By NEIL HARTNELL
Tribune Business Editor
FINANCE Corporation of the Bahamas (FINCO) profits near-doubled in 2017 due to a more than 50 per cent drop in loan loss provisions, even though bad credit increased to $121 million.
Royal Bank of Canada's (RBC) mortgage arm, in financial statements released yesterday, unveiled an improved financial performance even though impaired (non-performing) loans increased slightly as a percentage of its total gross credit portfolio.
The BISX-listed entity, 75 per cent majority-owned by RBC, saw little change in loan book health during the 12 months to end-December 2017, with 'impaired' loans - those 90 days or more past due - increasing in value from $119.414 million to $120.87 million.
"Loans and advances classified as impaired represent 14.44 per cent (2016: 13.95 per cent) of the total loans and advances portfolio," FINCO's financial statements, audited by PricewaterhouseCoopers (PwC), said.
"The allowance for impairment losses represents 8.92 per cent (2016: 8.01 per cent) of the total loans and advances portfolio, and 61.73 per cent (2016: 57.39 per cent) of the total impaired loans."
While 'impaired' and current loans were little changed from 2016, FINCO saw a jump in credit slipping into the 'past due but not impaired' category, which rose by 26.5 per cent - from $66.946 million to $84.657 million.
As with most commercial banks, the high 'bad loan' hangover from the 2008-2009 financial crisis continues to act as a drag on FINCO's financial performance. However, loan loss provisions fell by 50.1 per cent year-over-year - from $25.017 million to $12.477 million - accounting entirely for the mortgage lender's improved bottom line performance.
Total comprehensive income jumped by 91.3 per cent, rising from $11.604 million to $22.193 million, with the improved showing prompting FINCO's Board to reward shareholders for their patience with the payment of an early January dividend and $0.10 per share 'special dividend'.
Interest income and net interest income were both down against 2016 comparatives, with total income almost $3 million lower year-over-year, dropping 5.7 per cent to $48.779 million.
FINCO's results, though, were bolstered by a 5 per cent decline in non-interest expenses, which fell by more than $700,000 year-over-year to $14.349 million.
Much of this decrease came from a more than $800,000 drop in staff costs, which were cut by 34.5 per cent year-over-year from $2.58 million to $1.69 million, as FINCO reduced headcount and was more deeply integrated within RBC's other operations.
On the balance sheet side, FINCO's net equity or 'worth' rose from $179 million to $201 million, with total impairment allowances standing at $74.614 million.
FINCO continues to pay significant 'technical service and license' fees to its RBC parent, which totalled $71.42 million in 2017 compared to $6.012 million the year before.