The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) shrugged off a “tripling” of its licence fees to post a 46 per cent year-over-year comprehensive income increase for the 2014 first quarter, and enjoy “a big boost” in its return on equity.

Anwer Sunderji, the BISX-listed institution’s chief executive, said the more than-$900,000 bottom line increase came despite “a well over” $1 million increase in licence fees as a result of the 2013-2014 Budget.

“There’s quite a substantial change in comprehensive income, and return on equity has jumped to 27 per cent,” he told Tribune Business of the bank’s performance for the three months to end-March 31.

While loan book growth was relatively flat, Mr Sunderji revealed that Fidelity Bank (Bahamas) return on equity had risen by six percentage points year-over-year when compared to the 21 per cent achieved in the 2013 first quarter.

“That’s a big boost,” he told Tribune Business, adding that the bank’s return on assets had also increased on an annualised basis to 2.6 per cent, compared to 2 per cent, year-over-year.

Fidelity Bank (Bahamas) total comprehensive income hit $2.94 million for the three months to end-March 31, compared to $2.012 million for the same period in 2013.

A 19 per cent increase in revenues was able to more than offset a 14 per cent year-over-year jump in expenses, while provisions for loan losses - although down by 7 per cent - still exceeded $1 million.

Mr Sunderji told Tribune Business that the increase in Fidelity Bank (Bahamas) expenses, which he blamed largely on higher bank licence fees, had negatively impacted its efficiency ratio.

The efficiency ratio, which measures the percentage of bank revenues consumed by expenses, rose slightly from 2013 levels to 50 per cent, and the Fidelity chief expressed hope it would be lowered as 2014 progressed.

“There’s upward pressure on expenses because licence fees went up,” Mr Sunderji told Tribune Business,”so that’s going to affect our efficiency. We’ve got new licence fees in this quarter that we did not have in the first quarter in 2013.

“It’s more than several hundred thousand dollars. Our licence fees tripled, and the increase was well over $1 million for us.”

The bulk of the rise stems from the new and increased bank licence fees implemented in the 2013-2014 Budget, which introduced a new 3 per cent ‘Business Licence’ style tax upon the commercial banks in addition to the already-existing asset-based fees.

The commercial banking industry was hit hard by a government desperate for extra revenue wherever it could find it, but despite the impact, Mr Sunderji yesterday expressed sympathy for the Christie administration’s plight.

“I’m sympathetic,” he added. “They need the money, and have got to do what they need to do.”

Emphasising that he was “quite happy” with Fidelity Bank (Bahamas) first quarter performance, Mr Sunderji expressed hope that it would be “reflective of the performance of the bank for the year”.

“We’re in a good place, steady as she goes,” he told Tribune Business, adding that there was little Fidelity, or the wider commercial banking industry, could do about its collective $1.2 billion loan arrears pile.

“Nothing is going to happen there until unemployment comes down and the economy improves,” Mr Sunderji said. “These are factors outside our direct control, and we just have to go with the flow.

“It’s a tough place to be right now. I understand our delinquency ratios far exceed any other jurisdiction in the Caribbean. When the sub-prime crisis hit in the US, everyone was panicking, but our delinquency rate now is greater than for the sub-prime crisis.”

Mr Sunderji added that “everyone is waiting with bated breath” for the $2.6 billion Baha Mar project to go operational and positively impact the economy, and for more certainty around the Government’s fiscal reforms.

Since year-end 2013, Fidelity Bank (Bahamas) saw its assets grew by 5 per cent, and cash holdings rose by 37 per cent to top $82 million.