The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas’ managing director is urging the Central Bank to “level the playing field” by removing the restrictions imposed on its commercial lending in the wake of its near-collapse.

Kenrick Brathwaite told Tribune Business that the BISX-listed institution was “still paying for the sins of those who have gone before us” despite having a lending policy and staffing structure that was “as sound as any other bank” in this nation.

With Bank of The Bahamas restricted from lending to businesses since 2013-2014, he argued that lifting it would enable the institution to be “less aggressive” in seeking out consumer borrowers and other forms of lending and have a more balanced credit portfolio.

“My only hope now is the Central Bank releases that restriction on us for commercial credit, so we can level the playing field. Once they level the playing field we can be less aggressive in consumer lending and more aggressive in commercial lending,” Mr Brathwaite told this newspaper.

“They put that restriction on in 2013-2014. That’s a long time. They haven’t been back to do a full review and comment on whether we have addressed all the areas that were deficient..... All banks are not equal. We’re still paying for the sins of those who have gone before us.”

The Central Bank first has to complete an assessment to determine whether Bank of The Bahamas’ risk controls and other critical procedures are sufficiently robust to give it confidence there will not be a repeat of the huge commercial loan delinquency that almost led to the institution’s collapse.

Some observers will likely argue that the restriction should remain in place indefinitely given the $300m-plus cost imposed on the Bahamian taxpayer from two government bail-outs of Bank of The Bahamas, plus a $40m initial public offering (IPO) that the Government had to pick fully pick up via the Public Treasury and the National Insurance Board (NIB).

Mr Brathwaite said the few commercial borrowers left in Bank of The Bahamas’ lending portfolio had continued to pay their loans, adding: “We’ve been able to squeeze a couple of dollars out of them to keep them in the portfolio. It’s a far cry from where we want to be, but at least it’s allowed us not to drop off the cliff with commercial credit.

“I think the restrictions were warranted based on what the portfolio was doing, and no adherence to risk management, but our structure is now sound. It’s probably more sound than any other bank’s structure. There is more awareness of risk, and a complete separation between risk assessment and the actual lending. I think we should be in a position to lend.”

Mr Brathwaite said Bank of The Bahamas’ staff would compare well to those at other banks, and added that it was impossible to quantify the impact the continued commercial lending restrictions are having on the BISX-listed institution and wider economy.

He spoke after Bank of The Bahamas recorded $0.4m in net income for the three months to-end September 2021, noting that its share price stood at more than $2 at the date of his report - a jump from a low of $1.30 in the previous financial year.

“Total operating income during the first quarter of financial year 2022 showed a net increase of $1.3m (12.1 percent) compared to the first quarter of financial year 2021,” Mr Brathwaite said in his message to shareholders.

“These positive changes are due to higher net interest and non-interest income, mainly as a result of the growth in consumer loans while enhancing other existing revenue streams. The bank’s operating expenses increased by $0.5m (6.36 percent) during the first quarter compared to 2021, mainly due to higher staff costs and IT-related expenses as the bank invested in human resources, system innovation and upgrades to support the bank’s planned growth and strategic initiatives.

“Net credit loss expense of $2.7m was recorded in the current quarter while net credit loss reversals of $0.06m was recorded in the first quarter of 2021’s financial year as provision reversals were more than the credit loss expense for that period.”

Bank of The Bahamas is presently performing better than the likes of Commonwealth Bank, which suffered a $23.9m loss for the nine months to end-September 2021 - a near-$50m turnaround from the prior year’s $25.3m profit.

William Sands, Commonwealth’s executive chairman, in a message to shareholders said: “The primary contributor to the results has been the bank’s loan impairment expense of $74.8m, which when compared to the same period in 2020 reflects an increase of 92 percent.

“While the bank maintains a well-diversified loan portfolio, our customers in good standing that were granted extensions to participate in our loan payment deferral programme have been concentrated in the sectors of the economy most impacted by the pandemic, namely the hotel and leisure sectors.”

He added: “Our regulatory ratios remain very strong. The bank is required to hold a minimum liquidity ratio of 20 percent (the level of liquid assets against possible liquidity risk). As of September 30, 2021, the bank’s liquidity ratio is 59 percent.

“Additionally, regulatory capital adequacy ratios (capital levels to absorb exceptional losses) are set at 17 percent. At over 26 percent, the bank’s capital adequacy ratio is also well in excess of this Central Bank requirement.”