The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of The Bahamas’ first dividend payment for 11 years was yesterday hailed as “a miracle” by its long-suffering shareholders after it reported its second consecutive year with profits above $11m.

Neil Strachan, the BISX-listed commercial bank’s managing director, in unveiling its results for the 2023 full-year, disclosed it had paid $400,000 in dividends to ordinary shareholders as of June 15. “On June 15, 2023, after 11 years of dividends hiatus, the Bank paid dividends of $0.4m to its common shareholders,” he wrote.

“The bank’s financial position continues to be strong with total assets of $952m, of which loans and advances net accounted for $372.3m as at June 30, 2023. Total equity closed at $180.9m, with a common equity tier one ratio of 45.2 percent, which is well beyond the Central Bank’s minimum requirement of 18 percent. The bank’s capital and liquidity positions remain robust.”

Given that the Government and National Insurance Board (NIb) combined own 82.6 percent of Bank of The Bahamas, the majority of this dividend payment - some $330,400 - will have gone to them. The balance, some $69,600, will have been shared between the remaining 3,000 minority shareholders who will have received an average $23.2 per person or institution.

Nevertheless Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, who is one of those 3,000, told Tribune Business of the dividend payment: “It’s a miracle that seems to be headed in the right direction. The thing about the bank is that it could throw all those bad loans to Bahamas Resolve and suddenly everything is alright.”

Bank of The Bahamas’ woes, which resulted in two separate government bail-outs that saw a combined $267m in government bonds injected into its balance sheet to replace the toxic commercial credit transferred to Bahamas Resolve, also caused a spectacular dilution of the minority shareholders’ collective interest from 49 percent to the current 17.4 percent. This occurred when the Government shareholders picked up the entirety of a $40m rights offering.

It also resulted in a spectacular destruction of shareholder value, although the share price has somewhat recovered to close at $5.30 last night. While the resumption of dividend payments, albeit small, is certainly noteworthy and Bank of The Bahamas appears to have returned to sustained profitability, elements of its unaudited balance sheet and financials still give rise to concerns.

While its non-performing loans, as a percentage of the net credit portfolio, had reduced from 19.49 percent at end-June 2022 to 17.1 percent some 12 months later, the latter remains substantially higher than the industry’s near-8 percent average - meaning it is more than double that of its peers.

And, while it would still be solvent, Bank of The Bahamas would only have $14m in net equity if that last remaining $167m government bond was not included in its balance sheet. The net loan portfolio, in common with other Bahamian commercial banks, was relatively flat year-over-year having expanded by less than $3.5m. With new lending opportunities hard to come by, Bank of The Bahamas has turned to investments in government securities to drive its interest income.

“The Bank recorded higher total operating income year-to-date,” Mr Strachan wrote, “driven by increased net interest income and non-interest income. This improved performance is attributed to the bank’s investment of its excess liquidity in Treasury bills and government registered stocks, increasing interest income by $2.8m.

“Also contributing to the positive variance was the bank’s growth in its auxiliary revenue streams by $1.1m (10.9 percent) primarily from ATM services, fees and commissions, merchant services and prepaid cards....The bank recorded net income of $11.4m for the year ended June 30, 2023. This fiscal year net income of $11.4m, and $11.8m net income in the prior year, reflects the bank’s continuous achievement of maintaining profitability despite the current global economic challenges.”

Further breaking down Bank of The Bahamas’ performance, Mr Strachan added: “Total operating income was partially offset by higher net impairment losses and operating expenses. Additional impairment losses of $3.3m on the bank’s sovereign and corporate financial assets portfolio was recorded during the year stemming from the October 2022 Bahamas’ credit rating downgrade by Moody’s.

“This was partially offset by lower credit losses of $5.8m during the year compared to $6.4m in the prior year, and credit recoveries averaging $5m year-on-year. Operating expenses increased by $3.9m mostly due to higher employee expenses.

“Additional increases were also recorded in information technology and depreciation expenses as the bank continues to be proactive in enhancing its technology and facilities. A rise in banking licence fees billed by the regulator was recorded and an additional Business Licence fee was levied by the Government to the banking industry.”