The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed bank yesterday said fee income would account for 50 per cent of its revenues by 2017, after opting to “bite the bullet” on loan loss provisioning and incur a $389,000 third quarter net loss.

Describing the decision to allocate $4.4 million worth of operating profits to loan loss provisions as “the best thing to do”, Paul McWeeney, Bank of the Bahamas International’s managing director, said the restructuring of its business model and balance sheet made this move “much easier” to bear.

Pointing out that Bank of the Bahamas International’s net income for the nine months to end-March 2012 would have been $7.2 million, not the actual $2.8 million, had it not been for the provisions taken, Mr McWeeney said he was “optimistic” that the institution would be offering credit card processing services for two major private banks by September/October 2012.

Adding that the majority of necessary loan loss provisions would be “behind us” once the bank’s 2012 financial year closed on June 30, Mr McWeeney said fourth quarter and year-end profitability would “be better than” the end-March figure.

And he told Tribune Business that Bank of the Bahamas International expected to have between five-10 functioning off-site automatic teller machines (ATMs) by end-2013, the next two locations being Arawak Cay and the Welcome Centre at Prince George’s Wharf.

While Bank of the Bahamas International’s year-to-date net income is 17 per cent down on 2011 comparatives, and the $389,000 third quarter loss represents a more than $450,000 year-over-year reverse (allowing for preference share dividends), Mr McWeeney said the loan loss provisions were “the best thing to do”.

“It’s appropriate given the anaemic economic conditions to put it aside,” the Bank of the Bahamas International managing director told Tribune Business. “It’s a prudent measure, but the bank is still making a reasonable profit.

“The point is that it’s part and parcel of creating a new business model and recalibrating the balance sheet to operate in the new norm.

“We’re biting the bullet this year and putting it behind us. It’s the first time we’re doing it as aggressively as we are. There are provisions to come, but not at this level. After this financial year it will be behind us.”

Mr McWeeney disclosed that “a little more than $500,000” of the $4.4 million provisions were driven by changes in the unemployment rate, which he described as “a key driver” for credit arrears.

Elsewhere, Mr McWeeney said the bank’s strategy to diversify its business and revenue streams away from almost total reliance on credit, moving towards fee-based (as opposed to interest) income via its e-commerce platform and in-house credit card transactions processing.

On the latter service, Mr McWeeney said: “We have engaged two major offshore banks to provide private label cards.

“These are two major institutions that are very large private banks and have a base here. We’re optimistic they’ll be concluded by September/October.”

As for the newly-launched e-commerce platform, Mr McWeeney said the response from Bahamian merchants had been “tremendous”, based on the calls received by Bank of the Bahamas International.

He added that companies were “seeing opportunities they never saw before”, and assessing how to take advantage of the payment platform provided by the bank to develop new services and delivery channels.

“All of these positive features makes the decision to take major provisions much easier,” Mr McWeeney told Tribune Business.

“The business plan we have in place now calls for fee income to account for 50 per cent of the total revenue base. We’re optimistic that should be accomplished in the next five years.”

The Bank of the Bahamas International chief added that the contract for the off-site Arawak Cay ATM should be completed this week, with construction set to break ground “imminently”.

ATMs are already located at Lynden Pindling International Airport (LPIA) and Phil’s Food Services, and another selected site is the tourist Welcome Centre at Arawak Cay.

“We have a few more in the pipeline, at strategic areas around the archipelago that have expressed the need,” Mr McWeeney said.

“We’re trying to make assessments now as to the viability of those - the Exuma Cays, and a smaller one in Inagua. I would think that between now and the end of next year, we will have no less than five [off-site ATMs] and as much as 10.”

Mr McWeeney added that Bank of the Bahamas International’s risk weighted capital ratio, standing at 22.3 per cent, was well ahead of the 14-17 per cent regulatory minimum.

At end-March 2012, Bank of the Bahamas international had total assets of $848 million and shareholder equity of $117 million.

Net interest income of $26.8 million rose slightly year-over-year, and there was little change in income from fees and commissions.