The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Bank is aiming to redeem all its outstanding $81.5m preference share capital before year-end 2019 in a bid to “maximise returns” for equity investors.

The BISX-listed bank’s newly-released 2018 annual report confirms the redemption strategy, with the footnotes disclosing that five preference share classes worth a collective $48.9m were due to be fully paid out by May 1.

Raymond Winder, Commonwealth Bank’s president, who was travelling when contacted by Tribune Business yesterday, said he believed the redemption had been completed as scheduled although he needed to check on the last class. He said he would call this newspaper back to confirm, but nothing was received before press time.

Dividend payments to Commonwealth Bank ordinary shareholders will potentially increase as a result of the preference share redemption, and the end of interest payments to holders of those securities. That, though, may not be the only motive for the move, with Mr Winder yesterday saying the objective was “two-fold” although he did not explain that further.

However other Bahamian commercial banks, such as Bank of The Bahamas, have also been redeeming and paying out their preference shares in order to come into compliance with the new international bank capital standards set out by the Basle Committee on Bank Supervision.

Commonwealth Bank’s annual report makes no mention of this, though, merely saying: “In 2019 the group expects to redeem its outstanding preference shares in an effort to maximise returns to common shareholders. The total amount of preference shares outstanding is $81.5m.”

The BISX-listed institution, widely regarded as a market leader on personal loans, added that it was “cautiously optimistic” on The Bahamas’ 20189 economic prospects as a result of improved GDP forecasts from the IMF and other international agencies.

Looking back to 2018, Commonwealth Bank said profits of $51.9m, a 1.6 percent or $0.8m rise upon the prior year, were driven by a combination of a 24 percent year-over-year decline in impairment losses to $27.7m and a reduction in deposit rates.

“The Bank’s total allowance for loan impairment was $74.8m, which represented 7 percent of total loans,” the annual report said. “Total impaired loans was $64.8m, of which $45m or 69 percent were secured mortgages and business loans.

“Commonwealth Bank continues to report stronger credit quality ratings overall than the industry. The Bank’s delinquency ratio at the end of the year was 9.34 percent compared to 14.26 percent for the industry. Similarly, the bank’s non-performing loan ratio was 5.13 percent compared to 9.1 percent for the industry.”