FINCO pays out $57m dividends in 12 months

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed mortgage lender declared a combined $57.333m in dividend payouts to shareholders during the 12 months to end-January 2025, its latest annual report has revealed.

Finance Corporation of The Bahamas (FINCO), it in its report to investors for the year to end-October 2024, disclosed that the $20m in combined dividends declared for that financial year has been supplemented with a further $37.333m payout that was due to be disbursed on February 18, 2025. The latter payout was equivalent to $1.40 per share.

The majority of these dividends, just over $42m, will go to FINCO’s Royal Bank of Canada (RBC) parent as its 75 percent majority shareholder. The payouts come after the Central Bank loosened restrictions and limits on dividend declarations by all its commercial bank licensees as one way in which to reduce the industry’s $3bn-plus surplus liquidity stockpile.

The latest dividend payout comes after FINCO enjoyed a 50.3 percent year-over-year increase in net profits for its 2024 financial period despite finding new lending opportunities hard to come by. The improvement was entirely driven by a 687.7 percent increase, or more than $12m reduction, in the lender’s provision for credit losses, which enabled profits to improve from $21.091m in 2023 to $31.707m last year.

“Release of provision for credit losses was $14m for fiscal 2024, representing an increase of 687.7 percent from the previous year’s release of $1.7m,” FINCO told shareholders. “This favourable movement reflects the decrease in non-performing loans during the year and improvement in credit quality.

“Total allowance for loan losses is 6.9 percent (2023: 8.5 percent) of the total loan portfolio and the stage three allowance represents 56.7 percent (2023: 57 percent) of non-performing loans.... Net income increased to $31.7m compared to $21.1m for fiscal 2023. This sizable growth was mainly driven from releases of provision for credit losses partly offset by lower revenue and higher operating costs.”

Deverson Warner, FINCO’s managing director, said the institution’s core mortgage loan portfolio continued to contract in 2024. “We faced continued challenges with mortgage growth, registering a $15.3m decline in loan volumes compared to financial year 2023,” he said.

“We continued to see improving trends with early delinquency and non-performing loans, with non-performing loans down by $13.1m compared to prior year. Through strategic cost management and process optimisation we have held our expense growth to a negligible increase, ensuring greater value for our shareholders and clients.

“Our efficiency ratio weakened by 235 basis points to 44.4 percent compared to the prior year. While overall cost held, demonstrating our focus on cost management, revenue showed some decline compared to the prior year.”

Looking ahead, Mr Warner added: “We will continue to focus on stabilising and growing our portfolio through enhanced credit origination strategies, improved portfolio management and retention strategies. We will continue investing in digital tools and solutions to further enhance client experiences.

“By refining our credit processes and expanding partnerships with local professionals in the mortgage and construction sectors, we aim to increase mortgage approvals and accelerate the home ownership journey for more Bahamians. Through prudent risk management, cost efficiency measures and innovation, we will maintain strong financial performance while adapting to evolving economic conditions.”

Chris Duggan, FINCO’s chairman, said: “This past year, we experienced a 2.3 percent decrease in loans and advances to customers, totalling $605.4m. This reduction was primarily due to challenges in credit origination and the write-off of non-performing loans. However, we are pleased to report that our strategic efforts to address this decline have made a positive impact.

“A key focus has been to empower our relationship managers to actively build their portfolios through targeted acquisition activities with developers and realtors. Additionally, we have hosted client advice events and leveraged our network of contacts to generate new business opportunities.

“As a result of these initiatives, the declining trend in our loan portfolio has shown signs of stabilisation. While there is still work to be done, we are optimistic about the progress made thus far and remain committed to further strengthening our loan portfolio in financial year 2025,” he added.

“Despite the challenges posed by non-performing loans, the bank continues to maintain a strong capital position well above regulatory guidelines, with adequate provisions for any potential negative impact. We remain profitable, and there are no liquidity issues.

“Considering these factors, the Board of Directors declared quarterly dividends totaling $0.75 per share throughout fiscal year 2024. The Board reviews the dividends payments each quarter and will continuously monitor the economy, the mortgage portfolio and overall performance to ensure prudent financial management of RBC FINCO.”

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