The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman has urged the Government to clarify the speculation swirling around Bank of the Bahamas International, expressing fears that the ongoing uncertainty could cause “a run” on the institution by depositors and creditors.

K Peter Turnquest, the FNM MP for east Grand Bahama, also called on the Government to confirm whether the $31.5 million worth of capital injected into the BISX-listed bank last year was “a sound investment”, given that a significant chunk would have come from the National Insurance Board (NIB).

“We don’t want there to be a run on the investment, or run on the bank. That’s not helpful to anyone, and we’re not suggesting that to anybody,” Mr Turnquest told Tribune Business.

“All we’re asking for is clarity, and assurances that the Government and regulators are aware of the situation and working to rectify whatever the situation is.”

And he added: “The main concern is the protection of the investors, as well as the protection of the depositors People have put their life savings into Bank of the Bahamas, and want to have some reassurances in that respect, notwithstanding that there is a Deposit Insurance Corporation in place.”

Bank of the Bahamas International has moved to preempt Mr Turnquest, issuing a lengthy press statement in response to a tabloid newspaper campaign alleging that it has given out multi-million dollar, unsecured sums to politically-connected supporters of the Progressive Liberal Party (PLP) - much of which is in default.

Pointing out that it currently has close to $140 million in equity capital, Bank of the Bahamas International says in press advertisements that its risk weighted capital ratio of 22 per cent is higher than the 14-17 per cent mandated by the Central Bank.

Having addressed its financial soundness, and pointed out that high levels of non-performing loans are an issue impacting all Bahamas-based commercial banks, the BISX-listed institution added that it has set aside $40 million in provisions against bad credit it may be unable to collect.

And Bank of the Bahamas International dismissed allegations of political favouritism in the granting of loans as “simply untrue”, stating that all credit granted to “so-called political persons” occurred in 2008-2010, when their PLP party was not in power.

It added that any credit extended to them was “for bona fide commercial loans”, and described those that had attracted media scrutiny as “a very small fraction” of the total loan portfolio and “not in any way constituting a material risk” to the bank’s soundness.

Whether that will be enough to dampen the ongoing speculation is another matter. Some 43 shareholders are currently queued up to sell Bank of the Bahamas International shares on BISX, although most of these appear to be retail investors with 5,000 shares or less.

Only two ‘sell’ orders - for 100,000 and 43, 9367 shares respectively - appear to have come from institutional investors, indicating that most are content - for the moment - to remain with Bank of the Bahamas International.

And, of course, the bank is 65 per cent majority-owned by the Government through a combination of the National Insurance Board (NIB) and Public Treasury.

The bank’s 4,000 private shareholders were last year diluted by the Government, via the NIB and Treasury, injecting $31.5 million in capital last year - a move that reduced their combined equity stake from around 49 per cent to just 35 per cent.

Focusing on that injection, Mr Turnquest told Tribune Business: “We want to have some indication, and confirmation, from the Government, who is the shareholder - the majority shareholder - with respect to that investment from NIB, which is again the people’s money.

“We want to be assured they are sitting on a sound investment. We need transparency, and all the relevant agencies and departments on top of this, and doing what’s in the best interest of depositors and investors.”

Pointing out that Bank of the Bahamas International’s entire Board of Directors was appointed by the Government, Mr Turnquest added: “To have these kind of issues, one has to be concerned. One has to ask the question about Board governance.”

Mr Turnquest, in his release on the Bank of the Bahamas International situation, noted that the institution had suffered a $3.5 million loss for the year to end-June 2013, and another $1.9 million loss for the quarter to end September.

This, though, underestimates the losses sustained by Bank of the Bahamas International’s shareholders. The figures quoted by Mr Turnquest are the comprehensive losses, but for the same 15-month period, the bank’s ordinary investors suffered losses worth a collective $9.4 million - more than $3.1 million of which would have been attributed to private investors.

Paul McWeeney, Bank of the Bahamas International’s managing director, in a recent interview with Tribune Business said he was “cautiously optimistic” 2014 will herald a turnaround in its financial performance, after a 158 per cent increase in loan loss provisions drove the first quarter loss.

“We do see signs of a turnaround, probably in the third quarter, but we have to go through the process of working these financial transactions out,” Mr McWeeney said.

“We’re cautiously optimistic of a turnaround. The signs point to that, and it’s promising.”