The Tribune

• Flat Q4 loan book will be Fidelity chief’s ‘victory’

• Xmas loan demand returns to pre-COVID levels

• Merchants impose ‘pressure’ over card services

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) doubled the number of debt consolidation-linked credit reports it requested for November, its top executive revealed yesterday, as it targets a “flat” loan book outcome for the fourth quarter.

Gowon Bowe, the BISX-listed lender’s chief executive, told Tribune Business it had “certainly seen an uptick in the number of people applying for debt consolidation loans” as persons seek to straighten out their over-leveraged finances before they can obtain new credit.

Acknowledging that the month-over-month credit report requests doubling was a sign many Bahamians remain in financial stress, he added that the ability of the country’s first-ever credit bureau to provide a more complete picture of a borrower’s financial affairs will eventually increase private sector lending by the commercial banks.

The Fidelity chief also told this newspaper that he is targeting a “conservative” fourth quarter outcome where the bank’s loan book shrinks no further than its end-September position of $383.102m. This is despite the traditional increase in loan demand, and extension of credit, in the run-up to Christmas as persons seek extra financing to meet enhanced needs.

“Arresting the contraction” in the loan portfolio will represent “victory”, Mr Bowe said, adding that the lender is targeting a 25-25 percent return on equity for the 2022 full-year and also experiencing a further surge in card services demand from merchants eager to ensure they have the capacity to process card and other digital payment forms this Christmas.

Emphasising that Fidelity Bank (Bahamas) remains focused on quality borrowers as opposed to “a race to the bottom”, he revealed: “We would certainly have seen an uptick in the number of people coming in for consolidation. What I can tell you is that the number of credit reports that we’ve run from October to November has doubled.

“Most of those we are using credit reports on are largely new customers that are consolidating, and it allows us to get a feel for them. The number of credit reports we’re pulling, the amount we pulled in November compared to October has doubled.” Debt consolidation loans are often viewed as the last resort to stabilised troubled borrowers, who are now increasingly exposed by the credit bureau’s ability to access their histories from a variety of lending sources.

“We are seeing increased demand as we normally do during this period,” Mr Bowe said of Bahamian eagerness to access credit. “What would be considered positive for us would be flat, meaning that in this quarter there is no contraction in the loan book. For us, being able to arrest the contraction in the portfolio is a victory. That’s our target as opposed to growing the portfolio by any meaningful number between now and the end of the year.

“You may say that’s a conservative target, but there are a number of factors. The potential for some consumer loans to move into the non-bank space with quite significant interest rates, and customers getting into difficulty, that’s one aspect. We’re not trying to compete with that.

“The credit reports are leading to a lot more people coming in to consolidate. We won’t say unemployment is reduced in the country. We won’t say there us any meaningful growth in the economy as the buoyancy is still related to the rebound from COVID, not any growth beyond that.”

Fidelity Bank (Bahamas) loan portfolio contracted by 4.6 percent or close to $18.5m during the first nine months of 2022, dropping from $401.585m to $383.102m, in line with the rest of the commercial banking industry as it struggles to find new lending opportunities and qualified borrowers in the post-COVID environment.

However, Kenrick Brathwaite, Bank of The Bahamas managing director, also confirmed to Tribune Business that Christmas loan applications have returned to pre-COVID levels following two years when consumer confidence/demand was suppressed by the pandemic and related restrictions.

“The tourism industry is rebounding, and that provides another set of potential borrowers,” he explained. “Last year was an anomaly because of COVID. The last two years were pretty unusual in terms of lower than expected [credit] numbers, but this year’s numbers seem to be more in line with pre-COVID. Employment significantly impacts that. Once business is doing well, you are going to have that stream of customers for borrowing and everybody will be happy.”

Meanwhile Mr Bowe, emphasising that Fidelity Bank (Bahamas) is targeting “long-term customers rather than default on risks, added: “We are focusing on maintaining credit quality that has served us well throughout the year even though the loan book has contracted.

“This last quarter, we’re not seeing any contraction so far. We’ll have the usual repayments, the normal refinancings that may take place with competitors, so that means writing sufficient loans to replace those amortised normally or financed elsewhere.”

Pointing to the continued strength of Fidelity Bank (Bahamas) merchant card services, Mr Bowe added: “There’s significant optimism among merchants so we’ve been continuing growth on the card side. There are a lot more merchants looking at December and putting significant pressure on us to get them up and running as quickly as possible because they’ve seen the trends.

“Despite the reservations and objections by some, there’s greater movement to digital payment platforms. We are seeing merchants slow on the take-up to this point, and who are largely in cash-based businesses, applying for merchant services because they realise a number of their regular customers are using debit and credit cards, so they are looking to meet demand by having terminals in-store.

“We see December on the fees and commissions side as being a ‘black month’, like Black Friday, when retailers see themselves coming into profit for the first time and riding that through to Christmas. We are looking to capitalise on that as well.”