Investors ‘amazed’ over BOB’s first profit in 5 years

As of Tuesday, November 14, 2017

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

BANK of the Bahamas (BOB) “amazed” its shareholders yesterday by declaring its first quarterly profit in almost five years, following its $162 million summer ‘bail-out’.

The stricken BISX-listed institution produced $838,261 in total comprehensive income for the three months to end-September 2017, indicating that the shedding of many toxic commercial loans is already paying off.

A 63.7 per cent year-over-year reduction in loan loss provisions, from $4.387 million to $1.59 million, was largely responsible for BOB’s first quarter ‘in the black’ since the three months to end-December 2012.

The near-$3 million provisioning decline, produced by the ‘toxic’ credit transfer to the Bahamas Resolve ‘bail-out’ vehicle, helped drive a $4.217 million turnaround from the $3.379 million loss that BOB endured for the three months to end-September 2016

Some of BOB’s minority investors, unaware of the bank’s latest results release, were left stunned yesterday when Tribune Business informed them that the first quarter for its 2018 financial year had been a profitable one. Treating it as a modest bit of good news, they expressed hope this signalled the start of a long road to recovery and consistent net income performances.

“That’s incredible if you say it is,” Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, replied when informed of the first quarter profit. “I’m amazed and I’m delighted. They’re getting rid of the bad loans.”

Mr Lightbourn, who had written-off his BOB investment in common with many of the other 3,000 minority shareholders, said investors are now watching to see whether the first quarter performance can be sustained.

“We have to wait and see, but they’re trying to run the bank like it should be run,” he told Tribune Business. “I’m hoping it’s headed in the right direction. We’re in a tough economy, but getting all the commercial loans off their books will help enormously.”

Mr Lightbourn, though, conceded that minority shareholders will have to be in it for the long haul if their investments are to regain previous value. “It’s possible down the road,” he said, “but I don’t know what will happen in the meantime.

“It’s a disgrace, and I’m very disappointed, that nobody has been held accountable for what has happened to Bank of the Bahamas. That’s a polite way of putting it.”

Another BOB shareholder, speaking on condition of anonymity, said the BISX-listed institution’s return to profitability suggested that the new Board, headed by former PricewaterhouseCoopers (PwC) accountant and partner, Wayne Aranha, was already having an impact.

“I think they are obviously on the right track and have a good set of directors there right now,” the shareholder said. “Wayne Aranha is a very smart guy, and he’s going to take whatever steps are needed to turn the bank around.

“All the shareholders, especially those that turned up for the annual general meeting (AGM), have faith in his approach. He’s a very no-nonsense and methodical guy, and we have confidence he’s going to do everything in his power to turn the bank around.

“Once people see things are beginning to turn around, confidence will increase, depositors will start going there, and all-around faith in the bank will improve.”

BOB’s end-September 2017 balance sheet shows the summer bail-out’s full impact, with some $113 million written back in as ‘special retained earnings’ as a result of the toxic asset transfer to Bahamas Resolve.

That sum represents the difference between the $162 million gross value assigned to the transferred loans, and their much smaller ‘net book value’ of $49 million. The ‘write back’s’ end result was that BOB’s ‘special retained earnings’ jumped from $54.623 million to $167.26 million, the former figure representing what was ‘gained’ from the first Bahamas Resolve bail-out in October 2014.

The ‘special retained earnings’ now exceed BOB’s $139.841 million in accumulated losses at end-September 2017, and were almost entirely responsible for the bank’s net equity increasing from $63.908 million to $177.384 million within three months.

The Bahamas Resolve transaction also brought BOB’s regulatory capital ratios immediately into line with the Central Bank’s requirements, with some now triple the latter’s minimum stipulations.

The balance sheet, though, also reminds how BOB would be insolvent without the $211.825 million in government bonds that were injected to fill its financial holes. Stripping this out would leave BOB with assets of $641 million compared to total liabilities of $674.71 million.

Some $50 million of the total $261.825 million in bonds injected to BOB have already been redeemed, a move likely responsible for the bank’s cash balances growing from $97.97 million to $148.337 million quarter-over-quarter.

BOB’s unaudited financial statements for the quarter to end-September 2017 also disclose how its total commercial loan book has decreased by 54 per cent year-over-year as a result of the Bahamas Resolve transfer.

Outstanding commercial mortgage credit fell by 75.8 per cent, or more than three-quarters, from $64.791 million to $15.667 million, while other commercial loans dropped from $178.237 million to $96.316 million - a fall of 46 per cent.

The figures show how BOB’s consistently heavily losses since 2014 have stemmed largely from ‘toxic’ commercial loans, and raise fresh questions as to why the Christie administration did not shift more non-performing credit to Bahamas Resolve during its term in office.

BOB’s push into consumer lending, following the likes of Commonwealth Bank and Fidelity Bank (Bahamas), is also evident from the portfolio’s 16.9 per cent year-over-year growth - from $53.673 million to $62.745 million.

The bank’s gross interest income for the first quarter was essentially flat year-over-year at $9.105 million, but margins and net interest income jumped 7.5 per cent to $6.686 million due to lower deposit rates.

Higher net fee and commission income, which rose 19.9 per cent to $1.847 million, and growth in other income saw operating rise by just over $1 million to $9.439 million. The decline in loan loss provisions resulted in net operating income growing by 96 per cent - from $3.998 million to $7.849 million.

The near-doubling in operating income ensured BOB was able to more than cover its expenses, which dropped by 4.3 per cent, for the first time in almost five years.

DDK 6 years, 5 months ago

Writing off financial loss to a "bailout vehicle" is tantamount to printing money. Problem is, quantitative easing does not work. I am glad the shareholders are happy and optimistic and hope this turnaround is sustainable.

watcher 6 years, 5 months ago

Imagine how happy I'd be if in my business I didn't have to pay my suppliers, and my sales became instant profit. It's a wonderful life when someone else i.e. taxpayers, take on all the bad loans.

BahamasForBahamians 6 years, 5 months ago

Lol I bet the government thought this headline would generate some positive political capital.

John 6 years, 5 months ago

The Tribune is PLP in case you have forgotten. Hard work and due diligence generated the headline and hopefully, for long suffering Bahamian shareholders, February will bring more good news. And by June BoB may return to paying dividends. But more importantly the bank can regain its position in the banking market and offer consumers an alternative to having to stand in RBC's customer line for up to three hours to wait for their lack luster and overpriced services.

Well_mudda_take_sic 6 years, 5 months ago

Plenty smoke and mirrors here - truly pathetic. And the writer Neil Hartnell does not even bother to mention that the government has been paying on behalf of BoB the dividends owed to its preference shareholders with no recognition whatsoever of these transactions in BoB's accounting records. Also, we still have absolutely no transparency regarding the names of the politically connected borrowers whose loans totaling $162 million were transferred to Bahamas Resolve in the last round of essentially worthless loans heaved onto the backs of taxpayers. There is also the major accounting issue concerning BoB's recognition as equity of the so called "special retained earnings" represented by the notes receivable on BoB's balance sheet that are under the control of BoB's major shareholder as the issuer of the notes, i.e. the government, rather than BoB itself.

Reality_Check 6 years, 5 months ago

Government has yet to explain to Bahamian taxpayers that it has effectively guaranteed the repayment of the full amount (100%) of all deposits placed with BoB by depositors as a result of government keeping the doors of this insolvent bank open to the public. Ergo government has yet to explain how it can justify having fully protected the depositors but not having fully protected the minority shareholders of BoB from the losses they incurred in the value of their shares as a result of government allowing BoB to continue operating as a de facto insolvent entity.

John 6 years, 5 months ago

here we go... the split personalities at work again, each one greets one. BoB is learning to crawl before it tries to walk. The latest results proves it is capable of becoming solvent again and profitable, with the potential to repay the Bahamian taxpayer as American banks did under Obama. Why do you have a chip on your shoulder for everything Bahamian?

Reality_Check 6 years, 5 months ago

You are one of the very few to believe something dead can learn to crawl and then walk. Even D- educated Bahamians know that BoB is propped up by the already overburdened taxpayers and the criminal enterprises run by the numbers bosses, one of whom you sing to for your supper.

Well_mudda_take_sic 6 years, 5 months ago

BOL!! @John obviously believes in Zombie BoB!!!

OldFort2012 6 years, 5 months ago

Opinions are cheap and mainly hot air.

If you want the truth, look at the share price.

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by OldFort2012

sheeprunner12 6 years, 5 months ago

This is political rhetoric ......... How can BOB make a profit when it is being floated with our Treasury's money????????? ....... smt .......... Can a small business do that??????

bogart 6 years, 5 months ago

162 million quickly inserted after elections by the Finance Minister to stop BoB lawsuit against the Central Bank to now meet tier ratios despite deposits and shortly before 100 million support to create Resolve and guarrantee crystalised plus 40 million buy shres and drop in share price from over $5 to $1 + svhare value dropping some 160 million in share value and no investigation etcetc. and to generate 4.2 million profit. Really anyone commenting here has the capability of getting a better return with an investment of 162 m than 4.2m.We all love Bahamian but have the common sense to realize we re not good at owning or running hotels in our primary sector but still unable to realize we are unable to run financial institutions despite massive injections and lax regulations. This is an entity if any that should have serious forensic investigations.

ThisIsOurs 6 years, 5 months ago

He he, this sounds like the report of the "surplus" for the first two months of the financial year. The dental bank said , well they didn't do any capital projects and none of the bills have come in yet, but Johnson and KP declared a "surplus"

Porcupine 6 years, 5 months ago

The truth is dead. Our challenge is to find out the honest reason almost nothing works here. I would suggest it is because we play so loose with the English language to suit our own realities and our many unattended failings. That we continue to let things go, do not maintain them, and always make excuses for why we can't do what we said we would do is not a recipe for human success, by any definition.. It seems as if there are no consequences for bad behaviour in this country. Financial chicanery such as suggesting that BoB is solvent, while its' very existence is due to Bahamians tax dollars keeping it afloat is but one of the ways to steal, cheat and lie to Bahamians while still keeping that nice cushy job with six figures, instead of being out on the street or in jail, as these people should be. In a few short years the vast majority of Bahamians will be left with absolutely nothing but the clothes on their back. Thank your Bahamian, Christian, leaders, rulers, and owners.

bogart 6 years, 5 months ago

Of course the 3,000 shareholders/ investors are amazed at the first profit in 5 years but how do you think the majority of the tax paying public feel that 162 million of their money was just paid into BoB plus millions gone before without financial accountability or loan fraud investigations and the struggling people cupboards still bare??

BahamasForBahamians 6 years, 5 months ago

Thank you rightful thinking for Bahamians for silencing the political hack - John.

His loyalty is obviously to his party before the country - fooktards!

proudloudandfnm 6 years, 5 months ago

I wonder how many crooked polticians got loans from them this year?

Reality_Check 6 years, 5 months ago

Government + Bank Ownership = Gasoline + Fire

KABOOM!

BahamaPundit 6 years, 5 months ago

FAKE NEWS. If anything qualifies as fake news, stating that BOB has made a profit after receiving hundreds of millions of tax payer funds does.

Reality_Check 6 years, 5 months ago

Small wonder Tony Allen recently resigned as a director of BoB shortly after being appointed to BoB's board with Wayne Arahna. It seems Tony got in there, took a quick look, and then jumped ship and ran for the hills as quickly as possible in an effort to keep the solid reputation he developed as a banker with Scotia Bank in tact. This begs the question: Why is Arahna still willing to risk it all when it comes to his own reputation? It is only common sense that the new Minnis-led administration met an insolvent BoB on May 10, 2017 that it should have immediately placed in liquidation. Moreover, anyone with an ounce of common sense also knows that it is most unwise and imprudent to have any government of our country (whether FNM, PLP or whatever) owning a controlling interest in a clearing bank open to the public with publicly listed shares when it is the government itself that effectively also controls the entire regulatory apparatus of all banks domiciled in the Bahamas. Talk about a major conflict of interest!!

Well_mudda_take_sic 6 years, 5 months ago

BoB does not hold a banking license....it holds a license to steal from taxpayers to fill the financial craters created by loan and advances to corrupt politicians, their family members, friends, cronies and lovers that were never intended to be repaid!

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