By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
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)."
Comments
John 6 years, 2 months ago
And so where are the nay sayer's who said it was a waste of time trying to save this bank? Busy buying BoB shares...wanna bet? their value will probably triple by years end as long as the current board and proper management remains in place. Bob is now Central Bank compliant.
DonAnthony 6 years, 2 months ago
Don’t break out the champagne yet. At the current profitability rate BOB is at best fairly priced, probably a bit overpriced. Net income for the first half of year was only 1.5 million. Extrapolated out for the year only looking at 3 million net income for 43 million shares outstanding. That is an EPS of just .07 cents. At a PE multiple of 12 ( more than generous with no dividend payout only looking at a fair value share price of .84 cents). The current price is only $1 but as you can see that is overvalued at current profitability. Without a drastic increase in net income for the second half of the year, forget about this stock appreciating at all much less triple-fold.
John 6 years, 2 months ago
you forgot to factor in your equation how much the loss was was in the quarters prior to the earnings and also the growth potential of the bank both in the presence of new workers, 5000 at BAh MaR alone, and also due to the scaling back of operations by a major competitor who, apparently, has also saw increases in profits and resumed the payments of dividends.
DonAnthony 6 years, 2 months ago
No I didn’t. My figures quoted above are only for the last 2 quarters of positive net income ( a stocks price is its projected future earnings the past loses are meaningless in this regard), and extrapolated forward assumes positive net income. So even if there are no more negative quarters if it is no better than the last 2 positive quarters then the stock is currently overvalued. Hard to see net income improving much as interest income is decreasing and fixed expenses are high, even though provision for loses is now very low. As for growth, hard to see it, Fidelity and Commonwealth Bank are so much better run, specialize in the high interest consumer loans so they will get the lion share.
JohnDoe 6 years, 2 months ago
There are multiple ways to fair value the price of a stock and future earnings or more specifically future earnings growth is just but one of those ways. Credit quality, capital base, net interest income and commission fee income are all improving based on the above contrary to your shoe box analysis above. There is much to be said about this bail-out and without opining on the merits of your comments and valuation above please at least be accurate in your comments.
DonAnthony 6 years, 2 months ago
“Credit quality, capital base, net interest income and commission fee income are all improving based on the above contrary to your shoe box analysis above.”
This is all true however, interest income is declining with a declining loan book, fixed expenses are high, and most of all during these positive 2 quarters the provisioning for losses were low. If these do not improve then it is very hard to see net income improving. If there is any deterioration in the loan book, there meager profits will turn negative. I too want BOB to improve and succeed, only time will tell, but there is little to suggest much improvement from here. I take solace that perhaps the drain to the Bahamian taxpayer is over for now. At least until the next government mismanages this bank again. That is another overwhelmingly negative factor for this bank going forward as it is 83% government owned.
bogart 6 years, 2 months ago
100m bailout for Resolve plus 40 m for share rights plis 167m = 307m Share price fell from 5 dollars to 1 dollar lost in share value 160m??
DIFFERENT BOARD OF DIRECTORS BY NEW GOVERNMENT!!! Investigations needed!!
BahamasForBahamians 6 years, 2 months ago
The bad debt was moved from the company.. to another company.
If we account for the costs to service that debt, which is still a tax payer responsibility, this profit would probably be wiped out.
This is just a publicity stunt.
TalRussell 6 years, 2 months ago
Ma Comrade KP needs stop reading his own BS press clippings.... had the public purse only put $165.7 and not $167.7 million into BOM - where in hell would the $2 million "profit" have come from? {Why even try make this kinds books cooking up when your government beats you to it}.
John 6 years, 2 months ago
O SHiT LOOK...TAL RUSSEL CAN WRITES ENGLISH, BY GRAbs we knew it was a put on.
BTW Did BoB draw down all the funds loaned to it by the government or there are still some 20 million on reserve
bogart 6 years, 2 months ago
300m investment for 2m is less roi on a Fixed Deposit $1,000 over 1 year!!! .......point 6% 300m investment for assets worth 75m? Cause some of those valuations of those mansions, business in resolve aint worth the price. 167.7 more by the govt for assets worth even less. Google Bank of thr Bahamas James Smith. The former Central Bank Governor at least knows his numbers. Investigations needed to see how these enormous loans and others were given that failed...moreso investigate those applications that were denied etcetc. Must not be using the peoples VAT MONEY AND TAXES to support these failures without investigations.....including NIB monies into This bank......ESPECIALLY WHEN PEOPLE ARE ON THE SOUP LONE IN FREEPORT...PLUS CHARITY GROUPS ARE COLLECTING TO FEED BAHAMIANS......
John 6 years, 2 months ago
Well it took almost five years for BoB to meet its near demise. so of course it will not it will not be healed overnight. But the good news is the hemmoraging has stopped and hopefully there will be no further drain on the public purse. more importantly measures will be put in place to stop politicians and cronies from raping the bank in the future.
John 6 years, 2 months ago
Royal bank has been paying 0 interest on fixed deposits for over two years and a fraction of 1 percent for several years before that. Most stocks on the Bahamas market pay between 2 and 4 percent under current market conditions. Well preference shares pay slightly more. So BoB is still a good buy at $1.00. Just dump the stock before the next elections!
John 6 years, 2 months ago
BYW Canadians can now buy shares in marijuana stock. Even though legislation on legislation of marijuana has not been finalized and may not meet the deadline to allow legal sales of weed to begin July 1, stocks in marijuana production and sales have been on sale since last year. So if a Bahamian was to purchase stock in these companies can he or she be charged with cultivation or distribution of dangerous drugs under Bahamian law?
John 6 years, 2 months ago
*legislation on the legalization of marijuana.
joeblow 6 years, 2 months ago
$168 million cash injection = $2 million in profit and people celebrate. The government should inject another $1 billion so that the profits can increase to $24 million.
Government economics!
John 6 years, 2 months ago
As previous bloggers intimated: The price of the stock is against future earnings. And so the celebration was that the bank has come out of the red (not shirts like Tal would say) and shows strong potential for future money. After all people invest in crypto currency and what is it. Someone takes some Monopoly money and decides to pretend it’s real money. So others join in and give the crypto highly inflated ‘fiat ‘ value when they really should be charged with counterfeit money. Then the crypto collapses leaving many holding it who got seriously burned. Call it fraud. Now there are dozens of other cryptos hitting the market. The hype is pumped up and thousands more will get burnt.
John 6 years, 2 months ago
*then the Bitcoin
John 6 years, 2 months ago
BTW RBC plan to eliminate long lines seem to be working. Lunch time on a payday Friday and only 3 people in line. Service still slow as ever.
bogart 6 years, 2 months ago
See Nassau Guardian 28.10.16 'Resolve loans were worth only $22.5 m by Quincy Parker See Tribune 4.8.17 $166 bailout id BoB best shot by Natario Mckenzie See Tribune 4.7.17 'New warning over bad bank debyts by Rashsd Rolle
Porcupine 6 years, 2 months ago
I listened to the same global financial experts, akin to those posting here, talk about how sound their bank was. Or, the financial experts talk about Enron, AIG,............................................... The link provided here, https://www.fdic.gov/bank/individual/...">https://www.fdic.gov/bank/individual/..., is a list of recent bank failures. In my experience, talk of finances of so full of blowhard idiocy that it does not bear repeating, let alone reading. The world's economy, including it's banking system, is controlled by a handful of greedy white men. The rest of us are on the sidelines, thinking we're smart.
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