The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas yesterday said it was “slightly off expectations” of a $3 million half-year profit, largely due to a 189 per cent year-over-year increase in loan loss provisioning.

Conceding that this was something the BISX-listed institution had little control over, Paul McWeeney, its managing director, told Tribune Business that the weak economy and high unemployment had forced the bank to almost abandon its traditional niche - mortgage and commercial/industrial lending.

He disclosed that most of the 6.5 per cent increase in Bank of the Bahamas International’s loan book during the six months to end-December 2012 had resulted from retail/consumer lending, largely in the area of debt consolidation loans.

But, looking beyond the more than-$4 million loan loss provisioning increase for the first half of the bank’s current financial year, Mr McWeeney said almost all other indicators were moving in the right direction.

Expressing optimism that high system liquidity, and repayment of Bank of the Bahamas International’s remaining $10 million in mortgage-backed bonds, would further improve margins and net interest income during its 2014 financial year, Mr McWeeney said Bank of the Bahamas International was continuing to prioritise development of its electronic banking solutions.

An upgraded mobile banking product is set to be launched within another 30-60 days, while the bank also “anticipates growth” in merchant clients of its card processing platform.

Speaking after Bank of the Bahamas International suffered a 66.6 per cent year-over-year comprehensive income decline for the three months to end-December 2012, Mr McWeeney said “everything else is working fine” apart from loan loss provisions and the bottom line.

Net income for the half-year was down 11.8 per cent at $2.731 million, compared to $3.095 million in the year-before period, and Mr McWeeney told Tribune Business: “It was slightly off expectations, not by much.

“We though we’d almost be in the same position as last year - about $3 million - but were short by a couple hundred thousand.”

He added: “Everything else in the bank is working well, except for that which we can’t control the economy. We have no choice. We have to be prudent and protect the balance sheet. I just hope at some point that we can release that [loan loss provisions] back into the profit and loss statement.”

Loan loss provisions rose year-over-year from $2.215 million to $6.393 million, reflecting the weak economy and high unemployment/reduced incomes that have forced many companies and households to default on their loans.

While loans and advances on Bank of the Bahamas International’s balance sheet had risen by over $44 million, to $731.996 million, in the six months to year-end 2012, Mr McWeeney said new credit was “strictly retail”.

He added: “The numbers speak for themselves. It’s really debt consolidation loans.

“We’re not going to focus much on commercial lending for the time being. Those are the ones taking a really heavy beating.

“The priority now is non-lending - merchant acquiring, electronic banking. That’s where the focus is going to be, but we will still have to engage in lending. But it will primarily be retail lending.

“People are in desperate need of debt consolidation to reduce the financial burden, and the demand is very strong for that type of activity, but a lot of customers are stretched beyond our ability to help.”

The recession, and associated loan loss provisions, have spurred Bank of the Bahamas International to diversify away from relying solely on lending and into fee-based income. By 2017, it is hoping its revenues will be split 50/50 between lending and electronic banking.

Mr McWeeney told Tribune Business that Bank of the Bahamas International’s new Automated Teller Machines (ATMs) were getting “positive traction” with customers.

Installed last week at the Village Road branch, they allow customers to transfer funds between accounts and make cash deposits without needing an envelope.

These ATMs are set to be rolled-out to all Bank of the Bahamas International branches by end-April, improving customer convenience and functionality, and also reducing foot traffic in the branches. This, Mr McWeeney said, would free-up staff to focus on sales.

Bank of the Bahamas International was also set to introduce a new mobile banking application, together with a relaunch of its website, within the next 30-60 days.

Mr McWeeney told Tribune Business customers would receive an SMS text message telling them what transactions involved, and details on their account balance, the idea being to create “straight through processing” and let clients control the whole process.

Elsewhere, Mr McWeeney said take-up of Bank of the Bahamas International’s merchant e-commerce platform had been “slow”, largely because companies had yet to configure their own websites for electronic transactions.

“I think there’s significant room in the economy to grow electronic banking. I even see retail lending becoming more electronically-oriented in any event,” he said.

“We feel there’s a real market niche we can develop by new forms of delivering services to customers.”