 'A+'; Outlook Stable (
Global Financial Institutions Rating Criteria
Source: Fitch Ratings
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