The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) top executive yesterday said trends to end-June place it on target to hit year-end projections of generating around 75 percent of pre-COVID returns from its ongoing operations.

Gowon Bowe told Tribune Business that the three months to end-June 2021 had produced a “marginally” better outturn than the first quarter as he prepares to unveil the BISX-listed institution’s latest figures at next Wednesday’s annual general meeting (AGM).

He added that the commercial lender was drawing further encouragement from the “positive signs” that government agencies and private sector employers were recalling more and more staff to full work weeks, as opposed to reduced days, which will enable borrowers to fully begin servicing their loan obligations once again following the COVID-19 interruption.

“We have to see six months of good payments before we deem a loan to be back in good standing,” Mr Bowe told this newspaper. “We certainly do see some positive trends in a portfolio upon which we took an additional $15m [provisioning] on” in 2020.

He added that some of those provisions may be recovered before end-2021 if current trends hold, with Fidelity Bank (Bahamas) having set itself the goal of ultimately recovering $10m or two-thirds of that sum once the economy fully recovers from the pandemic. “We certainly seek between now and the end of the year to start that process of recovery,” Mr Bowe said last night.

Fidelity Bank (Bahamas), in its 2020 annual report, warned: “The road ahead in 2021 and 2022 is expected to remain bumpy, as COVID-19 is ever present with its mutations and varying strains. The bank has observed positive trends in its loan portfolios, with the most significant being a return to normal levels of loans matriculating into the status of non-performing, along with the recommencement of loan payments by borrowers in the tourism sector that were non-performing as of the end of the year.

“Collectively, these trends have contributed to financial performance for the three months ended 31 March, 2021, more comparable to pre-global pandemic levels and projections for the year ended 31 December 2021 of around 75 percent of pre-global pandemic returns from continuing operations, subject to no significant recurrences of the implementation of strategies necessary to curb the spread of health issues that led to the initial sharp contraction of GDP, and furloughs and increases in unemployment, or other unforeseen negative events.”

For 2020, Fidelity Bank (Bahamas) saw its modest $5.172m loan book expansion driven entirely by its $14.375m participation in syndicated lending to the Government, which offset the $9.203m decline in lending for mortgages and consumer loans.

“The experiences of the bank with its mortgage portfolio in prior years due to the lack of significant activity in the domestic real estate market, along with slow increases in employment resulting in limited numbers of potential borrowers qualifying for new mortgage loans, were exacerbated during the current year,” the annual report added. 

“With record levels of unemployment and the general economic uncertainty associated with COVID-19, mortgage lending in The Bahamas came to a virtual standstill as financial institutions, including the bank, focused more on the performance of existing credit facilities and the properties pledged as collateral.

“With increased employment uncertainty being experienced across most sectors of the economy of The Bahamas, the numbers of potential borrowers qualifying for new mortgage loans were even further contracted during the year and are likely to remain as such for the next two to three years, subject to the pace of the recovery of the economy of The Bahamas,” Fidelity Bank (Bahamas) continued. 

“Accordingly, the only significant activities in the mortgage portfolio of the bank during the year were loan amortisations. However there was some realisation, through sales pursuant to powers of sale, of properties pledged as collateral, which combined resulted in a decrease in mortgage loans of $4.915m.

“The enhanced efforts initiated in prior years in relation to realising collateral on non-performing mortgage loans, which are complemented by innovative strategies and media in attracting interest for distressed properties, continued with mild success during the year and ultimately contributed to some declines in persistent non-performing loans.”

Confirming that it will be cautious in underwriting new mortgage loans, Fidelity Bank (Bahamas) added: “Mortgage loans in The Bahamas face structural challenges due to the significant inventory of slow-moving distressed properties.

“Additionally, with The Bahamas geographically located on the hurricane belt, the bank diligently continues to enforce its credit risk management practices of ensuring that properties pledged to the bank are appropriately insured, regardless of the status of the payments by the borrowers.”