The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of The Bahamas' was forced by the Moody's 'junk' downgrade of the Government's sovereign creditworthiness to take a $6.3m provisioning hit, its managing director said yesterday.

Kenrick Brathwaite told Tribune Business the provisioning was required because the downgrade hit the value of the BISX-listed institution's government debt holdings, as COVID-19's economic fall-out drove it to a $7.413m net loss for the financial year that closed on June 30.

"We had to create an additional sovereign debt position because of the downgrade," Mr Brathwaite explained. This, together with $15.348m worth of loan loss provisions related to its credit portfolio, produced a more than $10m negative bottom line reversal compared to the $2.9m net profit that Bank of The Bahamas generated in 2019.

"The bank recorded net operating income of $14.3m for the 12 months ended June 30, 2020, compared to $4.6m in June 30, 2019," Mr Brathwaite said in his message to shareholders. "However, this net operating income has been offset by the provision for impairment losses of $6.3m and credit loss expense of $15.3m, resulting in an overall net loss of $7.4m for the year ended June 30, 2020....

"Net credit loss expense for the quarter ended June 30, 2020, increased by $6.7m compared to the quarter ended June 30, 2019; and a $13.6m increase for the year ended June 30, 2020, versus June 30, 2019, due to the pandemic. The bank also recorded a $6.3m provision for impairment losses on sovereign and corporate financial asset exposures due to the pandemic."

The timing of the Moody's downgrade, which occurred just before its June 30 year-end, was especially hurtful for Bank of The Bahamas. Mr Brathwaite added: "Comparing the current period ended June 30, 2020, to the prior period ended June 30, 2019, the bank’s total operating income increased by $2m or 18.25 percent for the current quarter and $6m or 14.64 percent for the current fiscal year."

He added that this was "explained largely by the $2.8m and $6.5m increases in net interest income for the current quarter and for the year, respectively. The positive variance in net interest income for the year was due to the increase in interest revenue by $5.3m, primarily from interest on consumer loans and deferred loan fee change in accounting estimate".

Interest expense fell by $1.3m, but "the impact of the pandemic was immediately felt by the bank on its non-interest income, resulting in an overall decline of $0.8m and $0.5m recorded for the current quarter and year-to-date, respectively".

Mr Brathwaite continued: "The bank’s operating expenses increased by $1.9m or 25.99 percent for the quarter due to increased bank licence fees imposed by the Central Bank, higher cleaning and sanitation expenses per the existing pandemic protocol, additional insurance and IT-related costs.

"The bank’s liquidity position remained strong as its cash and cash equivalents stood at $180.7m, a $23.3m or 14.77 percent increase since prior year. The bank’s key capital ratio is in compliance with regulatory requirements, with Tier One of 37.5 percent, well above the Central Bank’s minimum requirement of 9.6 percent."