By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank’s regional chief yesterday revealed that its non-performing Bahamian mortgages were nine percentage points higher than the Caribbean average, which would be cut to just 8 per cent if this nation’s data was excluded.

Bruce Bowen, Scotiabank’s senior vice-president for the Caribbean, told Tribune Business that “over 20 per cent”, or more than $1 out of every $5 mortgage dollars lent by the bank in the Bahamas, were delinquent.

This, he said, compared with a Caribbean regional average of 10-11 per cent - a figure that would be cut by between two to three percentage points if the Bahamas’ woes were excluded.

Describing the difference between the Bahamas and rest of the region, when it came to mortgages over 90 days past due, as “significant”, Mr Bowen told this newspaper: “On average, non-performing mortgage loans in the region are running at between 10-11 per cent.

“In the Bahamas, it’s over 20 per cent, and that 10-11 per cent includes the Bahamas as part of that average. If you took the Bahamas out, the rest of the region is running at 8 per cent.”

Mr Bowen said Scotiabank had also found it much more difficult to collect on home loan collateral in the Bahamas than elsewhere in the Caribbean.

While it typically took nine-12 months in North America, and 12-18 months in the Caribbean, for the bank to sell distressed properties to new buyers, Mr Bowen said the average time required in the Bahamas was five years.

“There’s a lot of systemic things that contribute to that,” he told Tribune Business. “No one of those is unique to the Bahamas, but a lot of them have come together.”

Mr Bowen said these factors included the “capacity of the court system” to deal with mortgage foreclosures and repossessions, plus the “steps and details” needed to complete the process.

The Bahamas’ relatively small population size, and the restrictions (exchange control, government approvals) on foreign buyers coming into the market also limited the pool of eligible buyers compared to other Caribbean countries.

The extent of the Bahamas’ mortgage crisis has also forced banks to become much more conservative in their lending, leading to fewer potential buyers qualifying for home loans.

All these conditions have combined to ‘clog up’ and slow down the Bahamian housing market, while simultaneously impacting Scotiabank (Bahamas) investment and capital returns.

Mr Bowen told Tribune Business that Scotiabank’s average return on equity (RoE) for the Caribbean is 15-17 per cent, whereas in the Bahamas it is “less than 5 per cent”.

Sean Albert, Scotiabank (Bahamas) managing director, said the institution was extremely well capitalised, but was unable to generate significant returns on this due to the inability of many borrowers to qualify for - or seek - new loans.

“The Bahamas itself was, at one point, one of our most profitable operations,” Mr Bowen added. “Now, it’s not.

“I believe that there is a good opportunity here for us to get back to a return on equity that is in line with the region. Right now, it’s a way’s below.”

Mr Bowen described the non-performing Bahamian mortgages as a “legacy” issue stemming from the 2008-2009 global recession, and the inability of incomes and jobs to fully recover from the effects almost seven years later.

He added, though, that loans originated by Scotiabank within the last two years were “performing much better”, with payment and delinquency rates in line with historical Bahamian averages.

“The Canadian banks, in response to the non-performing loan problems, became much more conservative in their lending policies than they were before,” Mr Bowen said.

“The mortgages and loans put on in the last two years have been, in terms of payments and delinquencies, performing much better; on par with what we would expect.”

The Scotiabank regional head said much of the non-performing loan woes related to credit originated in the years immediately prior to, and after, the 2008-2009 recession.

Scotiabank’s Bahamian mortgage experience is eerily similar to that of its fellow Canadian-owned bank, CIBC FirstCaribbean International.

Rick Parkhill, CIBC FirstCaribbean’s former chief executive, told Tribune Business in a late 2014 interview that the “magnitude” of non-performing home loans in the Bahamas was “greater than anywhere else” in the region, this nation accounting for 50 per cent of the bank’s ‘bad’ mortgages.

Mr Bowen, meanwhile, added that Scotiabank was “a solid number three” in the Bahamian commercial banking market - a position it is seeking to improve upon.

“We can do much better in market share than we’re doing right now,” he told Tribune Business of the Bahamas.

“We’re the biggest institution by market share regionally as a whole. We have a bigger market share in the region than in the Bahamas.

“The game plan, as in any market, is growing the business,” Mr Bowen added. “And the book of business [in the Bahamas] is really growing after several years of gradual decline.”

He said Scotiabank was focused on improving the Bahamian customer experience through quicker “turnaround” times on loan applications and processing, plus the “roll-out of technology” to boost convenience.

“We can do much better, whether it’s turnaround time and the way we process things, to get the Bahamas to the level we are at in a lot of other places, most of the markets,” Mr Bowen told Tribune Business.