The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Finance Corporation of the Bahamas (FINCO) yesterday disclosed that despite non-performing mortgage loans totalling $107 million at end-July, as a percentage of total credit this was almost five percentage points below the industry average.

Tanya McCartney, the BISX-listed lender’s managing director, told Tribune Business in e-mailed replies that its non-performing loan portfolio (credit more than 90 days past due) was “stable at this time”.

She added: “Non-accrual loans at end of the third quarter were $107 million or 11.77 per cent, compared to an industry average of 16.32 per cent at June 30.”

Ms McCartney was speaking after FINCO unveiled an 11.4 per cent increase in net earnings for the three months to end-July 2013, growing these from $6.18 million to $6.884 million year-over-year.

Mortgage book growth and “effective management of non-performing assets” helped drive a 6.8 per cent growth in interest income to $16.973 million, a more than $1 million increase upon the prior year.

This helped to offset a 110 per cent increase in FINCO’s provisions for non-performing loans, which more than doubled to $2.393 million from $1.142 million the year before.

“Our overall business performance results were consistent with expectations,” Ms McCartney said of the third quarter and first nine months of FINCO’s financial year.

“Demand for mortgages remains strong. We continue to encourage persons to take advantage of the pre-qualification process prior to looking for real estate. Once a client is pre-qualified they know the amount they are qualified for and are able to shop with confidence.

“At the moment we have a mortgage campaign to assist persons with closing costs up to $6,000.”

FINCO admitted, though, that demand for new credit remained “sluggish” with loan volumes up just 1.8 per cent over the 2012 year-end at $861.34 million - a rise of just over $16 million.

Ms McCartney told Tribune Business that FINCO had managed to keep its non-interest expenses in check by “leveraging its relationship with RBC Royal Bank, gaining economies of scale through outsourcing many of its back office functions to RBC Royal Bank”.

Interest expenses were also down, year-over-year, as “high levels of liquidity have lead to a softening of interest rates paid on deposits, and consequently the reduction in interest expense”.

Ms McCartney added that the 3 per cent Business Licence tax introduced in the 2013-2014 Budget, and impending arrival of Value-Added Tax (VAT), would increase the bank’s cost base.

“The new taxes will increase our operating cost, and like every other company the bank will have to manage this,” she said simply.

Bolstered by a strong first half, FINCO’s net income for the first nine months is 109 per cent ahead of 2012 comparatives, standing at $23.366 million.

This has been achieved largely through a combination of reduced interest expense, which has boosted net interest margins, and tight controls on staff and administrative expenses.

The big boost, though, has come from an almost-53 per cent fall in loan loss provisions, which more than halved this year to $5.251 million from $11.705 million in 2012.