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Bad loans blamed for BOB’s fourth quarter net loss

Bank of The Bahamas (BOB) continues to struggle with bad loans despite what it considers to have been “significant strides made” in its transformation process, as the bank saw an increase in net loan loss provisions of $20.1 million compared to the same quarter last year, according to a statement outlining the bank’s financial performance for its fourth quarter ended June 30, 2017.

That statement revealed that the bank recognized net loan loss provisions of about $35.4 million during the final quarter of its fiscal year and $49.2 million since the beginning of 2017.

“This was up by $20.1 million from the same quarter last year and up by $24.7 million year to date compared to the prior year,” the statement noted.

“As a result of the increased credit loss expenses, the bank recognized a net loss of $32.8 million for the quarter and $43.8 million year to date. The bank continues to focus its efforts on actively monitoring and managing the credit portfolio.”

These results have arisen as the government continues feverishly to turn the troubled bank around. It recently announced that it would allow the bank to release itself of $166 million of non-performing loans to special purpose vehicle, Bahamas Resolve Limited. The government has continued to say that it cannot let BOB fail.

The bank’s continued talk of a transformation includes turning the institution into a customer-centric one “with sustainable profitability, providing good returns for investors and stability and growth for depositors”.

“As we report on our fourth quarter and year-end results, we continue to focus on our initiatives around corporate governance, collections, cost optimization and customer care,” the bank stated in its statement.

“Through these initiatives, we at BOB are committed to returning the bank to profitability, ensuring that each customer experience is exceptional, and that the solutions we provide are cutting edge.”

BOB admits that its ultimate “return to profitability is largely dependent on the performance of the loan portfolio”.

“Before credit loss expense, the bank would have recognized net income of $2.5 million for the quarter and $5.4 million year to date,” the bank stated.

“As such, a great part of the bank’s profitability will be contingent on resolving its non-performing loans. To facilitate this, subsequent to June 30, 2017, the government has agreed to purchase certain loans, primarily impaired, by Bahamas Resolve Limited at a price equivalent to the gross book value of these loans, which is estimated to be $167.7 million. “The consideration for this purchase would be the issuance of a promissory note. In addition, the government has agreed to redeem the entire $100 million of the promissory notes from the first Resolve transaction in 2014 between August 2017 and May 2018. It is expected that this transaction will provide substantial relief for the bank’s credit portfolio and overall financial position and restore all of the bank’s regulatory capital ratios to compliance.”

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