The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A 141 percent increase in loan loss provisions due to Hurricane Dorian and new accounting treatments have been blamed for cutting Bank of The Bahamas’ first-half profits by more than $1m.

The BISX-listed institution, unveiling its results for the six-months to year-end 2019, revealed that total comprehensive income fell by 31 percent to $2.449m, compared to $3.553m the prior year, as the provisioning increase wiped out an improved showing across all revenue and operating income streams.

Kenrick Braithwaite, Bank of The Bahamas’ managing director, sought to send an upbeat message to shareholders by pointing to the operating income increases of 19.37 percent and 13.8 percent, respectively.

Total operating income rose by $1.9m to $11.55m for the three months to end-December 31, 2019, and also grew by $2.7m for the half-year to finish the period at $22.166m as opposed to $19.478m.

Mr Braithwaite added that this improvement was “explained largely by the $1m increase in net interest income and $0.9m increase in net non-interest income for the quarter, and $2m and $0.8m increases in net interest income and non-interest income year to date, respectively”.

“The positive variance in net interest income year-to-date was due to an increase in interest revenue by $1.3m primarily from consumer loans’ interest income as a result of the bank’s consumer loans campaign, and lower interest expense by $0.7m due to certain interest rates and deposit base reduction,” he continued.

“The bank’s net non-interest income also increased year-to-date primarily due to the gain on the sale of the bank’s trust business and higher fees and commission income.”

Mr Braithwaite said increased hires produced an operating expense rise of $0.6m, or 8.39 percent, for the 2020 second quarter, and $1.3m or 9.81 percent for the first half, as part of an “initiative to support the planned growth”.

However, Bank of The Bahamas’ improved top-line showing was undermined by the more than doubling of first half loan loss provisions, which surged from $2.111m in the prior year to $5.078m this time.

“Net credit loss expense for the quarter ended December 31, 2019, increased by $1.5m or 143.89 percent compared to the quarter ended December 31, 2018, and $3m or a 140.51 percent increase for the six months period ended December 31, 2019, versus December 31, 2018, due to the provision impact of the last hurricane and the IFRS 9 provision impact related to the overall portfolio growth,” Mr Braithwaite conceded.

Still, he emphasised that Bank of The Bahamas was maintaining the consistent profitability it has achieved since 2018 following the second of two taxpayer-financed bail-outs and a rights issue that pumped more than $300m into the troubled institution to save it from collapse and protect the wider Bahamian financial system.

“Returning Bank of The Bahamas to a level of profitability and implementing effective overall management were our initial steps to achieving long-term sustainable growth,” Mr Braithwaite said. “We have made considerable strides to achieving all of our strategic goals.

“However, there is much more that is required to ensure that this trend of profitability and growth will be maintained for many years to come. Our quest has not been an easy one” given the five consecutive years of losses incurred prior to 2018.

And while Bank of the Bahamas’ results and balance sheet look in better health than when it was at near-insolvency, problem signs remain not too far from the surface. In particular, non-performing loans still remain at an elevated 24.23 percent of the $363.24m net loan book, indicating close to $90m remains 90 days or more past due.

This indicates that Bank of The Bahamas has yet more work to do to straighten out its residential mortgage portfolio, with the toxic credit transferred to the Bahamas Resolve bail-out vehicle largely featuring bad commercial loans. Loan loss provisions of more than $61m are equivalent to 17.37 percent of the net loan portfolio.

As for the balance sheet, Bank of The Bahamas’ total liabilities would still exceed its assets without the continued injection of some $167.627m worth of government bonds via the second bail-out. The $134.597m accumulated deficit shows how far the bank still has to travel to fully recover.