The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Finance Corporation of the Bahamas (FINCO) cut staffing levels by one-third in its 2014 financial year, taking the reduction in its workforce to 50 per cent over the past five years.

Royal Bank of Canada;’s (RBC) mortgage lending arm, in its annual report, discloses that its staff count dropped from 95 in 2013 to 63 at end-October 2014, a decline of 33 per cent.

This continues the downsizing trend that FINCO has seemingly been on since 2010, when its workforce was 126-strong. Current staffing levels thus represent a 50 per cent reduction on what they were in 2010.

The BISX-listed lender has steadily reduced its workforce over the five years to 2014. While some of last year’s cuts likely relate to the closure of FINCO’s flagship branch in the Bahamas Financial Centre, it is also possible that the increasing integration with RBC’s main Bahamas’ operation has resulted in the transfer of jobs to the latter.

Michael Detje, FINCO’s chairman, writing in the 2014 annual report, said the $22.8 million increase in loan loss provisioning, which drove the 91.4 per cent profits slump in the past financial year, was sparked by the increased length of time it was taking to sell distressed mortgage properties.

“The sharp decrease in net income is attributed to an increase of $22.8 million in the provision for aging non-performing mortgages, resulting from a change in the mortgage provisioning methodology to reflect the extended time taken to recover on mortgage collateral,” he confirmed.

Loan loss impairments jumped by 376.6 per cent, from $7.468 million in 2013 to $35.595 million last year, resulting in net income plummeting from $30.359 million to $2.603 million.

Still, Mr Detje said FINCO’s non-performing mortgages, which increased year-over-year from $104.3 million to $117.6 million, as a percentage of its loan portfolio from 11.5 per cent to 12.8 per cent, were below the Bahamian mortgage industry’s 18 per cent average.

“The demand for mortgages in the Bahamas continues to be moderate,” the FINCO chairman added. “However, the slow economic recovery continues to negatively impact the level of non-performing mortgages and property sales in the market.

Robert Pantry, FINCO’s managing director, said the lender’s net outstanding loans fell by $17.4 million or 2 per cent to $847.8 million in 2014, due to the increase in non-performing mortgages.

On a brighter note, Mr Pantry said FINCO’s gross loans grew 1.2 per cent year-over-year, and that its market share remained “consistent”, but he conceded that its customer service ratings were “not as strong when compared to the previous year”.

Mr Pantry touted FINCO’s 27.9 per cent efficiency ratio as “among the lowest in the industry”, and added: “Moderate mortgage growth is projected in a very competitive mortgage environment, and in an economy that is still recovering from the economic recession.

“Delinquent and non-performing mortgages would continue to be a challenge based primarily on the level of unemployment.”

The increase in loan loss provisions meant that FINCO’s total allowance for impairment stood at 7.6 per cent of the loan portfolio, and 59.7 per cent of non-performing loans, compared to 4.7 per cent and 40.6 per cent, respectively, at the end of 2013.

It added that a 28.2 per cent increase in non-interest expenses, from $11.524 million in 2013 to $14.776 million, was driven largely by higher Business Licence fees and business development activities.