The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

SIR William Allen is stepping down as Fidelity Bank (Bahamas) chairman at next month’s annual general meeting (AGM) so he can devote more time to the telecommunications start-up he has “pioneered”.

Anwer Sunderji, the BISX-listed institution’s chief executive, told shareholders in the2014 annual report that Sir William was stepping down following a 10-year tenure so that he could assume the chairmanship post with Global Nexus Telecommunications.

“He believes that his commitment will leave him limited time to discharge his fiduciary duty to the bank as chairman,” Mr Sunderji said, adding that Global Nexus would “shortly be announcing its plans for going forward”.

Global Nexus, which is licensed by the Utilities Regulation and Competition Authority (URCA), was launched in 2010 as a Bahamian company that aimed to connect the Bahamas to the US, Canada, Cuba and Latin America via a submarine cable network landing in Freeport. It will thus be acting as a wholesale provider of telecommunications services, selling space on those cables to other operators.

Sir William, the former minister of finance under the first Ingraham administration, was chairman when Global Nexus launched. His departure from Fidelity Bank (Bahamas) chairmanship, but not the Board, suggests the telecommunications start-up is moving to kick its ambitions into high gear.

A 2011 press release suggested the first phase of Global Nexus’s roll-out would involve the laying of fibre-optic submarine cables between the Bahamas and Canada, offering an alternative route to telecommunications traffic other than the “traditional bottlenecks” around the US.

Meanwhile, Thomas Hackett, Fidelity Bank (Bahamas) chief financial officer, said the institution would be retaining more of its profits over the next two years to ensure its risk-weighted average capital hit the 20 per cent target ratio. It is currently at 18.5 per cent, above the Central Bank’s 14 per cent minimum.

Mr Hackett also warned that non-performing mortgage loans had continued to increase throughout 2014, indicating that “mortgage arrears are not stabilizing and further increases are expected in 2015”.

Fidelity Bank (Bahamas) mortgage portfolio declined by a further $12.1 million or 10.8 per cent in 2014, due to reduced home demand and the inability of borrowers to qualify for credit.

However, Mr Hackett indicated that Fidelity Bank (Bahamas) transition to a bank focused in consumer lending, and away from its traditional mortgage roots, was almost complete following another $33.9 million expansion in the consumer lending book in 2014.

The Fidelity chief financial officer said consumer credit now accounted for 71 per cent of its total loan portfolio, a percentage “in line” with the bank’s target ratio.

Mr Sunderji, meanwhile, said the bank was facing a growing “late payment problem” involving its mortgage portfolio.

“The mortgage delinquency situation is exacerbated each time the Government announces a ‘mortgage relief’ programme, as borrowers stop paying their loans hoping to benefit from the Government largesse, causing further delinquency increases,” Mr Sunderji told Fidelity Bank (Bahamas) shareholders.

“As it turns out, not all delinquent borrowers are elderly, disabled or unemployed (the Government’s target for assistance), and many of them have been occupying their homes for more than five years and not paying their mortgages.”

Mr Sunderji added that while Fidelity Bank (Bahamas) supported the Government’s intent to impose limits on how much of their salaries Bahamians could pledge to secure loans, it was likely to “create substantial hardship” among borrowers accustomed to using this method to cover everyday expenses.

“The Bahamian economy is dependent on consumer spending, as it is estimated that more than 50 per cent of the nation’s GDP is driven by it,” Mr Sunderji said. “Any change in limiting consumer loans could have an impact on the economy that is still hurting from a slow recovery from the recession.”

The Fidelity Bank (Bahamas) chief said that out of the $6 billion in outstanding private sector loans at end-March 2015, consumer loans accounted for $2.3 billion and mortgages, $2.8 billion.

Yet 18.5 per cent of mortgage loans, and 10 per cent of consumer credit, is non-performing. Some 16 per cent of all private sector loans are in this position, meaning they are 90 days or more past due.