The Tribune

• Despite 31.5% profit fall for first nine months

• Seen reasons for optimism over final quarter

• Loan book, merchant growth fuelling belief

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) yesterday said it is “not revising” its $16m profit target for the 2023 full-year despite its bottom line for the first nine months slumping by 31.5 percent year-over-year.

Gowon Bowe, the BISX-listed lender’s chief executive, told Tribune Business that despite a $5m drop-off in net income for the year to end-September “several positive elements” emerged towards the end of the 2023 third quarter to give the institution confidence $16m is still attainable.

Speaking ahead of today’s visit to Exuma, where he will attend the opening of a new business model that Fidelity Bank (Bahamas) hopes will enable it to “penetrate” other Family Islands, he added that a combination of renewed loan book growth; larger companies joining its merchant card services business; and “aggressive” loan write-off recovery had generated renewed optimism.

Mr Bowe had previously described a $16m full-year profit as “a worst case” scenario, but even that target appeared to be in doubt after the bank’s unaudited financials for the nine months to end-September showed net income was down by almost one-third at $10.666m as opposed to $15.571m in the prior year.

But, with the imminent Christmas season often seeing an uptick in credit demand from both merchants and consumers, the Fidelity Bank (Bahamas) chief said: “We are still targeting $16m. We’re not revising that at this point. We believe there’s still an opportunity in the fourth quarter. There are several positive elements to materialise.

“The third quarter was the first quarter [since the start of the pandemic] where we didn’t see any loan book retraction. We saw a modest expansion of about $1m.” Mr Bowe confirmed that last quarterly results period to witness a loan book expansion was the first three months in 2020 just before the first COVID lockdown was imposed.

“It’s the first time that we have not seen a contraction since the first quarter of 2020,” he affirmed. “Ultimately, that means there’s a levelling off taking place.” Turning to industry data, Mr Bowe said Central Bank statistics showed that while there was a $90m contraction in the commercial banking industry’s consumer loan book for the 2022 full-year, during the first nine months of this year there has been a modest reversal with $6m growth.

“If we’ve grown by $1m, we’re holding our market share,” the Fidelity Bank (Bahamas) chief said. “We can only grow as fast as the credit market.” Sacrificing price, and taking more risk on credit underwriting decisions, is not a strategy that the bank plans to adopt.

“Our fee and commission income already exceeds the prior year,” Mr Bowe said of a nine-month performance that saw this category increase by 19.3 percent year-over-year to $5.326m as opposed to $4.464m. “We continue to see growth in merchant business on-boarding.

“We have seen some larger merchants. We had started with small and medium-sized businesses that were under-served in terms of terminals to accept debit and credit cards. That has led to larger players, and the ability to attract larger players helps to build economies of scale.”

Mr Bowe, revealing that the banking industry is still in talks with the Government over the reimposition of Business Licence fees on the sector, said Fidelity Bank (Bahamas) had elected to absorb most of the hit from this levy one-time in the third quarter. This will not reoccur in the present fourth quarter, thus enabling more earnings to fall to the bottom line.

“We took three-quarters of the Business Licence fee, and that was almost $1m in the third quarter,” he explained. “That one, when you look at the third quarter performance, we won’t now have that same $1m hit. We already know we’re talking close to $4.5m than $3.5m.

“If we continue to see some loan expansion because we’re trending into that holiday season. This is the quarter that merchants have their biggest spend if economic conditions remain conducive.” Mr Bowe added that Fidelity Bank (Bahamas) targeting of delinquent borrowers with written-off loans is already starting to bear fruit.

“Towards the end of the third quarter, and going into October, the loan recoveries that I said we’d be more aggressive with, persons may have heeded the warning or clarion call,” he revealed, “and with the write-off portfolio we’re seeing a much greater percentage being attacked by the collection team.

“It’s going to be a slog; it’s not going to be an easy ride to the end of the year, but equally the more positive signs give us a greater level of optimism.... We can see stabilisation because interest income from loans has been consistent in the second and third quarters, and contracted in the first quarter, which means non-performing loans are not dragging it and we are building back to loan profitability.”

Mr Bowe estimated that this process will take another 18-24 months to conclude as the Bahamian workforce, and number of persons employed - as opposed to percentages - still has to recover to the numbers recorded prior to the COVID pandemic.

Turning to the opening of Fidelity Bank (Bahamas) prototype Family Island business model today, he added: “We have the new business concept and new equipment, and cash partners. We’re certainly excited to see if this business model works, and if it does we should be able to penetrate a number of the islands with a suitable model for a cashless bank but with a cash partner.”

Explaining that Exuma was targeted for the first branch in part because of its extensive population growth, Mr Bowe added that Eleuthera, Long Island and Bimini are the next locations being eyed for the new Fidelity Bank (Bahamas) Family Island model.