Bank of the Bahamas’ 3,000 minority shareholders have demonstrated their “complete lack of confidence” in the bank after forcing the Government to pick up its “entire” $40 million rights offering.
The troubled BISX-listed institution, unveiling its results for the three months to end-September 2016 yesterday, confirmed what most observers had long suspected - that not a single minority investor subscribed for their rights two months ago.
Yet Renee Davis, Bank of the Bahamas’ acting managing director, touted “a successful rights offering” in her report to shareholders, saying the $40 million equity injection had brought the institution back into compliance with key Central Bank capital ratios.
The unaudited financial statements accompanying Mrs Davis’s statement, though, told a much different story about the outcome of the September 6-12, 2016, rights issue.
“At the end of the offer period, the major shareholder subscribed for the entire offering, and the bank issued a total of $39.517 million in voting shares to its major shareholder at a price of $2.70 per share,” Bank of the Bahamas’ financials said.
The “major shareholder” is the Government, which holds its equity interest in Bank of the Bahamas through a combination of the Treasury and National Insurance Board (NIB).
It is unclear which contributed the rights offering financing, or whether it was a ‘joint effort’, but the Treasury’s cash-strapped position means it is likely to have come from NIB.
The end result, as Bank of the Bahamas’ financials show, is that the minority ownership interest in the institution has been diluted further, with the Government having increased its equity stake from 65 per cent to 79 per cent.
Few observers will have been surprised at the rights offering outcome, with Tribune Business having previously been informed that not one single investor subscribed for their rights via the two major broker/dealers, RoyalFidelity and CFAL.
Darron Cash, the former FNM senator and chairman, and a Bank of the Bahamas shareholder, told Tribune Business that the situation at the bank was “farcical”.
“The shareholder reaction to the rights offering reflects a complete lack of confidence in the Board and lack of trust in the Government,” Mr Cash said.
“It says they have no confidence about the future of the bank, and that ought to be very disconcerting to the Government. Bank of the Bahamas continues to be, by all indications, a bank in decline notwithstanding the efforts by the acting managing director to spin a good story.
“The only thing that will make a significant difference in the bank from a shareholder perspective is a significant policy decision by the Government of the Bahamas that they intend to divest themselves of majority and ownership and control of Bank of the Bahamas.”
The $39.517 million rights issue proceeds effectively represent another Government, taxpayer-funded ‘bail out’ of Bank of the Bahamas, following the $100 million ‘bonds for bad loans’ swap in October 2014.
The $482,667 ‘balance’ was used to pay offering costs, most of which would have gone to the placement agent, Leno Corporate Services.
Meanwhile, Bank of the Bahamas, which has sustained a collective $120 million loss over the past three years, incurred another $3.513 million in ‘red ink’ during the three months to end-September.
This represents a more than 10-fold increase upon the losses suffered during the same period in the prior year, largely due to a 71.7 per cent increase in loan loss provisions.
These rose year-over-year from $2.555 million to $4.387 million, raising questions as to whether the quality of Bank of the Bahamas’ loan book is improving.
“In the short term, the bank’s performance is largely dependent on the performance of our loan portfolio, which we continue to manage closely,” Ms Davis acknowledged.
“Though we have made significant strides to mitigate losses, the bank recognised net loan loss provisions of approximately $4.4 million during the quarter, which is up by $1.8 million from the same quarter last year.”
Mr Cash, meanwhile, said there was room in the commercial banking industry for an institution with the necessary focus and policies that would enable it to compete.
“It does not appear that Bank of the Bahamas has that focus,” he added. “There’s nothing in the acting managing director’s report that inspires confidence.
“The times she talks about focusing attention, it continues to be on internal challenges that they ought to have had a good handle on for the last several years.
“She says they’re managing and monitoring the portfolio, and managing expenses. These are all fine, but it does not give investors confidence that when it comes to the strategic development of the bank that they are doing anything exciting, creative and innovative as to its future.”
Mrs Davis touted Bank of the Bahamas’ “strengthened balance sheet” as at September 30, 2016, and its net equity of $100.229 million.
However, she did not mention that if the $100 million worth of government bonds injected as part of the first ‘bailout’ were removed, the bank would be barely solvent.
And Bank of the Bahamas’ deposits had fallen by more than $119 million during the three months since June 30, 2016, dropping by 15.6 per cent from $764.353 million to $645.234 million.
Its $97.517 million accumulated deficit is now almost twice the ‘special retained earnings’ of $54.622 million that were gained from the October 2014 ‘bailout’, and transfer of $45.2 million in ‘bad loans’ to Bahamas Resolve.
Mr Cash said that although the loan book remained relatively flat, at $507.446 million, Bank of the Bahamas’ interest income and net interest income were down year-over-year - something he described as “not a good sign”.
He added that shareholder confidence was further undermined by the release of the financial 2017 first quarter figures, when the audited statements for the 2016 full year had yet to be produced.
Bank of the Bahamas was supposed to release the year-end figures by October 31, but subsequently obtained an extension to the end of the 2016 calendar year.
“This inability to deliver year-end audited results while delivering unaudited first quarter results underscores the fact something very systemic is wrong,” Mr Cash told Tribune Business.
“There’s no sense trying to spin a positive story about the direction you’re moving in when the foundation, your year-end audited results, are not available to be inspected by the ordinary shareholders.
“One can legitimately say there continues to be a concern about Bank of the Bahamas’ ability to function as a going concern, and there’s a continual diminishing in confidence.”
Mrs Davis, describing the first quarter results, said: “Total operating income decreased from prior year by $1.8 million or 17.3 per cent for the quarter, primarily owing to a decrease in other operating income by $1.4 million for an extraordinary income recorded in prior year.
“The net interest income decreased with a minimal $0.8 million, due to a $0.9 million reduction in interest income for the quarter primarily related to the overall decrease in the loan portfolio, partially offset by a $0.2 million decrease in interest expense.
“The bank continued to manage its resources effectively and efficiently by successfully reducing operating expenses by 5.48 per cent overall.”
Comments
banker 8 years, 1 month ago
More robbery of funds from NIB to save their political cronies. Why isn't McWeeney in jail? By tiefing from NIB, they are insuring that NIB will not be able to meet its obligation in 4 years. The total destruction of the economy is nigh.
Honestman 8 years, 1 month ago
The Pension fund is already $1.6 billion in deficit. I guess this just brings D-Day that bit closer
China PLP should NEVER be allowed to get its grubby hands any any private institution and certainly not a bank!
Economist 8 years, 1 month ago
The Rating Agencies will have a heyday with this.
The final down grade for The Bahamas to Junk Bond status just got closer.
BahamaPundit 8 years, 1 month ago
Shame on the Tribune! This news should have been plastered over the front page in large, bold text, instead of hisdden on the Business section. This news is beyond outrageous! It is a tragedy; a perversion of decency. I can't take much more. I need a self-help group for those living in corrupt countries. I need to vent. It's driving me crazy that I am living in a country like this. So, the PLP MPs and cronies steal BOB's money using fraudulent loans and then use the people's tax money to pay the bank back. What is more, the company that listed the offering was paid 500K for its services, which required little more than meeting with the Government and signing some papers. Shouldn't Leno's fees have been performance based? They weren't able to sell a single share to the public, and yet they received 500K. I actually have to work for my money! To think that my hard earned tax dollars go towards schemes like this, tears me up inside. What did we do to deserve this government? Is there no justice? Is there no way to punish them for their criminality. Will they just walk completely free with pockets stuffed with millions when they leave office? Help!!!
BahamaPundit 8 years, 1 month ago
I'm beginning to see a pattern in the corruption. It sees that it is agreed by Cabinet at the beginning of the term in office that each MP should pocket 5 to 10 million dollars at the end of the 5 year term. They then set up crazy schemes over the years (Bamsi, Baha Mar etc.) to deliver funds to each. The PM and VP would probably take home 20 to 40 million each. The corruption appears to be planned out and organized.
alfalfa 8 years, 1 month ago
The real culprits in Bank of The Bahamas downfall will never face any penalty. The corruption dates back to the time when Euro-Canadian Bank sold out its majority shares to the Government and the then Prime Minister (Papa) brought in John Kenning, and Pauline Allen Dean ( two Barclays Bank rejects) to run BOB. Kenning's claim to fame was that he married into the Kelly money and Allen-Dean was his recruit. Kenning then brought in his protege, Paul McQeeny, to succeed Mrs. Allen-Dean and the rest is history. In essence if a true legitimate audit was done, and the real results revealed, the evidence would point out that corruption was rampant in BOB since the early 90's and that most of their non-performing loans were approved under an FNM government (albeit with PLP management at the helm), who provided no supervision to the activities of the Bank. Kenning has gone to meet his maker, Allen-Dean has retired, and McQueeny just received a fat severance package, and is now going to be the beneficiary of another cushy job in NHI. There will be no penalty for anyone in this fiasco, except the shareholders, and all of the governments paper shuffling and selling of worthless issues will not save them. If all of the local banks redeemed their government issued stock, the country would be bankrupt as the government reserves could not cover redemption. Only an idiot would invest in BOB.
screwedbahamian 8 years, 1 month ago
Any Bahamian contributor to National Insurance looking to be able to retire with any lengthy assistance is living in fantasy land. Just like "Papa" did in 2011,( and screwed me out of my retirement funds) the government will retroactively implement a 55 year qualifying period in order to be eligible to claim retirement, knowing that the fund would have long disappeared.
Tarzan 8 years, 1 month ago
Nothing but a hall of mirrors. What a joke.
Naughtydread 8 years, 1 month ago
Only a government as dumb and inept as the PLP could run a bank that loses millions a year. What a group of idiots. Damn shame, ON BLACK FRIDAY WE MARCH!
John 8 years, 1 month ago
BoB use to be one of the few (and rare) stars in the crown of the Bahamas government. Not only was it performing well as a bank, but it was growing its assets. The minority shareholders grew comfortable with their investment and look forward to the bank paying regular dividends as well as increases in the price of its stock. Then the corrupt, criminal minded, lawless PLP came to power and raped and ravished the bank. Left its kitty torn open, exposed and worthlessly empty. And rather than go fix the damage they done by going after those who got illicit loans from the bank, they continue to do more damage by raping another corporation to replace the stolen funds. What happens when it is your time to retire and you find that NIB is broke because of the actions of a criminal supporting corrupt, reckless and lawless government?
asiseeit 8 years, 1 month ago
Shit Show!
C2B 8 years, 1 month ago
Let me get this straight; Leno Corporate Services just got paid $482,667 for one transaction? Even by Gucci ass private banking standards, this is an absolute rip off. Everyone know these worthless shares would be bought by the Government. Who else would? So to transfer money from one pocket to the other, the Gov just paid half a million. Need we ask who owns Leno Corporate Services? I am pretty sure it isn't Jay Leno.
bogart 8 years, 1 month ago
The Bahamas operates in an International Global Environment with some of the most progressive legislation and some 6,000 Bankers the majority almost I estimate 99.999% of whom are damn hardworking highly trained persons. When situations as the Bank of the Bahamas occurs stated above by credible journalist and a premier daily newspaper, commenters above and public taxpayers or investors money is involved, there must be investigations. Currently the Financial industry is under global pressures from de-risking and correspondent International institutions. If there are wrongdoings in white collared businesses, person(s) must be punished. National Public investigations are needed where millions of dollars are involved. The poor hungry person stealing a can of sardine from the food store gets punished and gets locked up in jail. White collar wrong doings need to be investigated and jail time punishment applied where caught by auditors or investigators just as the person who steals a can of sardine who is listed in the newspapers and locked up in jail. Being on the border of the United States a major financial institution we need to be more serious.
banker 8 years, 1 month ago
Hywel Jones -- everyone knows who did it.
Well_mudda_take_sic 8 years, 1 month ago
Major crimes have been committed in the BoB debacle by the likes of Crooked Christie, Halkitis, Craigg, McWeeny, Demeritte, Rolle and others, not to mention the corrupt politically connected recipients of millions and millions of dollars of unsecured advances from BoB. The recipients of the unsecured advances from BoB had no ability or intention to repay the advances at the time they were made. Mangy Woman Slapper Miller and members of his family owe BoB in excess of $30 million of unsecured advances repayable on demand that have not been repaid. Crooked Christie has prevented BoB from demanding the repayment of these advances so that assets of value held by the likes of Miller and his family members can be seized and sold at auction to help defray the losses being filled in by amounts taken from our National Insurance Fund and VAT dollars.
Well_mudda_take_sic 8 years, 1 month ago
The references below to Sean McWeeney and his brother Paul McWeeney are all we need to know about the McWeeney family. Articles published in The Punch in December 2013 informed the Bahamian public that Bank of The Bahamas (BoB) had made the following loans and advances connected to political friends and cronies of Perry Christie:
• $28 million to Leslie Miller and/or entities owned by him and/or members of his immediate family. • $3.5 million to Obie Wilchcombe & Pleasant Bridgewater re. Universal Distributors Bahamas Ltd., a company apparently now defunct for all intents and purposes. • $8 million to another senior PLP cabinet minister, rumoured to be pudgy with short stubby grubby dirty sticky fingers. • $6.3 million to PLP business woman Patricia Mortimer who purportedly is a best friend and business partner of Lady Poodling and the owner of several shops at Nassau International Airport. • $2.3 million re. GEMS Radio Station which at the time was owned by Debbie Bartlett and Cyprianna McWeeney, the latter being the wife of PLP lawyer Sean McWeeney who is the brother of Paul McWeeney. • $4.5 million to enterprises owned/controlled by Edward Penn. • $4.6 million to Phil Lightbourne re. Phil's Food Services (Phil Lightbourne was the front man and spokesman for Ben Frisch who owned Bahamas Food Services up until the PM allowed the Frisch Family to sell it to Sysco Foods (a large U.S. public company) in April 2013.
Keep in mind that BoB is majority owned and controlled by the Bahamas government; accordingly its overall affairs fall directly within the portfolio of Christie as both PM and Minister of Finance. Most, if not all, of the loans and advances mentioned above had to be fully provided for by BoB, and likely have since been written off by BoB at great cost to hard working honest Bahamian taxpayers. Small wonder that, notwithstanding the mega millions in taxpayers’ funds (including our National Insurance funds) required to bail out BoB, Perry Christie was only too quick to come to the defense of Paul McWeeney (brother of Sean McWeeney) for having so handsomely rewarded the PM's political friends and business cronies! And let's not forget that Crooked Christie arranged for Paul McWeeney to receive a $750,000 termination bonus from BoB when the public's loud voice forced Crooked Christie to fire him from his cushy managing director job at BoB. Unbelieveably, Crooked Christie has granted crooked Paul another cushy job elsewhere in government. Crooked Christie, his side kick Paul and many others responsible instigating, enabling or wrongfully benefitting from BoB's corrupt lending practices have undoubtedly committed serious financial crimes for which they should be made to "do the time"!
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