The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

BANKS will continue to fuel the Bahamian consumer borrowing binge “for the foreseeable future” although one BISX-listed institution is reassuring shareholders it will not pursue “bragging rights” in this segment at the expense of prudent lending and risk management.

Greg Bethel, Fidelity Bank (Bahamas) president, writing in the institution’s just-released 2025 annual report ahead of tonight’s shareholder meeting, said the general absence of a savings culture with Bahamians “borrowing as much as they can as often as they can” will continue to dictate that commercial banks focus on the personal loan segment.

Net growth in the Bahamian commercial banking industry’s outstanding consumer loan portfolio, representing credit extended for auto purchases, vacations and other consumer goods, as well as debt consolidation, grew at a rate more than triple that for mortgages in 2025 - expanding by $119.5m compared to $34.4m. Total outstanding consumer loans at year-end 2025 stood at $2.207bn, just shy of $2.553bn for mortgages, with the former having rebounded quicker after COVID.

“Due to a persistent personal financial ‘culture’ whereby individuals borrow as much as they can as often as they can - or must - with no commitment to savings, the provision of credit products for individuals has been, and will continue to be, the primary product offering of the bank for the foreseeable future,” Mr Bethel conceded to shareholders.

“Nevertheless, the competition in this product segment is intense, impacting the market share of the bank as other financial institutions take on greater risk, which the bank is not prepared to take. The bank will not abandon its responsible lending philosophy and guidelines for short-term gain, bragging rights or to maintain market share by lending larger amounts, for longer terms, at lower interest rates, leaving customers with lower disposable income to support their families.”

Pledging that Fidelity Bank (Bahamas) will maintain a responsible approach to consumer lending, Mr Bethel added that it will seek to capitalise on digital and electronic payments by consumers - via debit, credit or pre-paid cards - to small and medium-sized businesses. And it also sees commercial loans to these corporate customers as “a significant growth area” that can offset any loan portfolio contraction elsewhere due to reluctance to take unnecessary risks on unqualified borrowers.

“These businesses are consumers of electronic payment services, payment products, card settlement services and card products, which are secondary offerings of the bank with growing importance to its revenue. This was evident during 2025, as seen in fees and commission income,” Mr Bethel explained.

“Making commercial loans available to small and medium-sized businesses, which utilise the electronic payment services, is expected to be a significant area of growth for the bank and is intended to offset the declining personal loan portfolio.

“Few consumers have a pattern of saving and investing to fund medium and long-term goals, which requires the bank to offer financial coaching for individuals and financial planning/consulting for business owners, including guidance on segregating personal and business finances; using financial statements and cash flow analysis; submissions of tax returns; and tax planning.”

Outlining Fidelity Bank (Bahamas) primary strategic goals for the next two years through 2027, Mr Bethel said that - besides retaining existing customers with value and services - it is also aiming to snatch customers from other institutions and “attract business, corporate, personal and private banking customers from the private sector seeking a superior banking relationship with commercially-attractive product bundling”.

Besides introducing new online and mobile banking applications, Mr Bethel said the BISX-listed institution will “continue to aggressively pursue opportunities for recoveries or restructuring of delinquent credit facilities, giving the underlying customers the opportunity to rehabilitate their credit reports issued by

the credit bureau”.

And, “when appropriate, terms and conditions will be adjusted to attract or retain personal loan customers, except where such customers are ‘maxed out’, near retirement or challenged with inadequate disposable income to meet family commitments”.

Fidelity Bank (Bahamas), in analysing its full-year 2025 results, said the credit bureau’s arrival - which has enabled banks to better detect risk and price loans because it supplies a borrower’s prior history, including current and prior defaults and delinquencies - is driving more Bahamians to regularise their financial affairs and resolve non-repayment of credit.

“More customers with defaulted loans are presenting themselves to the bank to address the hurdles caused by their defaulted loans resulting in less than favourable credit reports from the credit bureau, which are now being used by all commercial banks. As households seek to restore their finances and creditworthiness, there is an opportunity for continued recoveries of loans and advances to customers previously written-off,” it added.

“Interest income on loans and advances to customers decreased over the prior year as a result of the contraction in the primary interest earning assets of the bank, loans and advances to customers, notwithstanding growth in certain portfolios such as commercial loans.” However, Fidelity Bank (Bahamas) suggested that its tactic of targeting, and recovering, delinquent loans previously written-off is starting to bear fruit.

“The lessons learnt in relation to rehabilitating loans and advances to customers in default during fiscal years 2021 and 2022, following furloughs and unemployment associated with the global pandemic, transferred to a sustained strategy of aggressively pursuing loans and advances to customers previously written off,” it added.

“The execution of this strategy during the prior year experienced the expected challenges associated with any new strategy, but the consistency in executing the strategy in the current year expanded on the successes of the prior year and led to a net decrease in the expense for provision for loan losses of $59,135 [compared to $2.893m in 2024].

“The expense for provision for loan losses for the active loan portfolio was consistent with that observed in the two years immediately prior to the global pandemic. However, recoveries and restructurings of loans and advances to customers written-off in prior years, excluding those written-off during the peak of the global pandemic and already recovered, led to net decreases in the expense for provision for loan losses in the prior and current year.

“The Bank benefited from the discipline of remaining consistent with its underwriting practices in the face of the contraction in the loan portfolio, particularly considering the natural consequent anxiety and emotional inclination to assume greater risk to arrest this contraction, as poor quality credit has been limited and in turn loan loss ratios have been contained.”

As for current delinquencies and loan arrears, Fidelity Bank (Bahamas) said: “Non-performing loans observed decreases during the current year and, as of December 31, 2025, totalled $13.505m” compared to $13.633m at end-2024. This was equivalent to 3.75 percent of total loans and advances to customers, excluding accrued interest, and little changed from 2024’s 3.71 percent ratio.

“Non-performing mortgage loans totalled $8.809m compared to $9.609m at year-end 2024,b representing 65.23 percent of total non-performing loans and advances to customers,” the bank added. “As of December 31, 2025, the provision for loan losses totalled $15.191m, which represented 4.22 percent of total loans and advances to customers, excluding accrued interest.

“The persistent economic uncertainty that directly impacts the ability of borrowers to meet loan payment obligations correlates with the increase in provision for loan losses despite the contraction in the performing loans and advances to customers, as the model for calculation for expected credit losses was recalibrated during the year resulting in a provision for loan losses applicable to performing loans and advances to customers of $7.738m.

“Similarly, non-performing loans and advances to customers remained consistent with the prior year, and the provision for loan losses applicable to non-performing loans and advances to customers modestly increased to $7.453m” from $6.814m in 2024. The former figure represented 55.19 percent of total non-performing loans and advances to customers.