By NEIL HARTNELL
Tribune Business Editor
THE Bahamas Development Bank's (BDB) chairman expects a 37 per cent reduction in its 2017 net loss to $1.2 million, and pledged: "We are headed in the right direction."
Lynden Nairn told Tribune Business in a recent interview that the Board is laying the foundations for the BDB to become "a true development bank", adding that net losses and a $60 million accumulated deficit are "not the best measurements" of its success.
He argued that BDB's contribution to job creation, GDP growth and foreign currency earnings, through the businesses it finances and supports, were better indicators of its effectiveness.
And, promising that the institution will become "much more transparent and accountable", Mr Nairn said the Minnis administration had given every indication it was committed to the $43 million bond restructuring that is critical to the BDB's turnaround.
"The net loss dropped significantly in 2016, and it is going to drop even more in 2017," he told this newspaper. "While we expect a loss in 2017, it will be much less than the year before. It's going to be in the vicinity of $1.2 million. "We are headed in the right direction. We're creating the conditions for the Development Bank to be a true development bank."
Mr Nairn was speaking after Tribune Business revealed the BDB's 2016 audited financial statements, which showed that its total comprehensive loss fell by 42 per cent to $1.878 million from $3.23 million in 2015, due largely to a $1.585 million 'swing' on loan recoveries.
More alarmingly, the financials disclosed that BDB's 'sinking fund' covered just one-third of its $46 million outstanding bond debt at year-end 2016,. And just 28.4 per cent of its loans were rated as 'performing' at 2016 year-end, with the bank also suffering from a $31.31 million solvency deficiency.
Some $22.731 million worth of loans were classified as non-performing, meaning they were at least 90 days past due, while just $9.935 million worth of credit was current.
The 'sinking fund' deficit, coupled with the $21.543 million owed by the BDB to the Government, explains why Mr Nairn previously said "everything turns" on the bank's ability to restructure these $64 million in long-term debts.
"I can certainly say this: Clearly, the bank cannot exist if these debts are not restructured," the BDB chairman said in his most recent interview. "If they're not, that would be a very clear indication that the Government is going in another direction, but we do not think that is the case.
"All the indications are that the Government believes the BDB can serve the purpose for which it is intended. We expect the restructuring to take place and, in fact, we expect in years to come for additional funding to be pursued.
"Persons should not get the impression, despite the state of the Bank today, that we are expecting more than the normal subvention from the Government. Historically, the Government has been contributing $3 million annually," Mr Nairn continued.
"That's not a lot of money. We don't expect that number to rise, as the Deputy Prime Minister [K P Turnquest] has indicated he expects that will cease in three years, and we will have charted a course for sustainable profitability. We're not expecting an issue there."
The Minnis administration has set 2020 as a deadline for the BDB to 'stand on its own feet', whereby it will cease paying the $3 million annual bond interest payments to the National Insurance Board (NIB) and the Central Bank on its behalf.
Mr Nairn and the BDB Board are hoping to persuade the Government to convert the Bank's $21.543 million debt to it into equity, while also encouraging NIB and the Central Bank to extend the maturity/principal repayment date for the bonds (a debt rollover) and lower the interest rate coupon.
The BDB chairman said that while asset quality was "important", restructuring the long-term debts owed to NIB, the Central Bank and the Government were "more significant" to its health.
"The good thing about the Bank's loan portfolio is those loans are highly collateralised, quite frankly," he revealed. "We're doing a lot of work to remediate this thing (see other article on Page 1B)."
Acknowledging that the BDB's $60 million accumulated deficit was "high", Mr Nairn added: "We don't measure the effectiveness of a Development Bank based on its profitability.
"While we want the BDB to have a level of sustainable profitability, we're not going to measure its impact on that. We're going to measure it on other metrics: the number of persons employed, foreign currency earnings and savings, and GDP growth. As an institution, we have to gather that kind of information."
Mr Nairn conceded that the BDB needed to restore its image and public confidence, and revealed: "The Bank intends to be much more transparent and accountable and, in that vein, it will be holding at least quarterly press conferences to talk about our results, the impact of what we're doing.
"We understand we have a PR issue, understand the public perception out there, and think we can soon overcome that. The only way to do that is to talk about what is happening with the Bank."
Mr Nairn said the BDB was completing a "comprehensive strategic plan" that will soon go to Cabinet, then be released to the Bahamian public.
"I was eager for January to come because we're going to release our strategic plan," he told Tribune Business. "I'm eager for that to come out.
"I think the Bahamian people will be pretty pleased with the direction the bank is headed in, no question. We still have a ways to go, but it will certainly help."