The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas’ recently-announced restructuring plan has yet to convince one outspoken shareholder, who says it provides little reassurance “on the viability of the bank”.

Dionisio D’Aguilar, one of the BISX-listed institution’s 3,000 minority investors, told Tribune Business that last week’s statement by managing director, Wayde Christie, “didn’t really change” the concerns over his investment.

While praising Mr Christie for “talking the right talk”, the Superwash president said Bank of the Bahamas “continues to loose oodles of money” and be propped up by the Government.

“I guess they’re preparing the public for some sort of imminent downsizing,” Mr D’Aguilar said of how he interpreted Mr Christie’s statement, “and that they’re overstaffed based on the business they have.

“They’re going to focus on expenses, and rely on the Government to bail them out; not by giving them loans or capital, but giving them deposits. There’s no doubt about it; the Government of the Bahamas is propping up the bank with the people’s money.”

Mr Christie, in a statement issued prior to the Easter holiday, pledged to “leave no stone unturned” in returning Bank of the Bahamas to sustainable profitability following three consecutive years of heavy losses that prompted a $100 million Government ‘bail out’.

But few specifics were provided on a “transformation” exercise said to have been underway since January 2016, as he hinted the bank may downsize to achieve its goal of becoming “leaner, faster, better”.

Mr Christie, though, did suggest that the BISX-listed institution was adopting a new, more conservative approach to risk management and lending.

For his part, Mr D’Aguilar conceded that Bank of the Bahamas’ pre-2008 focus on mortgages and commercial/industrial lending had left it horribly exposed to the two sectors that had suffered the most.

“They’re in the niche of business that has the greatest default rate, and their lending practices were identified by the Central Bank as inappropriate,” he added.

Mr D’Aguilar said commercial and mortgage loan delinquency rates were close to 30 per cent and in the high teens, respectively.

And the perception remained that Bank of the Bahamas had extended credit to politically exposed persons (PEPs) and others who were not equipped to handle loans of the size - and terms - that they received.

“He’s certainly talking the right talk,” Mr D’Aguilar said of Mr Christie’s message, “but the bank continues to lose oodles of money.

“He didn’t indicate how long the losses would continue or whether the reserves are sufficient, so he didn’t really change my mind on the viability of the bank. If not for the Government of the Bahamas, the bank would have folded.”

Mr D’Aguilar also questioned whether the “transformation” exercise purportedly underway would be enough to revive Bank of the Bahamas’ fortunes.

“This statement gives you a warm, fuzzy feeling that they’re heading in the right direction, but who knows?” he told Tribune Business.

“There’s no doubt that the Government is propping the bank up, as they can’t afford for it to fail.

“It would wipe out too many depositors, and the greatest loser would be the Government of the Bahamas. They’re pouring in tonnes of NIB and Treasury money into Bank of the Bahamas.”

The extent to which the Christie administration is supporting Bank of the Bahamas is disclosed by the fact that some $316.503 million, or just over 45 per cent, of its total $697.383 million in deposits come from either the Government or its agencies/corporations.

The $316.503 million figure is almost $110 million, or 52.9 per cent, higher than the $206.944 million in Government and related agency deposits held by Bank of the Bahamas at year-end 2014.

Without this elevated support, Bank of the Bahamas’ deposit base would have shrunk by around $82 million in the year to end-June 2015.

Bank of the Bahamas is also likely to be benefiting from the fact it is the only commercial bank to declare it will accept deposits from a legalised web shop gaming industry.

The timing of Mr Christie’s statement appears designed to coincide with both the release of its 2015 annual report and upcoming annual general meeting (AGM), which will be held on April 15.

Mr Christie said Bank of the Bahamas’ so-called ‘transformation team’ had $3.5 million in recovered assets in hand, or under contract, since their appointment in January 2016.

He added that troubled loans were being renegotiated, while new corporate governance policies were being introduced and efforts made to address capitalisation and liquidity concerns.

“We have been, and continue to examine and assess, the policies and procedures of this bank from one end of the spectrum to the other,” said Mr Christie. “We are leaving no stone unturned. We can no longer be all things to all people.”

While his statement was somewhat hard to interpret, it seems to imply that Bank of the Bahamas is withdrawing from commercial lending and will also reduce staffing levels via the non-replacement of persons when they leave.

And even though Mr Christie’s statement lists several objectives, it is relatively short on the ‘how’ - how they will be achieved, and any targets and timelines for returning to profitability.

Bank of the Bahamas promised that it would disclose its restructuring plan to shareholders following its last annual general meeting (AGM), held in December 2014, but this is yet to occur.

There has also been no further mention about securing minority shareholder representation on Bank of the Bahamas’ Board of Directors, even though this was another issue discussed at the last AGM.

Currently, all directors are appointed by the Government and National Insurance Board (NIB), which collectively hold a 65 per cent majority shareholding.

Bank of the Bahamas shareholders lost almost $100 million during the past two financial years, which also witness the Bahamas Resolve ‘bail out’ - where some $45.2 million in bad loans were removed from the balance sheet in exchange for Government paper (bonds).

Tribune Business reported in February how long-suffering Bank of the Bahamas shareholders incurred a further $3.392 million loss during the final three months of 2015, with the institution still non-compliant with key capital ratios.

The BISX-listed institution, unveiling its second quarter and half-year results for the 12 months to end-June 2016, again blamed ‘bad’ loan provisions for losses that now exceed its 2014 ‘bail out’ write-back by almost $20 million.

Bank of the Bahamas has been in non-compliance with two key capital ratios for at least six months, with the breaches dating back to at least its end-June 2015 financial year close.

The only ‘crumbs of comfort’ for Bank of the Bahamas’shareholders were the fact that the bank’s losses seem to be declining in size.

The fiscal 2016 second quarter loss for ordinary shareholders was down by 40.5 per cent, from $5.697 million to $3.392 million, while the half-year’s ‘red ink’ declined by 62 per cent - from $9.895 million to $3.751 million.