BOB targeting “real growth, not loan loss management”

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By NEIL HARTNELL

Editor-in-chief of the Tribune

[email protected]

The Bank of The Bahamas said yesterday it was looking to generate sustained profitability “from real growth rather than managing delinquency reserves” after enjoying a positive net income of $ 14 million.

Kenrick Brathwaite, chief executive of the BISX-listed institution, told Tribune Business he did not forecast $ 6.419 million in net profit for the fiscal year ended June 2021 because he did not forecast to be able to resume “aggressive” provisioning for loan losses taken. the previous year.

The performance of the BISX-listed institution for the 12-month period was due almost entirely to the reduction in loan loss provisions, which fell 51.4% year-on-year from $ 15.348 million to $ 7.456 million. And it received an extra boost by being able to write off some $ 5.341 million in past debt write-downs after being forced to set aside an additional $ 6.316 million in fiscal 2020.

As a result, Bank of The Bahamas went from a net loss of $ 7.303 million the previous year to a net profit of $ 6.419. “Net credit loss charges of $ 7.5 million have been recorded since the start of the year, compared to $ 15.3 million in the same period last year, a positive variance of 51 %, “added Mr. Brathwaite in his message to shareholders.

“Reversals of impairment provisions of $ 5.3 million were also recorded during the current year, against impairment losses of $ 6.3 million the previous year, as loss estimates of expected credit and assumptions used on its sovereign and corporate exposures during the previous year did not materialize. “

The Managing Director of the Bank of The Bahamas, in a subsequent interview with Tribune Business, added, “We’ve had a few adjustments, mostly on the supply side, but we’ve also seen some growth. I think we were aggressive in forecasting these loan losses last year. We didn’t know what it would look like this year.

“I believe that even in the hotel industry, employment was a little better than we thought. Many more people went to work. But we are still working towards sustained profitability through real growth as opposed to managing bad debts. “

Mr Brathwaite said the Bank of The Bahamas’ fiscal year until the end of June 2021 was to be “halved” because it had “two parts”. While the performance of the institution on ordinary operations was “quite close to what we had anticipated, we had not really anticipated this kind of adjustment in provisions, so we did not anticipate profitability greater than 6 M $ ”.

The BISX-listed bank, he added, was still in the “foundation building phase” according to its three-year strategic plan. This step should be taken by the end of the current fiscal year, at the end of June 2022, Mr. Brathwaite, who recognized that the return to sustained profitability through organic growth would be akin to a marathon given the close to 138 million of its balance sheet at the start of the period.

He compared the progress of the Bank of The Bahamas to “slow cooker versus microwave”, but said: “We want to introduce debit cards, expand the credit card wallet, focus a lot. on market services, consumer loans … We want the Central Bank to lift restrictions on our commercial loans.

“How it all comes together, we would be in a position where we can achieve sustained profitability… The government and the high-end corporate sector.

“There are always vehicle loans, and we still do lot loans. We have had some success in this area after we introduced the Mortgage Department last year. This has helped stem the loss of mortgages, so we are winning in this area.

Bank of The Bahamas increased its consumer loan portfolio by nearly $ 23 million year over year in the 12 months ended June 2021, bringing it to $ 123.732 million. Overall, however, loans unrecorded 90 days or more past due represented 18.95% or $ 74.16 million of its total net loan portfolio of $ 391 million at year-end.

That figure was down from 22.65% at the end of June 2020, while the provisions for loss as a percentage of net lending of $ 391 million also fell from 18.43% to 15.67%. But, while the Bank of The Bahamas balance sheet shows net equity of $ 161 million, this is only made possible by the “promissory note” or bond of $ 168.718 million injected into the balance sheet. the bank as part of its 2017 taxpayer-funded bailout.

Without this bond, which is due to be repaid and paid to the Bank of The Bahamas by the government in August 2022, the BISX-listed institution would still suffer from a solvency deficit with liabilities exceeding assets.

Mr Brathwaite, in his message to shareholders, said: “The experience gained in responding to the pandemic will undoubtedly be a catalyst for further change, with an opportunity for a more streamlined and efficient banking model, evolving towards a more streamlined and efficient banking model. position of sustainable profitability and growth. …

“With the shift to a predominantly virtual environment and an adjusted operating model, banking has gone smoothly, technology has been deployed, and unprecedented agility and resilience has been demonstrated. As a result, customers have been served, employees have been productive, and regulators have been reassured.

“However, while we recognize the challenges that persist before the positive impact of the current vaccination takes hold and the economy fully rebounds, we are optimistic for the future.”


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