The Tribune

• BISX-listed bank ‘has some work to do’ in second half

• Merchant services ‘catch up’ to aid full-year profit goal

• Credit bureau’s launch catches out some borrowers

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) is “still on track” to deliver $25m in full-year profits despite falling $500,000 behind pace at the 2022 half-way mark, its top executive said yesterday, as he looks to merchant services to close the gap.

Gowon Bowe, the BISX-listed institution’s chief executive, told Tribune Business that “internally we recognise there is some work to do” after net income for the six months to end-June was essentially flat with last year at $10.367m compared to $10.332m.

Besides the traditional increase in loan activity during the year’s second half, driven by Back to School and Christmas holiday spending, he disclosed that the focus on providing merchants with electronic payment, card and commerce solutions was a key area “where we see catch up in terms of where we are”.

Mr Bowe told this newspaper that Fidelity’s investment was already “starting to bear fruit”, with the number of entrepreneurs, vendors and merchants onboarded “exceeding expectations”. Declining to give an actual number, he asserted that this success was evident through the near-$1.2m year-over-year increase in commission and fee income for the 2022 first half, which had risen by 70.7 percent to $2.839m from $1.664m.

The BISX-listed commercial bank also incurred expenses during the 2022 first half that will not be repeated in the latter six months, Mr Bowe said, adding that when these were stripped out the institution’s net profit for the mid-way mark would have been around $12m - not far off 50 percent of the $25m target.

“In terms of it’s overall performance, it was quite as strong as the first quarter but, ultimately, it’s not behind where we had expected,” he told Tribune Business. “It was roughly in line with expectations. It’s $500,000 behind where we would have liked to have been. 

“We knew we would not be spot on at the mid-point, but when you strip out all the [non-recurring expense] elements we’re not too far off the $12m mark, which is what we had intended.... In the absence of economic shocks, and with inflation factored in, we’re confident we are still on track to meet that $25m.”

Mr Bowe said the non-recurring expenses taken in the year’s first half involved non-material amounts in the hundreds of thousands of dollars range, such as $500,000-$600,000, and included items such as performance incentive payments to staff that had carried over from 2021 due to a change in how this will now be calculated.

Profits for the three months to end-June 2022 were lower quarter-over-quarter at $4.654m, as opposed to the $5.7m-plus generated during the year’s first quarter. “Internally we recognise we have some work to do, but we’ve not dropped in terms of what our expectations are,” the Fidelity chief added. “When you strip out the elements that are not recurring we’re just shy of a mid-year performance of $12.5m. It’s probably equivalent to $12m, so we have some work to do in the second half.

“We’ve spent the first half of the year investing, where we moved into merchant services, and we will now start to see the fruits of that labour as people use the terminals. We’ve onboarded a significant number of merchants, starting out with those that need it, did not have merchant services and were missing out on significant numbers because they could not swipe cards.”

Taxi drivers and straw vendors were among the entrepreneurs set to benefit from the portable swipe devices provided by Fidelity Bank (Bahamas), which is also rolling out its Click and Pay product among merchants with an established physical presence. This enables small businesses and others to send invoices electronically and receive debit and credit card payments the same way, thus providing them with an e-commerce platform.

“It has certainly exceeded our expectations and it’s continuing,” Mr Bowe told Tribune Business. “It’s starting to build, so if we keep the momentum that’s where we see catch up in terms of where we are. We’ll start to see it in the fees and commissions. We’re not looking to replace interest income; we’re seeking to add services and derive fees from alternative services.

“We’re looking to expand the base with expanded services. We’re $1.2m ahead of last year for the first half on fee and commission income. That gives you an indication of how successful it has been. A pleasant surprise has been the Family Islands where, despite the protests we see from time to time there are far more businesses willing to move to digital and saying that if they have the terminal it opens up far more opportunities for them.”

The Bahamas’ first-ever credit bureau has begun issuing reports to lenders on borrowers’ complete credit histories and loan exposures, and Mr Bowe disclosed: “The credit bureau is having a greater impact because it is enabling us to see the extent of exposure of some of our consumers. 

“There have been some interesting response: ‘I don’t remember that one’ or ‘I meant to include that’.” Describing the process as “a learning exercise”, he added that while it would not chill the banking sector’s willingness to lend it is “illuminating some of the risks we have to confront”.

With the economy continuing to re-open and recover post-COVID, Mr Bowe said Fidelity Bank (Bahamas) was returning to hotel industry workers, those in ancillary businesses such as restaurants and other reviving sectors in its search for new lending opportunities.

The bank’s loan book shrunk by more than $11m to just over $390m in the 2022 first half, and he conceded: “It’s still quite challenging in terms of new credit. What we are seeing in large part is recycled credit with existing customers. It’s not the expanded growth; it’s really tempered and you have others paying off.

“The mortgage portfolio is not growing as it is in a run-off state. We get around $4m-$5m repayments on mortgages that are not being replaced on that side. On personal loans, we’re not finding an abundance of new customers. It’s typically existing customers making payments and seeking to extend credit on existing loans. That’s why we’re moving back to the private sector” and seeking opportunities from qualified borrowers there.

Mr Bowe said borrowers whose loans went into arrears, or default, because of COVID and the associated clampdown on commercial activity would not be moved back into the “performing” category until they had made six months of consistent payments to ensure it is not “a blip in terms of employment”.