The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas “owes it to its shareholders” to publicly release its turnaround strategy, one outspoken investor warning it was “of the utmost importance” this be done without further delay.

Dr Johnathan Rodgers, the well-known eye doctor, told Tribune Business that both minority shareholders and the wider Bahamian public needed to see the BISX-listed institution’s revival plans for the good of its “credibility”.

He warned that it was vital that this be restored in the wake of continued losses during the first half of Bank of the Bahamas’ 2015 financial year, so that its depositors and the wider economy be protected.

Shareholders who attended the bank’s last annual general meeting (AGM) said its chairman, Richard Demeritte, promised to disclose the turnaround strategy to the 35 per cent minority public investors once it was approved by the Board and the Government.

Paul McWeeney, Bank of the Bahamas’ managing director, subsequently told Tribune Business in an interview that the strategy had been completed, and it was just a case of working out how best to release it to shareholders.

Yet, when speaking to this newspaper last week following publication of the bank’s second quarter and half-year results, Mr McWeeney - who is stepping down at end-June - seemed to retreat from previously-stated position.

While saying the strategy would have been published if left up to himself, Mr McWeeney hinted that the final decision would rest with the Board and his replacement, who might have a different attitude.

“I think they owe it to the shareholders to do that,” Dr Rodgers told Tribune Business of the need for its publication. “As soon as they determine what the strategy is going to be, they need to do it.

“The credibility of the bank is the most important thing. People need to have faith in the management and directorship, and what they promised to do. If they do not have faith in the bank, they will not be willing to do business with it and place deposits with the bank.”

Dr Rodgers then reiterated: “It’s of the utmost importance that they [the bank] come up with a credible plan that works, and let the shareholders know it and the public know it.

“If they don’t, it means the Government is going to have to keep the liquidity going. We’re still waiting with open eyes to see what the plan is.”

Dr Rodgers said the bank’s turnaround required “a serious injection of [equity] funds”, which he estimated at around $500 million.

This money, he added, needed to be invested in profitable lending opportunities so that Bank of the Bahamas could “make up for the losses” incurred in the past two years and remove the risk now transferred to the Bahamian taxpayer.

Dr Rodgers, who set out his own ‘rescue plan’ for Bank of the Bahamas via an article for Tribune Business several months ago, warned that the situation required more than just throwing money at it.

“They need to revamp the entire operation of the bank,” he told Tribune Business. “They have too many branches and are far too top heavy.”

And apart from focusing on expense control and cost-cutting, Dr Rodgers said Bank of the Bahamas had to “come up with a game plan for whatever their niche will be in the Bahamas”.

Taking Fidelity Bank (Bahamas) as an example, Dr Rodgers said it had undergone a revival after moving into consumer loans as opposed to remaining a staid mortgage bank.

Bank of the Bahamas suffered a near-$69 million net loss for the year to end-June 2014, forcing its majority 65 per cent shareholder, the Government, into a $100 million rescue ‘bailout’ of the bank via the Bahamas Resolve transaction.

The losses, related to heightened loan loss provisions, wiped out Bank of the Bahamas’ retained earnings and thrust it into a deficit position, while also pushing it into non-compliance with the Central Bank of the Bahamas’ key capital ratios.

While the worst appears to be behind Bank of the Bahamas, at least for the moment, the losses have continued - albeit at a reduced pace - with almost $10 million worth of ‘red ink’ racked up for the six months to end-December.

Dr Rodgers, meanwhile, reiterated demands made by minority shareholders at the last AGM to have Board representation, and for the existing directors to all be removed.

He told Tribune Business that there “needs to be a complete replacement” of the Board so as to make a clean break with the bank’s recent past, bringing in directors with the necessary skill sets to “develop a game plan for the bank to fight its way out of the mess and become profitable again.”

Pointing out that minority shareholders, namely Bahamian private and public investors, still owned 49 per cent of the voting rights in Bank of the Bahamas, Dr Rodgers said they had no representation on the Board.

“They have no say whatsoever in who sits on the Board. That’s a very big weakness,” he added, with the Government still able to appoint all the directors en masse.

“The majority shareholder has the right to appoint whoever they want to appoint, but if you go by normal practice, the minority shareholders should have representation on the Board.”

Dr Rodgers added no one would benefit should the worst happen, and Bank of the Bahamas ultimately fail.

“We all want the bank to be successful, not just the common and preference shareholders, but the whole economy. If the bank goes down, then the whole economy goes down,” he warned.

“Everybody wants the bank to work because the outcome of that bank not working, I don’t want to imagine.”

Dr Rodgers suggested that a healthy Bank of the Bahamas would be well-placed to start lending again, filling the space vacated by the Canadian-owned banks, which have pulled back on their credit growth.

“The Bank of the Bahamas could be well-positioned to take over that business. We’re hoping and praying that they can,” he said.