The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Free National Movement’s (FNM) chairman yesterday called into question the Government’s financial priorities in light of its $31.5 million capital injection into Bank of the Bahamas International (BOB), telling Tribune Business: “There appears to be a bigger story than meets the eye”.

Commenting on recent statements in Tribune Business by Bank of the Bahamas International’s managing director, Paul McWeeney, who said it was effectively looking for its majority Government shareholder to underwrite its branch expansion to Bimini and Abaco, Darron Cash said there was always a “major concern” with the Government’s level of involvement in the bank’s operations.

Mr McWeeney told Tribune Business that the bank was hoping the Government could “offset” some of the losses it was likely to incur in the initial Family Island expansion stages by putting business its way.

Prime Minister Perry Christie went public recently in urging Bank of the Bahamas International to expand its branch network to the two islands and serve the population increase expected to result from multi-million dollar tourism investments.

The Government (via the Treasury and National Insurance Board) has increased its majority stake in Bank of the Bahamas International from 51 per cent to 65 per cent, via the injection of $31.5 million in new capital into the BISX-listed bank. This has diluted other shareholders.
 “The Managing Director’s statement that he was looking for the Government of the Bahamas to subsidise part or all of BOB’s initial Bimini operations does not square with his other statement that the groundwork for establishing Bimini operations had already been done before the Prime Minister gave the Bank its marching orders,” Mr Cash said.

“One would expect that if the groundwork was already done then the bank would have already determined that there was a viable business case for the expansion. Consequently, there would be no need for them to go to the Government with that in hand asking for subsidies.”

Mr Cash added: “Given the bank’s other release, I have taken note of the discussion of capital injections by the Government and the other share transactions.

“The reported capital injection of $31.5 million by the Government raises a few questions. Importantly, on the issue of government resources, one wonders why at a time when government cannot pay lunch vendors who feed needy students in public schools, and when the Treasury cannot make basic payments to prison officers, why was BOB the Government’s financial priority at this time? There appears to be a bigger story than meets the eye.”

Bank of the Bahamas International revealed on Monday that last month’s 2.2 percentage point increase in the unemployment rate caused a $700,000 one-time spike in its credit loss provisions, as it warned shareholders to brace for more potential losses.

Addressing investors after they suffered a collective $6.217 million net loss on their equity investments in the BISX-listed bank, Paul McWeeney, its managing director, effectively delivered a profits warning and said: “By no means are we out of the woods.”

Mr Cash told Tribune Business: “As noted in the earlier release, there is always a major concern with this government’s level of involvement in the operational affairs of BOB and similar entities.

“There is always an itch for a Christie-led government to use entities like BOB - notwithstanding its status as a publicly traded company - as tools of public policy to achieve success in programmes like mortgage relief. One has to wonder how much of that is at stake here.”