By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) is “extremely confident we will exceed the $18m” full-year profits target for 2024 as it explores the best way “to enter into the venture capital space”.

Gowon Bowe, the BISX-listed lender’s chief executive, told Tribune Business that while the bank has no plans to become a fully-fledged venture capital firm it is assessing how to “take a portion” of its capital and invest this by taking equity positions in emerging companies as opposed to the traditional credit advances.

Confirming that Fidelity Bank (Bahamas) Board has given approval in principle to this initiative, he added that the details - including how much capital it will make available, how quickly and which businesses it will seek equity ownership positions in - is still being worked out.

Mr Bowe also disclosed to this newspaper that the commercial bank is eyeing growth from providing banking services to Bahamas-domiciled International Business Companies (IBCs) that conduct their commercial activities outside this jurisdiction.

With many such entities complaining that they are finding it tough to open bank accounts in The Bahamas, he explained that Fidelity Bank (Bahamas) has sought to accommodate their needs via a balanced risk-based approach where it will only handle the operational expenses and local activities of IBCs.

Speaking after the institution’s profits for the nine months to end-September 2024 jumped by 32.7 percent year-over-year, increasing by $3.5m from $10.666m for the 2023 comparative period to $14.158m, Mr Bowe said the “inspection under the hood” he spoke of last year to ensure Fidelity Bank (Bahamas) was a well-tuned machine had already paid-off during the year’s first three quarter.

Voicing optimism that the 2024 fourth quarter will produce a similar performance to the three months to end-September, when profits were $5.17m, he added that repeat will take the bank well beyond the $18m bottom line target set almost one year ago.

“I think we had targeted $1m with a stretch to $20m,” Mr Bowe told Tribune Business. “We did $5m in the third quarter. When you look at the drivers of that they are relatively stable in terms of fee and commission income and interest income. 

“We expect the financial performance for the fourth quarter to be consistent with the third quarter. If that holds true we should be between $18m and $20m, but we know things come through the final quarter making sure bills are paid.....

“Our main thing is we want to make sure we have a stable base we can actually build upon. We are not looking for unusual business spikes which revert to provisions that we see with others. We are focused on making sure everything we’re doing is consistent and stable,” he continued.

“We never panicked when we had a decrease in profitability [in 2023]. We never over-reacted. We recognised there were still profitable elements being observed and just needed to turn them into better profit-generating opportunities.”

Disclosing that small businesses and entrepreneurs are one potential growth area that Fidelity Bank (Bahamas) is focused on, Mr Bowe revealed: “We’re looking at how to enter into that venture capital space. Not as a venture capital firm, but how we take a portion of the bank’s equity and instead of using it as a commercial and retail bank in the traditional space, how do we move that into the venture capital space?

“Which means taking a possible risk and taking an equity investment in some of the new small businesses that are emerging. We are seeing positive trends emerging in the logistics space, the retail space, and because of them entering the credit space we see them approaching us to be not just service providers but business advisers.

“Some of that is going to require us having skin in the game, meaning we may have to contribute not by loans but by equity positions. That’s very new. The Board has given its consent in principle but wants to see how much equity we allocate, how quickly and the nature of the businesses that we participate in.”

Besides its credit card business and traditional loans, Fidelity Bank (Bahamas) also sees potential growth opportunities in meeting the domestic banking needs of locally-domiciled IBCs such as hedge funds that conduct most of their commerce offshore in other jurisdictions.

“Some of that IBC space we are also participating in in that we have received inquiries from that community who are finding it difficult to open bank accounts in The Bahamas,” Mr Bowe told Tribune Business. “We have sought to facilitate the industry on a risk-based approach, taking on operational expenses and local activities that they are doing in the country.”

Looking ahead to 2025, with the economy reverting to its traditional annual growth rates of less than 2 percent now that the post-COVID reflation is complete and employment unlikely to experience a material increase, the Fidelity Bank (Bahamas) chief said significant loan book expansion is unlikely.

“In that sense, we have to look at how we squeeze, if you will, blood from the stones we have,” he added. “The actual growth in credit for the year, which is 2024, is less than $100m for the whole industry through the end of October. My main message is, when you look at the $500m lost in COVID, that $100m gain a year, that’s going to take time. It’s positive in terms of forward movement but is not at a pace that inspires excitement....

“I think we’re building the foundation. Last year, when I told you we went under the hood, to use that same analogy, we have changed out all the spark plugs, and changed the hoses, so we have got the engine sounding the way we want it. 

“We have stabilisation in the loan portfolio and modest growth. We are seeing some small increases in the loan portfolio but nothing like five years ago and we don’t expect that. If we did there’d be concerns that it was a mirage.” Despite a decrease in the unemployment rate, Mr Bowe said that in terms of raw numbers there are fewer persons employed now than in 2019 before COVID struck.

Fidelity Bank (Bahamas) loan portfolio has seen little to no growth year-over-year, standing at $360.174m at end-September 2024 compared to $359.245m at the same point in 2023. However, Mr Bowe said the 39 percent drop in the lender’s loan loss provisions, from $7.459m to $4.555m for the year’s first nine months, reflects the improvement in delinquency recoveries.

“That was a strategic priority for us,” he explained. “We have certainly been more aggressive in the court system so delinquent borrowers know we will meet them in court if they do not pay. We have been more open to restructuring for persons trying to correct their credit history and creditworthiness.”

Fidelity Bank (Bahamas) saw total income for the nine months to end-September 2024 increase by more than $4m year-over-year to hit $48.346m as opposed to $44.245m during the same period in the prior year - a gain of 9.3 percent. Much of this came from a 44.5 percent jump in fee and commission income, which rose by more than $2.5m from $5.326m in 2023 to $7.697m.

Describing “imitation as the greatest form of flattery”, Mr Bowe acknowledged that rivals were moving into areas such as merchant acquiring services, but he pledged that the bank will remain the “premier credit card service provider” for both Visa and MasterCard as it possessed both the systems and personnel to drive future growth.

However, Fidelity Bank (Bahamas) general and administrative expenses for the first nine months of 2024 rose by more than $2.5m or 17.2 percent to $17.527m compared to $14.954m in the year-before period. Mr Bowe said $1.5m, or “the bulk” of the $2.5m rise, was directly linked to the growth in fee and commission income and expansion of the card business as every new customer generated an additional cost.

Investments in system and cyber security also accounted for part of the general and administrative expense increase. And salaries and employee benefits also rose as Fidelity Bank (Bahamas) ensured it has sufficient staff to “accommodate all business lines”.