Commonwealth Bank ended 2019 with a net income of $31.6 million after reporting a decrease in loan receivables of $47.4 million, its just released annual report shows.
The majority of those impaired loans, 68 percent, were secured mortgages and business loans, the majority of which were based on Grand Bahama.
Commonwealth Bank President Raymond Winder said this was primarily the result of the devastation caused by Hurricane Dorian, along with the proliferation of unregulated financial lenders.
“Along with the ongoing operation of lending entities that are not regulated by the Central Bank of The Bahamas, the Bahamian consumer continues to be heavily laden with consumer debt. This is placing the bank at a temporary competitive disadvantage, as customers move balances to more aggressive lenders. As a result of these factors, plus the losses from Hurricane Dorian, loan receivables fell by $47.4 million for the year,” he said.
“Under the new International Financial Reporting Standard 9 ‘Financial Instruments’ which was introduced last year, impairment is recognized earlier than under the old accounting treatment. As a result of assessments of expected credit losses deriving from the hurricane damage, loan loss impairment expense increased by $20.3 million for the year compared to 2018. This conservative position had to be taken with the hurricane occurring so close to year end and there being so much uncertainty as to when and if business will be able to re-establish themselves and re-employ their staff – our customers.”
Despite the increase in impaired loans, Commonwealth Bank reported stronger credit quality ratings overall than the industry, with the bank’s delinquency ratio at the end of the year standing at 11.3 percent compared to 12.1 percent for the industry.
The bank’s non-performing loan ratio was also lower than industry standard, settling at 5.73 compared to 8 percent.
“In 2019, asset growth over 2018 was almost flat at 0.3 percent, reaching $1.709 billion. Gross loans contracted $47.4 million. With the noted contraction in loans, the liquid side of the balance sheet, cash and investments grew $78.4 million or 12.3 percent,” Winder said.
Commonwealth Bank’s market capitalization of $1.3 billion remained unchanged at the end of 2019, solidifying it as the largest market capitalization on the Bahamas International Securities Exchange (BISX).
The bank also retained the largest holders of the consumer loan market, ending the year with approximately 40 percent of the industry.