By NEIL HARTNELL
Tribune Business Editor
A BISX-listed bank's loan book has performed "better post-Dorian" than before the storm, a top executive revealed last night, adding that it has set an initial $26m profit target for full-year 2020.
Gowon Bowe, Fidelity Bank (Bahamas) chief financial officer, told Tribune Business that the commercial institution was "confident" it can replace the annual profit income lost from selling its 50 percent stake in former merchant banking affiliate, RoyalFidelity Merchant Bank & Trust.
Disclosing that this would put the bank "on target" for $26m-$26.5m in 2020 annual profits if expectations are met, Mr Bowe added that the bottom line outcome could be even greater depending on how the wider Bahamian economy performs post-Dorian.
He revealed that Fidelity Bank (Bahamas) had taken a relatively firm line with delinquent borrowers impacted by Dorian, using insurance proceeds to settle or pay down non-performing loans that had been past due for a long time.
Mr Bowe also explained that the bank had tailored loan payment "waivers and holidays" to the particular client's circumstances, rather than give an automatic exemption to all borrowers in Abaco and Grand Bahama, as this created an opening for potential abuse.
Reiterating Fidelity Bank (Bahamas) stance that it was not sacrifice profitability for the sake of growth, he added that it would be happy "to observe a slight contraction" in its $432.336m lending portfolio to escape being on "the wrong side" of any economic slowdown.
"Looking forward we know Hurricane Dorian is going to have some impact in the wider economy," Mr Bowe told Tribune Business. "Our underwriting policies to-date have proven to be prudent. The loan portfolio has performed better post-Dorian than pre-Dorian. Some of that is due to insurance proceeds being used to settle long-standing non-performing loans, which is not a popular move."
Mr Bowe, though, said Fidelity Bank (Bahamas) and its fellow commercial banks were justified in taking such action if delinquent borrowers had made no effort to come bank into compliance with their contractual obligations under the loan agreement.
And he added that the BISX-listed bank had done "very little" in terms of extending moratoriums on debt repayment in the Dorian-impacted zone as borrowers "for the most part" have continued to service their loan requirements.
"While some of our competitors gave blanket waivers, we feel that if you don't grant waivers tailored to individual circumstances, people will take advantage of it," Mr Bowe explained.
Looking ahead to Fidelity Bank (Bahamas) 2020 prospects, he said it was presently forecasting a slight rise in profits compared to 2019 that could be raised depending on how well the overall economy performs during Dorian reconstruction activity.
"What we are planning for is to be very diligent in monitoring the economic situation and not becoming too aggressive because of slow loan growth," Mr Bowe told Tribune Business. "Our underwriting policies have served us well to-date, and if it means slower growth so be it.
"What we are looking at firstly is we are confident we will certainly be able to replace the share of profits from RoyalFidelity. What we're really targeting is replacing the profitability that will not be there from RoyalFidelity, so we're effectively putting ourselves on target for $26m-$26.5m profit."
That slightly exceeds the $24.946m that Fidelity Bank (Bahamas) earned from continuing operations for the 12 months to year-end December 2019, which itself was a 23.3 percent on the prior year's $20.24m bottom line.
The $7.561m gain on the sale of its RoyalFidelity stake, and $1.591m share of the merchant bank's profits that were "held" for the now-closed sale, ultimately took 2019 net income to $34.097m thanks to those two one-off gains from the now-closed sale.
Mr Bowe said Fidelity Bank (Bahamas) will be better able to assess its 2020 growth prospects within the next "four to five weeks", when it will have a better handle on loan portfolio growth outlook following both Dorian and the traditional post-Christmas lending lull.
"Our Board of Directors clearly articulated at the annual general meeting that we're not going to grow at the expense of profitability," he told Tribune Business. "We're continuing to make sure our underwriting policies are beneficial, and if there is any slight contraction in the loan book we are prepared to observe that to make sure we're not on the wrong side of any slow growth in the economy."
Mr Bowe added that with Fidelity Bank (Bahamas) risk weighted capital assets in excess of the 20 percent regulatory target, it was possible the bank could return capital to shareholders. However, he described this as unlikely as the loan portfolio was "stable and still growing moderately".
He also branded the $165.446m cash position at year-end 2019 as "misleading" on the basis that $50m of that sum has now been deployed in interest-earning term deposits. Fidelity Bank (Bahamas) is also contributing $15m towards the commercial banking sector's $200m Dorian loan to the Government, while other banks are set to reduce their deposits with it by $20m.
"When you look at the cash position we're actually in the best position than we have been for a long time," Mr Bowe said. He added that 2019 loan book growth would also have looked much better if the commercial bank had not been required to redeem a $10m "reverse purchase agreement" with its former RoyalFidelity affiliate.