The time has come to sell Bank of The Bahamas. More specifically, for the majority shareholder, the Government of The Bahamas, and in particular the National Insurance Board, to sell its shares in BOB.
There are a dozen reasons why the government should offload the once highly profitable and now struggling BOB and allow a private sector group to operate the financial institution with an impressive and loyal customer base. It’s not BOB’s performance that dictates what financial analysts largely concur are the right next steps. State-owned banks in general are getting a thumbs down except in developing or newly emerging economies. The literature is rife with academic treatises that reach similar conclusions in favour of privatization for state-owned banks, especially in cases where they compete with commercial banks and lenders. Poorer countries depend on state-owned banks to provide mortgages so the poorest can own a morsel of the pie or state-owned banks shore up state-run economies. Dangers are obvious. Developing or emerging economies can operate state-run banks for political purposes and gain, as if they had their own Monopoly board and could go straight to Boardwalk.
As countries develop and stand on their own two feet, they shed owning what can be better governed and operated by the private sector without political interference.
Still, it is not a slam dunk for BOB. We in The Bahamas cling to our past and that includes our habits of doing business as much as what church or religious place of worship we attend. We think of ourselves as a first world nation, yet we own an airline, a challenged power company, a water and sewerage operator, major hospitals, including facilities for the elderly and emotionally challenged. And BOB was once a source of funding for much of the above, at one point having pumped more than $50 million into government coffers.
So crazy as it sounds, BOB holds a sentimental place in the hearts of many Bahamians who say, ‘This is my bank.” They line up as if there were no such thing as online banking. They deposit their dollars in a savings account. Their children save in a BOB piggy bank.
For many who were or are close to BOB, selling this strange mixture of business and sentimental pride is anything but easy to contemplate. I know. For many years, my public relations firm represented Bank of The Bahamas. Hugh Sands was chairman when we started with BOB at the turn of the century. Pauline Allen-Dean was just handing over the Managing Director’s reins to Paul McWeeney, who steered the bank from one success to another until what we now call the Great Recession of 2008. BOB chalked up firsts leaving the competition in its wake. It was the first to offer trust services to Bahamians in B$, the first to offer a debit card, the first to host a mortgage fair, now considered run-of-the-mill and probably soon to be re-staged as virtual. BOB was the first commercial bank to open a location in South Florida,
First to partner with health care providers here and abroad with a BOB Medline card that provided for immediate entry and, in many cases, VIP treatment. It was also the first all-Bahamian bank to offer private banking to its clients. It introduced the BOB American Express platinum and was the first to recognize the power of athletes like Olympic gold medalists Chris ‘Fireman’ Brown and Tonique Williams-Darling who later worked there in HR.
And, as if a predictor of a digital world, BOB was the first to produce a truly comprehensive website that included check imaging and automated payroll services. Years later, it was the first bank in The Bahamas to offer mobile credit card terminals,
As a client, BOB was exciting. its energy was like ideas on steroids. Exec, managers and support staff wore the BOB uniform with the kind of pride that folks working at Tesla or Google feel. It was cutting edge and it was fun. It was also, for many years, the most profitable commercial bank in The Bahamas, earning hundreds of millions for its owners, the government and the people of The Bahamas who were shareholders.
And then the economy tanked. Real estate soured. Mortgages went unpaid. Several large business loans that started out as good payers got in deeper and deeper and less than a decade after the bank was winning award after international award it became a national liability. In late 2014, the Christie administration bailed it out with a $100m special purpose vehicle, Bahamas Resolve Ltd., to offload commercial debt that, if not collectible in its current stage, could ostensibly be redirected, and a business resurrected. Instead of being the recipient of BOB dividends, government became the life raft that kept BOB afloat and out of insolvency.
Sure, the idea of Bahamas Resolve was interesting. Take failing businesses or troubled debt-laden properties, find investors, sell them off and make them successful. The problem was that turnaround investors did not break down the door and the debt sat, effectively having shifted from one arm to another. Just like 20-lb barbells, it weighed the same whether dragging down the left fist or the right.
Even $100m lighter, BOB was left dangling, its share price dropping to its lowest ever in recent days, far less than half of what it was at its highest with few takers.
No longer the shimmering light setting the pace, BOB is begging to be rescued and the only sensible rescue is a buy-out by a group of Bahamians. The government needs money, not debt, and should not be seen to be in a position of ‘requesting’ loans, nor leaning on a teetering structure for support while it pays a Canadian bank overdraft fees for handling its payroll.
Timing is important in any transaction and given the publication this week of BOB’s financials showing another quarter of stability with $2.3 million in net earnings over the past nine months ending March 31, 2020, the bank is a more attractive offering than it may have been three years ago before it began to turn the corner. Whatever it faces as a result of COVID-19, it does not face alone.
Consider the positives. BOB, with over 40,000 accounts, has a strong customer base that would be likely to stay with the bank under new ownership. Its major shareholder, the National Insurance Board, would reap instant financial renumeration which it can sorely use. Ownership of a bank would deepen and broaden Bahamian participation in the economy and this government or whatever government takes the bold step of selling BOB will be one step closer to the right to call The Bahamas a first world nation.
Sometimes the hardest thing to do is to let go of what you love.