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BOB books 3.7M profits amid expansion

The Bank of The Bahamas (BOB) recorded $3.66 million in net income available to common shareholders for its 2010/2011 fiscal year, down 26.0 percent from the previous year as a credit loss expenses spike swallowed up strong growth in operating income.

The credit loss expense line came in at $9.1 million for the year ended June 30, 2011, up from $3.7 million year-on-year.  It brought the bank’s credit provisions to 2.7 percent of the loan book in economic conditions that have left many banks with a greater proportion of provisions.

According to the bank’s managing director, Paul McWeeney, however, the level is just right for the composition of the bank’s loan book.

“Compared to many other banks, we have the smallest allocation of consumer loans, accounting for no more than 15 percent of the total loan book,” McWeeney said, explaining that residential and commercial loans made up a larger portion of BOB’s loan portfolio.

The accounting mechanisms for provisioning used by commercial banks are fairly standard, McWeeney said, but with a smaller portion of the book in the riskier consumer loans, the credit loss provision is lower than that of many other banks in the local market.

At June 30th, total loans to clients, net of provisions, were $669.16 million.  Mortgage loans increased 5.0 percent to $362.64 million, commercial loans by 17.8 percent to $157.69 million, as consumer loans fell by 8.9 percent to $47.28 million.  Respectively, they accounted for 53.2 percent, 23.2 percent, and 6.2 percent of the loan portfolio before adjustments for provisions.

BOB saw its total operating income grow 12.16 percent to $42.27 million, up from $37.69 million the previous year.  It was supported by a 14.7 percent increase in net interest income to $36.04 million.  Still, after the 150 percent jump in credit loss provisions, net operating income was down 2.6 percent to $33.1 million.

Total assets stood at $823.81 million for BOB at the June 30th year-end, a 6.0 percent increase over the previous year.

BOB is now into its $6 million two-year capital expenditure program.  Under the program the bank’s Village Road location is being upgraded and expanded to double the branch’s capacity, McWeeney telling Guardian Business that is now in its final stages and should be completed soon.  He added that the bank is about to begin its build-out of its Charmichael Road branch, and is looking at a number of offsite locations to expand its now state-of-the-art automatic banking machine (ABM) network.

The bank is also looking to expand its merchant services, and will present a “more robust”  user platform for merchants using its electronic card payment services, according to McWeeney.

McWeeney also reported that the bank was moving to expand its private banking and trust operations to include international clientele.  To that end, the bank recently participated with the Bahamas Financial Services Board (BFSB) in its recent promotional tour in Asia.

BOB booked $0.23 in basic earnings per ordinary share at year-end.

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