The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FINCO's $125m bad loan pile resulted in a 35 percent cut to the mortgage lender's profits for the nine months to end-July 2018, with little sign of improvement in key indicators.

Management, in a statement to shareholders, blamed the more than $6.5m decline in year-over-year profits on a 64.7 percent increase in loss provisions associated with a stubbornly-high non-performing loan portfolio.

It also cited a greater-than $4.5m fall in top-line interest income, which fell by 10.7 percent from $44.079m to $39.36m, as the other major factor behind the slippage in its bottom line performance.

"The bank's net profit for the nine months ended July 31, 2018, was $12.2m which represents a decrease of 35 percent or $6.5m when compared to the corresponding period for 2017," FINC told investors.

"This decrease is attributed mainly to lower interest income and an increase in loan loss provisions driven by the non-performing loan portfolio. The bank continues to face challenges with loan origination.

"Non-performing loans, at $125m, had decreased slightly during the period but remain at a very high level. However, the bank's capital ratio continues to be strong and above regulatory requirements."

FINCO's depressed bottom line shows the continuing challenge Bahamas-based commercial banks in reducing delinquent, non-performing loans to pre-recession levels, the industry total having spiked at $1.2bn some years ago.

The mortgage lender, which is 75 percent majority-owned by Royal Bank of Canada (RBC), is also having challenges finding qualified new buyers to lend to given the fragility of the domestic housing market.

FINCO's performance for the 2018 third quarter mirrored that for the year-to-date, with profits down almost 40 percent at $5.812m compared to $9.566m for the same period in 2017.

It was again hurt by loan loss provisions that were up by almost $2.4m year-over-year, while interest income was down 12.2 percent at $12.799m compared to $14.56m in the year-before period.

FINCO's difficulties in finding new lending opportunities were also highlighted by the more than $37m decline in loans on its balance sheet, which fell from $758.055m to $720.836m. Customer deposits were down by over $27m compared to the 2017 year-end total, but shareholder equity remained over $200m.

Rob Johnston, head of RBC Caribbean Banking, said in May 2018 that FINCO is still not where we need it to be" despite improvements elsewhere in its network.

"Our personal banking business in The Bahamas bank is very strong and, again, we are not concerned at all," he said. "Where we have not been able to make the same progress is with our clients who are dealing with FINCO. Our mortgage experience is still not where we need it to be, and there are a number of reasons why.

"We are working with the judiciary, the Government and other stakeholders to try and help clients get that part of their stability where they want it to be. People don't want to be worrying whether they are going to lose their home.

"We are not in the business of taking people's homes from them. We want to help people find ways to make ends meet but also honour their obligations. That's that fine balance that we are prepared to, at the individual client level, find the right answer."