The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Deputy Prime Minister yesterday pledged that “a comprehensive plan” to rescue Bank of the Bahamas will be unveiled by its August 2 shareholders’ meeting, the institution having “abandoned” its legal battle with the Central Bank.

K P Turnquest told Tribune Business that the stricken BISX-listed bank had also become “fully compliant” with the regulator’s capital requirements, an assertion that might surprise its dividend-starved preference shareholders.

Placing Bank of the Bahamas among “the top considerations” for the Minnis administration, Mr Turnquest emphasised that there would be “no political interference” in Board and management decision-making under this government.

The Deputy Prime Minister suggested that this had contributed significantly to the bank’s nine-figure losses, and the potential systemic risk it continues to pose for the banking system and wider economy.

He promised that the new government’s turnaround plan, for which he revealed no details, would restore shareholder and depositor confidence by returning Bank of the Bahamas to “sustainable profitability”.

“We are obviously intent on fully supporting the bank, and we’re going through a structuring exercise at the moment to determine how that will look,” Mr Turnquest told Tribune Business.

“That restructuring plan will be rolled out at the AGM (annual general meeting) or before. We are putting the final touches to that, and the final plan will be unveiled at or before the AGM.”

Mr Turnquest, who has ministerial responsibility for Bank of the Bahamas as minister of finance, declined to provide specifics on the Government’s restructuring proposals other than to describe it as “a comprehensive plan”.

He did, though, confirm that the BISX-listed institution, which is 82.58 per cent majority owned by the Government, had ceased its resistance to the Central Bank’s regulatory demands.

“That has been abandoned,” Mr Turnquest said of the Supreme Court action. “We have been able to satisfy ourselves there’s no need carry forward with that action.”

Tribune Business revealed earlier this year how Bank of the Bahamas had sought judicial protection from the Central Bank’s impositions prior to the May 10 general election.

It had asked for a court-imposed ‘stay’ of the regulator’s demands for an “immediate” $50 million increase in loan loss provisions, and the initiation of legal action against “politically exposed” bad borrowers.

The Central Bank had also wanted Bank of the Bahamas to “convert the first $10 million tranche of contingent convertible bonds to common equity Tier 1 capital, and all future capital injections must be paid in cash and constitute common equity Tier 1 capital” - a requirement the bank has since complied with.

Despite the ongoing concerns over its solvency and compliance with the Central Bank’s capital requirements, Mr Turnquest yesterday said Bank of the Bahamas now met its regulator’s stipulations.

“We’ve already dealt with our capital ratio requirements,” he told Tribune Business. “The bank is fully compliant at this point. That particular issue is not a concern. We’re within the requirements of the Central Bank in terms of capital.”

The Deputy Prime Minister’s assertion may surprise some of Bank of the Bahamas’ preference shareholders, who were last week informed that a second consecutive bi-annual dividend payment due to them will not be forthcoming.

The BISX-institution informed Class A, B, D and E preference shareholders that it was “not allowed” to pay a dividend, which many interpreted as a sign that it had yet to meet the Central Bank’s capital ratio and solvency standards.

Mr Turnquest’s comments, though, bring this belief into question, although Bank of the Bahamas’ ‘accumulated deficit’ and consistent losses may be other factors acting as a dividend ‘bar’.

The Deputy Prime Minister, meanwhile, promised that the Minnis administration would follow through with efforts begun under its predecessor to have independent directors appointed to Bank of the Bahamas’ Board.

“There was a nomination that was made, and we will carry through with that,” he said. “Two names were suggested, and we’re speaking to them. We’ve selected one.”

That individual, who Mr Turnquest declined to identify, will be nominated to the Board - and ratified - at the August 2 AGM. They will represent the interests of the 17.42 per cent minority investors, making a break from Bank of the Bahamas’ Board that have been 100 per cent selected by the Government.

Mr Turnquest said the Government would not interfere with Board decision-making, adding that management changes would be left to the directors’ determination.

“We have appointed a very competent Board of professional persons who have experience in the industry, and relevant experience in other areas, which brings depth and expertise to the Board,” he told Tribune Business.

“They will make decisions as to the composition of management. We do not intend to interfere with the bank at the political level. That’s what got us into the situation we’re in. We’ll leave it to the professionals of the Board to make the appropriate decisions, and we’ll trust their judgment.”

Mr Turnquest was responding after Darron Cash, the former chairman, suggested that changes at management level - as well as a new Board - were required to properly turn Bank of the Bahamas around.

Shareholders are also likely to query yesterday’s announcement that Bank of the Bahamas plans to establish a physical presence on Bimini to replace Royal Bank of Canada (RBC), given that $130 million-plus losses over the past four years suggest consolidation - rather than expansion - is required.

The bank’s latest financials showed that its total comprehensive loss for the nine months to end-March 2017 jumped by 69 per cent year-over-year, growing from $6.707 million to $10.793 million.

A staggering 46.07 per cent, or $234.886 million out of a total $510 million loan portfolio, was non-performing at end-June 2016.

Pledging to restore confidence in the bank, Mr Turnquest said: “It’s certainly up in the top considerations for the Government.

“We recognise that many Bahamians have their investments in Bank of the Bahamas, and that the bank has had some challenges over the years for no other reason than weak policies, and we’re seeking to remedy that.”

He emphasised: “It’s a priority area, and we recognise the effect it has on the economy and financial services industry, which is why we want to protect it and shore it up so depositors and investors are protected.

“We’re very confident we’ll be able to sort it out. Investors, depositors and the Bahamian people as a whole will be confident and appreciate the restructuring effort that is planned. We believe we will bring confidence to the future stability and profitability of the bank.

“We are confident the plan we’re going to put forward will result in the bank’s return to profitability, and paramount is the intention to protect the depositors and investors, and generate the kind of confidence in the institution that will make it sustainable.”