By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of The Bahamas’ top executive says it will “be excellent” if its closes its 2021 financial year in a “break even” position after incurring $20m in loan loss provisions over the past two years.

Kenrick Brathwaite, the BISX-listed institution’s managing director, told Tribune Business that the entire commercial banking industry was in “the telling period” where it will learn just how many of its COVID-19 loan deferrals are to become non-performing and pass 90 days past due.

Revealing that the many institutions are “past the point of giving forbearance” for borrowers working in or connected to hotels and tourism, he argued that the banking sector’s position would be “a lot better” if The Bahamas can get 70 percent of employees in its largest industry back to work.

“The hotel industry is what’s driving the provisions and loan loss provisions,” Mr Brathwaite explained, after Bank of The Bahamas was forced to take another $4.46m in credit loss expenses for the three months to end-December 2020.

“If we can get 70 percent of persons in the hotel industry back to work that results in a position that is a lot clearer and much better. We have a lot of hotel workers who have loans and we’re past the point of giving forbearance.

“Anyone affiliated with the hotel industry is driving these figures. We need some of these hotels to open up, come on stream so we can offset some of this unemployment. I think this is the telling period now after the forbearance in 2020.”

Mr Brathwaite said loan payments for many borrowers impacted by COVID-19 furloughs, job losses and income cuts had been waived until December 2020 as part of bank deferral initiatives. Some facilities, he added, had remained on deferral going into 2021 while others have been restructured.

“There’s no way you can have loans on the books for a year without payment and think there’s not a challenge with them,” the Bank of The Bahamas chief said. “You have to make a decision with those accounts, go through the bucket of 30, 90 days in arrears, and we’d expect without the hotels coming online those provisioning figures will escalate from December.”

Bank of The Bahamas barely managed to generate a first half net profit, coming in at $56,321 for the six months to end-December 2020 compared to the $2.223m produced in the year-before period that was COVID-19 free, due to the pandemic’s devastating economic impact on borrowers.

Revealing that COVID-19 had set back Bank of The Bahamas’ restructuring and turnaround plan by some six to nine months, Mr Brathwaite said the BISX-listed institution was in a much weaker position than its rivals to cope with the pandemic’s fall-out because of the $144m accumulated deficit being carried on its balance sheet due to past losses that required two taxpayer bail-outs.

Disclosing that Bank of The Bahamas’ forecasts and budget for its 2021 financial year had “anticipated normalcy by January 1 and that didn’t happen, he added that the bank was “going to get the brunt of it” for another six months as the pandemic’s impact continues to work its way through the economy.

“We’ve taken over these two years almost $20m in provisions because of the COVID-19 situation,” Mr Brathwaite told Tribune Business. “We started off from a small position in terms of overall profitability, and that’s not sustainable. We started off with a small piece of the pie and break even will be excellent for us.”

Mr Brathwaite, in his first half message to shareholders, said: “The pandemic has resulted in travel and border restrictions, quarantines, curfews and lockdowns, causing lower consumer demand and general market uncertainty.

“Notwithstanding, the bank recorded net income of $0.06m for the six months ended December 31, 2020. The Bank remains committed to overcoming this crisis, focused on our strategic plan in strengthening of our systems, expanding of products, and improving overall customer service.”

Total operating income fell by $0.7m or 5.64 percent for the second quarter, and by the same amount or 3.28 percent for the half-year, due to lower net non-interest income that was partially offset by higher net interest income.

“The impact of the pandemic was immediately felt by the bank on its non-interest income resulting in an overall decline of $0.9m and $1.2m for the current quarter and year-to-date, respectively,” Mr Brathwaite said. “The positive variance in net interest income of $0.3m and $0.5m were attributable to lower interest expense owing to a decline in certain deposit balances and interest rates.

“The bank’s operating expenses increased by $1.4m or 18.52 percent for the current quarter, and $2.1m or 14.25 percent year-to-date as higher bank license fee of $0.6m was recorded by the bank due to the increase in levy imposed by the Central Bank.

“Increases were also noted in staff costs, depreciation and IT-related expenses as the bank invested in the human resources, system innovation and upgrades to support the bank’s planned growth and strategic initiatives.”