The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas appears to have incurred a further $6.511 million net loss for the first quarter of its 2015 financial year, its top executive describing the past 12 months as “the most challenging for me personally”.

The BISX-listed institution’s 2014 annual report, while providing more details on its $100 million ‘rescue’, shows that its ‘accumulated deficit’ rose from $40.2 million at June 30 to $46.711 million by October 31, 2014.

Increases/declines in accumulated deficits are generated by a company’s profitability. In Bank of the Bahamas’ case, the increased accumulated deficit at end-October 2014 is evidence of a net loss for its equity shareholders in the preceding three months.

Paul McWeeney, Bank of the Bahamas’ managing director, could not be reached for clarification or comment last night on its 2015 first quarter performance.

While the further net loss may add to unease among some shareholders and capital markets participants, following the almost-$69 million in ‘red ink’ incurred by ordinary investors in the 2014 financial year, Mr McWeeney previously told Tribune Business that Bank of the Bahamas would be through the worst come the 2015 first quarter.

The October 31 balance sheet shows how the $100 million ‘bad loans for bonds’ swap has boosted Bank of the Bahamas, enabling it to ‘write back in’ some $54.623 million worth of loan loss provisions and accrued interest income.

These ‘special retained earnings’ effectively wipe out the $46.711 accumulated deficit, boosting net shareholder equity from $69.737 million at end-June 2014 to $117.963 million at October 31, 2014.

Bank of the Bahamas said this had brought its total equity “back in line with historical standards”, while also returning three key capital ratios to compliance with Central Bank of the Bahamas’ requirements.

The bank’s common equity tier 1 ratio, which must be at least 8.5 per cent, rose from 5.2 per cent at end-June to 14.35 per cent at October 31, 2014.

Total Tier 1 Capital, which must be at least 11.7 per cent, rebounded from 5.04 per cent at end-June to 14.16 per cent come October, while Total Capital increased from 11.13 per cent to 21.4 per cent of risk-weighted assets - above the 17 per cent minimum.

But total tier one capital, which must be a minimum 75 per cent of total capital, remained just outside this range, though having improved over the three months from 45.29 per cent to 66.15 per cent.

The October 31 balance sheet also shows how the ‘hole’ created by the transfer of $100 million in ‘bad’ loans has been plugged by the unsecured, promissory notes of equal amount that are underwritten by a government ‘comfort letter’.

Bank of the Bahamas also appears to have expanded its loan book while the ‘bail-out’ was being concluded. Given that it had some $660.551 million worth of outstanding loans at end-June, the $100 million transfer should have dropped this to around $560 million.

Yet Bank of the Bahamas’ outstanding credit portfolio at October 31 was $608.36 million, suggesting that it has still been able to lend despite its much-needed rescue.

The bank also saw a near-quadrupling of its cash and assets in its account with the Central Bank, which jumped from $25.712 million at end-June to $93.239 million just three months later.

Mr McWeeney and Bank of the Bahamas’ chairman, former auditor-general, Richard Demeritte, were also at pains to imply that confidence in the institution was being restored, with 2,500 new depositors attracted during the 2015 first quarter.

“We are confident that our customer and deposit base will continue to grow and expand,” Mr McWeeney wrote.

“Indeed we have welcomed over 2,500 new customers in recent months, a fact that has given us added cause for optimism that we will return to profitability in the not too distant future.”

Bank of the Bahamas total deposits grew by 10.9 per cent quarter-over-quarter, from $679.231 million to $753.464 million at October 31.

While this suggests the previous year’s trends, where private depositors pulled more than $100 million from the bank, may have been reversed, it is unclear whether the majority of this increase has come from government-related agencies.

“Having spent almost a quarter century with the bank, and almost 14 of those years as managing director, I can truly say that the last 12 months have been the most challenging for me personally and for the rest of our management team,” Mr McWeeney wrote.

“Although the bank still has serious work to do, I can cautiously say that I can now see the light at the end of the tunnel........ Although we have had a challenging journey over the last 18 months, I have never doubted the viability and long-term sustainability of the bank.”

Apart from the shift away from commercial lending towards retail and consumer banking, Mr McWeeney reiterated that Bank of the Bahamas would focus on electronic banking and fee-based income to offset the reduction in revenues from its loan book.

Mr Demeritte added: “Working to address the challenges with which we were confronted, our Board and senior management also oversaw improvements to the bank’s financial, governance and senior management structure prior to the restructuring of our loan portfolio.

“It has been an intricate and demanding process, through which we have been led by our managing director.

“Though not publicised, the managing director also led a substantial reorganisation of the senior management team, of back office operations, as well as an evaluation of the bank’s information technology infrastructure. Directors, in turn, oversaw governance changes at the Board level.”