The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) chief executive yesterday conceded that its record-breaking 2015 profits may have been “fortunate”, after they received a $3-$4 million boost from ‘one-off’ events.

Anwer Sunderji told Tribune Business that the BISX-listed institution’s 46.5 per cent year-over-year bottom line increase was aided by a greater-than-expected contribution from its RoyalFidelity Merchant Bank & Trust affiliate.

He added that Fidelity Bank (Bahamas) also benefited from interest costs and loan loss provisions, both of which came in lower than the company had projected.

“We had a fortunate year last year,” Mr Sunderji told Tribune Business. “The results were influenced by one-off events that are unlikely to happen this year.

“We got $3.148 million from the merchant bank, whereas we were expecting $2 million, we got $2 million in interest savings which we didn’t expect, and loan loss provisions were more than $800,000 lower.

“We benefited from all of that, but those are one-off things and we may not see the same this year. We’re grateful for everything that occurred, but don’t know if they’re going to happen in 2016.”

Fidelity Bank (Bahamas) net income grew by more than $6 million year-over-year during the 12 months to end-December 2015, rising from $14.126 million the prior year to $20.7 million.

Of that latter figure, $19.737 million goes to its equity shareholders, with the balance accruing to preference share investors.

Mr Sunderji added that the bank’s return on equity (RoE) was around 36 per cent for 2015, with return on assets (RoA) close to 4 per cent, describing both figures as “very good”.

The commercial bank, which is 75 per cent majority-owned by its ultimate parent, Fidelity Bank & Trust International, has benefited from a complete transformation of its loan portfolio make-up over the past six years.

Traditionally a conservative mortgage lender, Fidelity Bank (Bahamas) has followed the lead established by the likes of Commonwealth Bank and become largely a consumer lender.

Almost three-quarters of its $374 million loan portfolio now consists of auto and other personal-type credit, with Mr Sunderji yesterday revealing that the bank has completely stopped issuing new mortgage loans.

“They’re about 76 per cent [of the loan book], give or take,” he told Tribune Business of Fidelity Bank (Bahamas) consumer advances.

“It’s been prescient. We moved out of mortgage lending in 2010. That’s not when the proverbial hit the fan, but it’s close to that.

“We’re not issuing new mortgages. We have $86 million worth of mortgages, and have lots of issues with the current book.”

Fidelity Bank (Bahamas) 2015 financial statements, which have been obtained by Tribune Business, show how consumer lending accounted for virtually all the 8 per cent growth in its loan portfolio last year.

Both the total book, and consumer loans, expanded by $38 million in 2015, with the former hitting $374 million and the latter $272 million.

As a percentage of the total portfolio, consumer loans grew from 68 per cent to 73 per cent. Yet outstanding residential property mortgages declined from $84 million to $73 million, year-over-year, and as a percentage of the total book from 24 per cent to 19 per cent.

“We cannot compete with the money centre banks offering mortgages at three-something per cent. It’s not our game any more,” Mr Sunderji told Tribune Business, explaining Fidelity Bank (Bahamas) withdrawal from the mortgage market.

“Bahamians have really struggled to pay their debts, and pay their mortgages. It’s not an area where we want to expand.”

His comments highlight the dilemma caused by the Bahamian housing and mortgage market crisis, which was sparked by the 2008-2009 recession, and resulted in many Bahamians being unable to service their home loans.

With around $670 million worth of mortgage loans in default, and a delinquency rate of near 20 per cent, several banks have decided to effectively withdraw - or limit their exposure - to this market.

This has had the effect of ‘drying up’ lending to some of the Bahamas’ more productive industries, especially given that borrowers seem to prioritise serving auto and other personal-type loans over mortgages - their largest investment.

Mr Sunderji added that the Government’s long-promised Mortgage Relief Plan threatened to further complicate the situation, rather than ease it as the administration hopes.

“The Government has announced a Mortgage Relief Plan, and that’s always problematic for the banking industry, as we don’t know what people will do,” he explained.

“Some stop paying their debts to take advantage of the Government’s largesse, so there’s moral hazard in there. We don’t know what’s going to happen. The Government wants to help the Bahamian people, and has set aside some money to help them, but it’s nowhere near the amount of indebtedness.”

Mr Sunderji said Fidelity Bank (Bahamas) was “striving to achieve” the same $20 million net income for 2016, and added: “More of the same will be pretty good for us.

“If we do another $20 million-odd, that will be fantastic. Other banks are much larger than we are, but we seem to have found our niche.”

Mr Sunderji disclosed that Fidelity Bank (Bahamas) is in the process of relocating its Tonique Williams-Darling Highway branch, based at the former Robin Hood store, to the shopping centre at the Independence Drive-East Street roundabout.

“It’ll be open in the next 60 days,” he added.