The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Deputy Prime Minister yesterday declared that all efforts to rescue stricken Bank of the Bahamas (BOB) have “obviously not worked to-date”, after the insolvent institution’s losses jumped 61 per cent for the 2017 financial year to-date.

K P Turnquest told Tribune Business that the BISX-listed institution’s new Board, set to be appointed imminently by the new government, would be charged with determining “how best to deal” with its numerous problems.

Pledging that the Dr Hubert Minnis-led administration will continue to stand behind BOB, especially since the Government is its 79 per cent majority shareholder, Mr Turnquest said “critical decisions” had to be made on the loss-making bank that threatens to become a continual drain on taxpayers.

“I think the situation at Bank of the Bahamas is well known. It is an issue we ought to be very careful about,” the Deputy Prime Minister said, after BOB reported its results for the nine months to end-March 2017.

“Nonetheless, having said all that, the Government of the Bahamas will certainly stand behind the bank, and we will certainly do everything in our power to have it put on the path to recovery as quickly as possible.”

With BOB’s nine-figure losses over the past three years continuing to increase, and the bank now embroiled in a court battle with the Central Bank of the Bahamas, another taxpayer-financed bail-out looms as increasingly likely.

When asked whether BOB would likely represent a short-term drag on Bahamian taxpayers, Mr Turnquest replied: “Exactly.” However, he stopped short of confirming that another injection of public funds is imminent.

“I think we’re going to have to look at a number of strategies,” he told Tribune Business, “and as we appoint the new Board they’ll be charged to determine the way forward and how best to deal with the bank.

“Obviously, the restructuring exercises to-date have not worked, and we have to make critical decisions on how we go forward.”

The Government, under the former Christie administration, financed the initial BOB ‘bail out’ in October 2014 via a ‘bonds for loans’ swap, whereby a net $45.2 million in ‘bad’ loans were taken off the bank’s balance sheet in exchange for a $100 million promissory note.

The liability associated with those loans, and responsibility for collecting them, was transferred to Bahamian taxpayers. This ‘bail out’ was followed last year by the Government taking up BOB’s entire $40 million rights issue, and investing a further $10 million in the bank’s contingent convertible bond issue.

Mr Turnquest did not reveal who the new Board’s members will be yesterday, as BOB’s financial statements for the third quarter of its current financial year provided little comfort to both the Government and shareholders that a turnaround is imminent.

BOB’s 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.

Renee Davis, BOB’s managing director, blamed the increased ‘red ink’ on its “conservative” loan loss provisions, which she said stood at 18.7 per cent of its total loan portfolio compared to the 6.5 per cent industry average.

However, this could also be viewed as further evidence of BOB’s poor-quality loan portfolio. Its financials for the year to end-June 2016, as first revealed by Tribune Business, disclosed that a staggering 46.07 per cent, or $234.886 million of its then-$510 million loan portfolio, was non-performing - meaning it was 90 days or more past due.

BOB’s loan loss provisions for the nine months to end-March were up 50.3 per cent year-over-year, standing at $13.858 million compared to $9.22 million for the same period in 2016.

Mrs Davis’s report to BOB’s long-suffering shareholders attempted to focus on the positive, pointing to a more than $1 million year-over-year rise in net fee and commission income.

Referring to the ‘turnaround plan’ unveiled at BOB’s last annual general meeting (AGM), Mrs Davis said: “The bank has successfully restructured more than $22 million since the start of the transformation strategy.

“One of the bank’s most successful initiatives is the debt-consolidation programme, which contributed $27.5 million in new loans. The bank continued to be in compliance with its key capital ratios of Tier 1 and Total Capital.”

The latter, though, was only achieved through the Government’s take-up of the $40 million rights issue. And Mrs Davis’s report was almost as notable for what was not in it, as there was no mention of its legal battle with the Central Bank, and bid to seek Supreme Court protection from the regulator’s impositions.

BOB’s end-March 2017 balance sheet also confirmed that the bank would be insolvent without the $100 million ‘promissory note’ injected in the 2014 bail out, for otherwise liabilities would exceed assets by almost $11 million.

The balance sheet also showed a declining loan book and shrinking deposit base, with the latter down by more than $143 million or 18.8 per cent since June 30, 2016.

BOB’s accumulated deficit, or total losses, stood at $105.029 million at March 31, 2017, almost double the $54.622 million ‘special retained earnings’ it was able to ‘write back’ into its balance sheet following the Bahamas Resolve ‘bail out’.

The Minnis administration, in a statement issued last night, said: “The Government of the Bahamas acknowledges that the Bank of the Bahamas is a systemically important financial institution, and as such is fully committed to its success.

“The Government further acknowledges the concerns of the various stakeholders with respect to the bank’s capital, liquidity and governance.

“In its role as the majority shareholder, the Government is committed to working with the Board, management and regulators in comprehensively addressing all of these issues and returning the bank to sustained profitability.”