The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Bank says demand from “dissatisfied businesses” sparked its entrance into providing merchant-acquiring services for commercial clients and drove an 8 percent increase in fee income.

Tangela Albury, the BISX-listed institution’s chief financial officer, in written replies to Tribune Business questions said it had seized an opportunity to expand into a new market segment with the result that fee-based income rose by $3m year-over-year to $24.862m for the nine months to end-September 2024.

Speaking to the lender’s drive into an already-crowded niche, which features competition from both Fidelity Bank (Bahamas) and Bank of The Bahamas among others, she said: “We are pleased to provide businesses in The Bahamas with another option to facilitate accepting their electronic payments, primarily credit and debit card transactions.

“Introducing merchant-acquiring services aligns with our philosophy of seeking opportunities to provide value-added services and products our customers want. For the nine months of 2024, the fee income growth of 8 percent reflects the boost to the bank of adding this service.

“While we continue to explore expansion opportunities for this service, there is a notable demand among businesses dissatisfied with their current providers, presenting a significant growth opportunity.” The fee-based revenue helped drive Commonwealth Bank’s profitability for the nine months to end-September 2024 to $49.436m - a figure just under $900,000 below the prior year’s $50.308m comparative.

Nevertheless, despite the modest 1.7 percent net income fall year-over-year, Ms Albury said Commonwealth Bank’s financial performance has “exceeded expectations” amid “strained operational efficiency” and “hurdles” from continued increases in the cost of doing business in The Bahamas. As a result of this, general and administrative expenses have risen by $7.816m or 12.8 percent year-over-year.

Directly addressing this increase, which saw this cost item grow from $61.114m to $69.93m for the first nine months of 2024, Ms Albury told this newspaper that Commonwealth Bank is exploring a solar energy “pilot project” as a means to reduce energy costs although she did not go into detail. She said: “The main challenge stems from rising costs in banking operations.

“Policy changes over the past three years, including increases in real property taxes, National Insurance Board (NIB) contributions, deposit insurance premiums and the reinstatement of Business Licence fees has created hurdles for the bank in achieving its strategic financial goals. Additionally, sharp increases in property and medical insurance costs have further strained operational efficiency.

“At its core, improving operational efficiency requires revenue growth, cost reductions or a combination of both. As seen in the third quarter’s financial results, we are successfully increasing the bank’s income. Moving forward, we aim to intensify efforts to identify cost-saving opportunities without compromising the quality of customer service.

“One such initiative is a pilot project exploring the use of solar energy as a primary electricity source for select business operations.” The increase in total non-interest expenses, which rose year-over-year to $67.761m for the nine months to end-September 2024 as opposed to $64.212m for the same period last year, offset a similar growth in net revenues which hit $117.197m compared to $115.52m in 2023.

Speaking to Commonwealth Bank’s bottom line, Ms Albury told this newspaper: “For the nine months ended September 30, 2024, the bank recorded a consolidated net profit of $49.4m compared to a consolidated net profit of $50.3m for the same period in the prior year.

“This marginal decline of 1.79 percent reflects increased non-controllable costs, which have now firmed into the operations of the bank despite the fact that income increased by 2.3 percent... The third quarter results have exceeded expectations, with credit demand from the post-pandemic economic recovery remaining strong for the nine months of 2024.

“We are pleased with our credit production for 2024, which has exceeded internal targets for most of the year to-date. These efforts are supported by sound credit risk management to ensure that the growth in loans receivable is sustainable, and have eased some of the pressure on our delinquency management efforts,” she added.

“However, our laser focus on controlling delinquency firmed our solid performance for 2024, which allowed the bank to exceed its internal profit targets.” Commonwealth Bank’s net loan portfolio expanded by just over $26m during the first nine months of 2024, increasing by 3.2 percent to $834.106m compared to $807.984m at end-September 2023.

“We are very encouraged by the bank’s loan portfolio growth in 2024, arising from an increase in credit demand, particularly in the consumer lending segment,” Ms Albury said. “However, looking ahead, credit demand is expected to moderate as the Bahamian economy stabilises, moving further away from the post-pandemic recovery phase.

“The financial outcomes for 2024 and projections for 2025 are anticipated to remain stable compared to the 2023 results.” Commonwealth Bank also declared that it will pay its shareholders an extraordinary two cents per share dividend to coincide with the Thanksgiving and Christmas seasons in addition to the regular three cent quarterly dividend.

The lender added that these payments will take collective shareholder dividends paid out for 2024 to-date to $32m, aligning with last year’s total. The extraordinary dividend was paid last week to coincide with Thanksgiving, while Commonwealth Bank also touted a year-over-year 26 percent increase in its share price which stood at $5.03 at end-September compared to $4 exactly 12 months beforehand.