The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank (Bahamas) managing director yesterday predicted the commercial banking sector would not see a “sustainable recovery” in its $1.2 billion non-performing loans pile until early 2015, with his own institution’s retail/personal credit arrears rate running around 20 per cent.

Pointing out that this was in line with the Bahamian industry average, Kevin Teslyk said 2014 would be “an important year” for the industry, given that the Baha Mar development and its 7,000 jobs were expected to come online that December.

The Bahamian economy’s performance, and any hopes the banking sector has of reducing its delinquent loans, are inextricably linked to job creation, income increases and reduced unemployment. Baha Mar is effectively the ‘only game in town’ that could begin to put a significant dent in this picture.

Mr Teslyk, meanwhile, conceded that it would “be multiple years, three-five years”, before Scotiabank (Bahamas) and its competitors saw a sustained reduction in non-performing loans, and their move towards levels more in line with historical trends.

“I think we’ll start to see some sustainable improvement - material might be too strong a word - but the early stages of sustainable recovery in 2015. It’s really going to be early 2015 when hundreds of jobs are created and spending power returns to the economy,” Mr Teslyk said.

Analysing Scotiabank (Bahamas) performance in 2012, and looking forward to next year, Mr Teslyk said it had invested $8.2 million in capital projects during the 12 months to end-October 2012.

This was indicative of annual capital expenditure going forward, he added, with some $1.3 million of that sum having been invested in Scotiabank (Bahamas) new 4,100 square foot Carmichael branch that is set to open on Monday.

“We continue to invest, we continue to grow in the Bahamas,” Mr Teslyk said, noting that Scotiabank (Bahamas) had added about one dozen jobs in 2012 - with another 10 to come from the Carmichael opening.

He added funds had been invested in upgrading Scotiabank’s main Rawson Square branch, and the establishment of its Cable Beach location.

ATMs have been replaced at most branches, and Scotiabank (Bahamas) will this Thursday unveil upgrades to its website and online banking functions. These will be rolled out across all its business segments in 2013.

While Scotiabank (Bahamas) financials for the year to end-October 2012 were still being audited, Mr Teslyk said: “On paper, the results from an income statement perspective are going to some improvement year-over-year as a result of the extraordinary actions we took in 2011, provisions against the residential mortgage portfolio.”

Taking that out, Mr Teslyk said, would see Scotiabank (Bahamas) achieving a “flat year” from a net income, asset and deposit growth perspective.

Giving further details on this, he explained that while Scotiabank (Bahamas) loan loss provisions would be down year-over-year for 2012, that had resulted from a decision to increase these for the residential mortgage portfolio in 2011.

“Because we were more active relative to a number of our peers in 2011, there appears to be a year-over-year decrease, but provisions are still high historically,” Mr Teslyk said.

And, providing cause for some mild optimism, Mr Teslyk said Scotiabank (Bahamas) non-accrual loan portfolio was “flat on the retail side” year-over-year. With no growth, he expressed hope that this would “start to work its way down”.

Still, the bank’s performance was in line with budget projections set at the start of the 2012 financial year, with all business lines - personal/retail, corporate commercial, and wealth management - performing to expectations.

While Scotiabank (Bahamas) felt it had “most of what we needed” for 2012 in terms of products, although it had introduced the new Aero credit card and refreshed the Scotia Professional Plan for small businesses to “give better flexibility”.

While the same position applied for 2013, Mr Teslyk added that Scotiabank (Bahamas) was “looking to augment wealth management with extra products and solutions”.

For 2013, he described as “a priority” the establishment of a Scotiabank (Bahamas) physical presence in eastern New Providence. This, though, would depend on getting the right location and appropriate return on investment, with branch models ranging from a full service centre, boutique and in-store presence under consideration.