The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Long-suffering Bank of the Bahamas shareholders incurred a further $3.392 million loss during the final three months of 2015, with the institution still non-compliant with key capital ratios.

The BISX-listed institution, unveiling its second quarter and half-year results, again blamed ‘bad’ loan provisions for losses that now exceed its 2014 ‘bail out’ write-back by almost $20 million.

John Rolle, the newly-appointed Central Bank governor, declined to comment when asked by Tribune Business how long the regulator was going to tolerate Bank of the Bahamas’ persistent breaches of several minimum capital ratios.

“All of our licensees are closely supervised, and that’s as much as I can say,” Mr Rolle said, when asked how the Central Bank planned to deal with the situation.

Bank of the Bahamas has been in non-compliance with two key capital ratios for at least six months, with the breaches dating back to at least its end-June 2015 financial year close.

Its results for the six months to end-December 2015 reveal that the bank’s Tier 1 Capital, as a percentage of total risk weighted assets, now stands at 10.95 per cent compared to the 12.8 per cent minimum.

This represents a further decline from the 11.06 per cent at end-June 2015. The other problem ratio continues to be Tier 1 capital as a percentage of total capital, which is now at 63.45 per cent compared to the minimum 75 per cent.

Senior executives at other banks have privately complained to Tribune Business that a ‘double standard’ appears to be in play, with no action - including sanctions - taken against Bank of the Bahamas for its breaches while all its rivals remain in compliance.

They have also voiced suspicions that the Central Bank’s seeming reluctance to act is being influenced by the fact that the Government is Bank of the Bahamas’ 65 per cent majority shareholder, via the Treasury and National Insurance Board (NIB).

Mr Rolle declined to comment on both complaints.

Bank of the Bahamas’ predicament also resulted in one of its shareholders grilling Keith Davies, the Bahamas International Securities Exchange’s (BISX) chief executive, over its recent annual results filing extension and other regulatory issues.

Mr Davies told Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, that BISX always “reviews and vets whether it’s justified” for listed companies to obtain an extension for the public release of their financial results.

BISX’s listed issuers are required to release their annual results within four months of year-end, but Bank of the Bahamas obtained a two-month extension for its 2015 figures, which were finally released just before New Year’s Eve.

“They requested an extension and received an extension,” Mr Davies explained. “They’ve published a notice saying why they received this extension. They are up to date at the moment.

“You may not like the fact they’re late for the reasons they’ve given.”

Mr Lightbourn also asked Mr Davies how long the bank can take - post year-end - to hold its annual general meeting (AGM).

“They seem to think they can do whatever they want,” Mr Lightbourn said.

Mr Davies, who was addressing the Rotary Club of East Nassau, said he recalled that Bank of the Bahamas had promised to hold its AGM for 2015 during the first quarter of this year.

To achieve that target means the meeting will have to be held by March 31. Given that BISX-listed companies are required to notify investors of the date, and supply all proxy-type material, one month in advance, this suggests the bank has only two weeks left in which to initiate this process.

Mr Davies added that BISX has also “forced companies” to appoint independent directors to their Boards, so that the interests of minority investors are protected.

Bank of the Bahamas, though, has yet to do this with all its Board directors being appointed by the Government.

“Nothing surprises me any more,” Mr Lightbourn told Tribune Business later on the bank’s latest results. “I don’t expect any better from them.

“The whole thing is a disgrace. It’s a national embarrassment. If the bank were in private hands, the Central Bank would have closed them down a long time ago. It’s the Government of the day insisting they be left in business. The bank’s a mess.”

The only ‘crumbs of comfort’ for Bank of the Bahamas’ 3,000 minority shareholders are the fact that the bank’s losses seem to be declining in size.

The 2016 second quarter loss for ordinary shareholders was down by 40.5 per cent, from $5.697 million to $3.392 million, while the half-year’s ‘red ink’ declined by 62 per cent - from $9.895 million to $3.751 million.

The second quarter results, covering the three months to end-December 2015, provide the first ‘true’ year-over-year comparatives of Bank of the Bahamas’ performance since the $100 million Bahamas Resolve ‘bail out’ on October 31, 2014.

Wayde Christie, Bank of the Bahamas’ managing director, described its performance as “encouraging”.

He admitted, though, that the bank’s performance is dependent on the level of provisioning required for its non-performing loan portfolio. Another $2.54 million was written off during the half-year.

Still, loan loss provisions fell by almost 30 per cent year-over-year for the second quarter, dropping to $3.58 million compared to $5.083 million the year before.

For the half-year to end December 2015, they fell by the exact same percentage - dropping from $8.796 million in the year-before period to $6.134 million.

“Achieving operational efficiencies, sustainable growth and aggressively managing our non-performing loans remain primary focuses for the bank and, despite the challenged economic environment, our outlook is positive for the medium to long-term,” Mr Christie wrote in his message to shareholders.

The reduced loan loss provisions were not enough to restore Bank of the Bahamas to profitability, even though total operating income increased by $2.6 million year-over-year for the first six months.

Operating expenses, meanwhile, dropped by $0.9 million or 5.34 per cent to give the BISX-listed bank a collective $3.5 million boost.

As for the balance sheet, Bank of the Bahamas’ $74.348 million accumulated deficit has more than wiped out the $54.623 million in ‘special retained earnings’ that it gained as a result of the Bahamas Resolve transaction.

While it still has net equity of $83.8 million, the bank would be insolvent without the $100 million worth of government bonds it received in the Bahamas Resolve deal.

Bank of the Bahamas’ latest results will likely do little to dispel the feeling that either another Bahamas Resolve-type transaction, or a recapitalisation, of the bank is required to return it to sustained profitability.

Such a transaction would likely cost several hundred million dollars, and Tribune Business understands that no further requests have been made of Bahamas Resolve to take more toxic loans.

Bank of the Bahamas’ latest results also undermine the prediction by its former managing director, Paul McWeeney, that it would have returned to profitability by the 2015 year-end.

“with the restructuring we’re doing internally and the new retail products we’re set to launch. We are very confident we will return to profit in the near future - I would anticipate within the next 12 months. The bank has a solid future ahead of it.” Mr McWeeney had said on November 4, 2014, in the wake of the Bahamas Resolve deal.