By NEIL HARTNELL
Tribune Business Editor
BANK of the Bahamas (BOB) yesterday provided further evidence that its $167.7 million bail-out may provide the foundation for a sustainable future, as half-year profits neared $2 million.
The troubled BISX-listed bank enjoyed two consecutive profitable quarters for the first time in five years, largely due to a 55 per cent reduction in loan loss provisions stemming from the removal of toxic commercial credit from its balance sheet.
The transfer of those loans, worth just 37.6 per cent of their principal value, to the Bahamas Resolve 'bail out vehicle' has brought Bank of the Bahamas back into compliance with the Central Bank's regulatory capital ratio requirements and given long-suffering shareholders hope there may be 'light at the end of the tunnel'.
Removing that toxic credit, which had a principal amount of $134.5 million and unpaid interest worth $33.7 million, enabled the bank - owned 82.6 per cent by the Government through the Treasury and National Insurance Board (NIB) - to 'write back' some $83.947 million in loan loss provisions.
The net book value of those loans transferred to Bahamas Resolve was just $50.6 million, with the taxpayer now 'on the hook' for those liabilities and charged with attempting to secure the underlying assets pledged as collateral.
The main beneficiaries from the Government's 'good bank/bad bank' solution to Bank of the Bahamas' woes have been its 3,000 minority shareholders, with the 'bail out' having produced a more than $7.3 million bottom line 'reversal' - taking Bank of the Bahamas from a $5.428 million loss the year before to a $1.888 million total comprehensive profit for the six months to end-December 2017.
The second quarter, covering the three months from end-September, saw the bank move from a $2.09 million loss to $1.05 million profit year-over-year. Renee Davis, Bank of the Bahamas acting managing director, said management and the Board were "working steadfastly to a period of sustained profitability".
"The bank's second quarter continued to indicate improvements in its financial performance through operational efficiencies and revenue growth strategies," Ms Davis added.
"The bank recognised net income of $0.8 million during the second quarter and $1.5 million year to date December 31, 2017, compared to a net loss of $2 million during the prior year quarter and a net loss of $5.5 million prior year to date December 31, 2016."
Ms Davis said the BISX-listed institution's operating income increased by $1.5 million or 16.94 per cent for the second quarter, and rose by $2.5 million or 14.79 per cent for the half-year.
She added that this resulted from a $1.3 million net interest income increase, stemming from the reduction in the Bahamian Prime rate. Higher fee and commission income drove a $1,2 million rise in net non-interest income.
"A positive variance was realised in net credit loss expense as the bank recognised approximately $1.7 million for the quarter compared to $2.9 million in the prior year's quarter, a 40.29 per cent decrease," Ms Davis said.
"Year-to-date, the bank recognised net credit loss expense of approximately $3.3 million compared to $7.2 million in the prior year, a decrease of 54.51 per cent. During the quarter, the bank sold another $5.7 million in non-performing loans to Bahamas Resolve, in addition to the $162 million during the first quarter for a promissory note of the same value, which now totals $167.7 million.
"This resulted in an improvement in the bank's credit quality and increase in its capital base. The bank also partially redeemed its $100 million note receivable from the first Resolve transaction, resulting in a total inflow of $69 million (as $50 million was redeemed during the first quarter)."