The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of The Bahamas cannot truly “say we are on the way back” until it generates sustainable loan book growth again despite enjoying a 2022 financial year in which profits more than doubled to hit $11.218m.

Kenrick Brathwaite, the BISX-listed institution’s managing director, told Tribune Business that the 156.7 percent increase in total comprehensive income to end-June 2022 compared to the prior year’s $4.37 was driven by reduced loan loss provisions and non-interest income revenue sources - neither of which can be relied on as consistent profit drivers.

Emphasising that Bank of The Bahamas needs to get back to its core business, which is extending loans to qualifying borrowers, he added that he was optimistic that the Central Bank will “release us” some time in the current 2023 financial year from the bar imposed on writing commercial credit ever since the institution was first rescued in 2014 by a taxpayer-financed bail-out.

“It’s a signal that we’re on the way back,” Mr Brathwaite told this newspaper of profits more than doubling year-over-year. “But if you analyse the income figures you realise that what would sustain us is growth in lending, and you don’t see that.

“We see some growth in consumer lending, but that’s small. Delinquency management and non-interest revenue sources, that’s what’s driving our profits now, and you cannot really rely on that to be sustainable. Once we start growing the loan book, especially the commercial credit, whatever the bottom line figures look like, as long as it comes from growth in that I will be happy.

“Once we see growth in our loan portfolio and loan book, we can say we’re on the way back. Right now we have a challenge with mortgages; we have a challenge with losing our portfolio there,” Mr Brathwaite continued. “We’re losing our portfolio on commercial because we’re not lending, but are developing new revenue streams to offset that.

“When we look at other revenue streams we can say we have put a lot of things in place that have strengthened the bank. Although we’re not lending the way we’d like to, we can say the bank is a lot stronger. I’m optimistic and am going to say that the glass is half full. We’ve done so many things to put us on the right track for future growth and sustainability that I’m comfortable to say we’re on the right track.”

Bank of The Bahamas’ interest income, representing the yield on its loan book, was relatively flat year-over-year although it increased slightly to $40.955m compared to $40.099m. Aided by higher liquidity, both within itself and the wider commercial banking system, which acted to depress deposit rates, the BISX-listed institution saw an increase in net interest income as associated expenses dropped.

Net interest income rose by 7.9 percent to $35.398m, compared to $33.322m in the year to end-June 2021, with a further boost coming from the just over $2m increase in net fee and commission income to $9.477m. Other operating income also rose slightly to $4.221m, with total operating income jumping by 11.2 percent to $49.096m as opposed to the prior year’s $44.167m.

With operating expenses held relatively flat, the remainder of Bank of The Bahamas’ profit increase was driven by the $4.5m reduction in loan loss provision to a net $359,000 as opposed to the prior year’s $4.805m as the commercial banking industry regained prior COVID deferrals.

Overall loan book growth, though, proved elusive as net advances to customers declined year-over-year by more than $20m to $368.589m. Some $52.846m in loan loss provisions were on the books at end-June 2022, with a further $12.476m written-off or charged off during the prior 12 months. More than half the remaining provisions, some $27.266m, were attributable to residential mortgages while another $15.689m related to consumer loans.

Loan loss provisions were equivalent to 14.34 percent of the net loan portfolio at 2022 year-end, and 73.55 percent of total delinquent or non-accrual loans, both representing slight declines on 2021. Yet 19.49 percent or $71.855m of the $369m net loan portfolio, a ratio still high by industry standards, was deemed non-performing by year-end meaning that this is credit 90 days or more past due.

Mr Brathwaite, confirming that the resumption of commercial lending is a key element in plans to revive loan growth, said he was optimistic that the Central Bank will this year release the prohibition that has been in place since this segment nearly caused Bank of The Bahamas’ collapse.

“The Central Bank has just done their review, and I’m optimistic that at some time in this financial year they will say we’re fine to go ahead. They’ve done their review, and there are just a few questions we’re discussing, but I’m optimistic they’re going to go ahead and release us. I’m hoping sooner rather than later,” he told Tribune Business. 

Asked whether shareholders should be concerned about Bank of The Bahamas re-entering a space where it previously ran into trouble, Mr Brathwaite replied: “I think what is essential to point out is all off the issues and pitfalls we had in that period were around us not adhering to risk management protocols, controls and appetite.

“We have restructured the system, restructured our people and introduced new policies to ensure that doesn’t happen. We’ve brought some additional people on board to ensure knowledge gaps have been filled. We’ve done everything asked of us and more.”