BOB yet to convince over future ‘viability’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas’ recently-announced restructuring plan has yet to convince one outspoken shareholder, who says it provides little reassurance “on the viability of the bank”.

Dionisio D’Aguilar, one of the BISX-listed institution’s 3,000 minority investors, told Tribune Business that last week’s statement by managing director, Wayde Christie, “didn’t really change” the concerns over his investment.

While praising Mr Christie for “talking the right talk”, the Superwash president said Bank of the Bahamas “continues to loose oodles of money” and be propped up by the Government.

“I guess they’re preparing the public for some sort of imminent downsizing,” Mr D’Aguilar said of how he interpreted Mr Christie’s statement, “and that they’re overstaffed based on the business they have.

“They’re going to focus on expenses, and rely on the Government to bail them out; not by giving them loans or capital, but giving them deposits. There’s no doubt about it; the Government of the Bahamas is propping up the bank with the people’s money.”

Mr Christie, in a statement issued prior to the Easter holiday, pledged to “leave no stone unturned” in returning Bank of the Bahamas to sustainable profitability following three consecutive years of heavy losses that prompted a $100 million Government ‘bail out’.

But few specifics were provided on a “transformation” exercise said to have been underway since January 2016, as he hinted the bank may downsize to achieve its goal of becoming “leaner, faster, better”.

Mr Christie, though, did suggest that the BISX-listed institution was adopting a new, more conservative approach to risk management and lending.

For his part, Mr D’Aguilar conceded that Bank of the Bahamas’ pre-2008 focus on mortgages and commercial/industrial lending had left it horribly exposed to the two sectors that had suffered the most.

“They’re in the niche of business that has the greatest default rate, and their lending practices were identified by the Central Bank as inappropriate,” he added.

Mr D’Aguilar said commercial and mortgage loan delinquency rates were close to 30 per cent and in the high teens, respectively.

And the perception remained that Bank of the Bahamas had extended credit to politically exposed persons (PEPs) and others who were not equipped to handle loans of the size - and terms - that they received.

“He’s certainly talking the right talk,” Mr D’Aguilar said of Mr Christie’s message, “but the bank continues to lose oodles of money.

“He didn’t indicate how long the losses would continue or whether the reserves are sufficient, so he didn’t really change my mind on the viability of the bank. If not for the Government of the Bahamas, the bank would have folded.”

Mr D’Aguilar also questioned whether the “transformation” exercise purportedly underway would be enough to revive Bank of the Bahamas’ fortunes.

“This statement gives you a warm, fuzzy feeling that they’re heading in the right direction, but who knows?” he told Tribune Business.

“There’s no doubt that the Government is propping the bank up, as they can’t afford for it to fail.

“It would wipe out too many depositors, and the greatest loser would be the Government of the Bahamas. They’re pouring in tonnes of NIB and Treasury money into Bank of the Bahamas.”

The extent to which the Christie administration is supporting Bank of the Bahamas is disclosed by the fact that some $316.503 million, or just over 45 per cent, of its total $697.383 million in deposits come from either the Government or its agencies/corporations.

The $316.503 million figure is almost $110 million, or 52.9 per cent, higher than the $206.944 million in Government and related agency deposits held by Bank of the Bahamas at year-end 2014.

Without this elevated support, Bank of the Bahamas’ deposit base would have shrunk by around $82 million in the year to end-June 2015.

Bank of the Bahamas is also likely to be benefiting from the fact it is the only commercial bank to declare it will accept deposits from a legalised web shop gaming industry.

The timing of Mr Christie’s statement appears designed to coincide with both the release of its 2015 annual report and upcoming annual general meeting (AGM), which will be held on April 15.

Mr Christie said Bank of the Bahamas’ so-called ‘transformation team’ had $3.5 million in recovered assets in hand, or under contract, since their appointment in January 2016.

He added that troubled loans were being renegotiated, while new corporate governance policies were being introduced and efforts made to address capitalisation and liquidity concerns.

“We have been, and continue to examine and assess, the policies and procedures of this bank from one end of the spectrum to the other,” said Mr Christie. “We are leaving no stone unturned. We can no longer be all things to all people.”

While his statement was somewhat hard to interpret, it seems to imply that Bank of the Bahamas is withdrawing from commercial lending and will also reduce staffing levels via the non-replacement of persons when they leave.

And even though Mr Christie’s statement lists several objectives, it is relatively short on the ‘how’ - how they will be achieved, and any targets and timelines for returning to profitability.

Bank of the Bahamas promised that it would disclose its restructuring plan to shareholders following its last annual general meeting (AGM), held in December 2014, but this is yet to occur.

There has also been no further mention about securing minority shareholder representation on Bank of the Bahamas’ Board of Directors, even though this was another issue discussed at the last AGM.

Currently, all directors are appointed by the Government and National Insurance Board (NIB), which collectively hold a 65 per cent majority shareholding.

Bank of the Bahamas shareholders lost almost $100 million during the past two financial years, which also witness the Bahamas Resolve ‘bail out’ - where some $45.2 million in bad loans were removed from the balance sheet in exchange for Government paper (bonds).

Tribune Business reported in February how long-suffering Bank of the Bahamas shareholders incurred a further $3.392 million loss during the final three months of 2015, with the institution still non-compliant with key capital ratios.

The BISX-listed institution, unveiling its second quarter and half-year results for the 12 months to end-June 2016, again blamed ‘bad’ loan provisions for losses that now exceed its 2014 ‘bail out’ write-back by almost $20 million.

Bank of the Bahamas has been in non-compliance with two key capital ratios for at least six months, with the breaches dating back to at least its end-June 2015 financial year close.

The only ‘crumbs of comfort’ for Bank of the Bahamas’shareholders were the fact that the bank’s losses seem to be declining in size.

The fiscal 2016 second quarter loss for ordinary shareholders was down by 40.5 per cent, from $5.697 million to $3.392 million, while the half-year’s ‘red ink’ declined by 62 per cent - from $9.895 million to $3.751 million.

Comments

Sickened says...

A failing bank and our PLP government is forcing public workers to open up a bank account there, exposing thousands more Bahamians to a high possibility of potential losses. Not very responsible governance.

Posted 29 March 2016, 3:47 p.m. Suggest removal

242gal says...

Nice move - require the webshops to bank there. Webshops will do the bailout. Even though I thought the referendum on webshops was a "no"? Corruption at its worst/best.

Posted 29 March 2016, 3:54 p.m. Suggest removal

Economist says...

He is telling the truth, "no stone unturned", he just didn't say anything about the boulders of bad debt.

Posted 29 March 2016, 4:04 p.m. Suggest removal

John says...

BoB was a profitable institution in terms leaner than these, so the question of its viability is answered. The problem with BoB, like many things , is political interference. The cookie jar was robbed, the bank was raped, multiple times, and ravished and sodomized and the pirates have gotten away with the loot. Moving forward the bank may have to be downsized if it is to be revived. BUT mechanisms and policies need to put in place to ensure that once the bank's worthiness and success are restored, the pirates, thieves and rapists do not return and redo what they already did. Of course, like DeAguilar, many of the minor shareholders only wish the bank can return to profitabliity, if even for a short while, so they can dump their shares, at least some of them and cut their losses. This to will affect BoB as an ongoing institution.

Posted 29 March 2016, 7:44 p.m. Suggest removal

bogart says...

.as a victim this is no consolation, plus there is the 'de-risking' Penalties including jail time and severe fines should apply as there are already jail time and fines for OECD there should also be same for those who hurt fellow Bahamians.

Posted 30 March 2016, 2:18 p.m. Suggest removal

bogart says...

.......should clarify that there are jail time and monetary fines for Bahamians and Banks who engage in Money Laundering to protect the nation from blacklisting by OECD. So how come the nations leading Government Bank is not being charged? Example must be set so that the other Banks who diligently protect our reputation is not lumped in the 'de risking' rules plus quality of loans should be examined to see where errors have been made to customers accounts. Trying to say that all BOB policies are correct is clearly not so.

Posted 30 March 2016, 4:53 p.m. Suggest removal

bogart says...

to clarify there are jail terms and money fines for banks and employees who are guilty of money laundering to prevent funds from entering OECD system and possible blacklisting of the Bahamas entire banking system........... Seeing the many weaknesses its time to examine these loans to see their causes. No bank is perfect and lets see which customers have been victimized. The IMF has said in previous report that the banks have engaged in over lending and in this report nothing seems to have been mentioned about the 4,500 whose loans are in default.The government bank should not drag down the other banks who are diligent. Thousands of bank customers are petitioning for a Consumer Protection Agency and an Ombudsman to protect them from banks with all the lawyers to fight the grassroots customer and sell their homes whereas the big and mighty get special financial vehicles to take them away from the stress. 'De- risking exercises will separate the good from the bad.

Posted 30 March 2016, 5:42 p.m. Suggest removal

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