By NEIL HARTNELL
Tribune Business Editor
A prominent Bank of The Bahamas shareholder yesterday urged the government to follow CIBC’s lead and “be more aggressive” in seeking to exit its 82.6 percent majority ownership of the lender.
Darron Cash, the former Free National Movement (FNM) chairman and senator, told Tribune Business that the government needed to “stop looking in the rear view mirror” and instead seek to facilitate the “progressive, smart and capable Bahamians interested” in entering commercial bank ownership.
Declining to identify who he was referring to, Mr Cash added that the government “should not be naive” and believe it can recover the $300m-plus of taxpayer monies pumped in to rescue Bank of The Bahamas through two bail-outs and a subsequent rights issue.
Applauding suggestions by K Peter Turnquest, the deputy prime minister, that the BISX-listed bank is seeking strategic partners, he argued that it was “only when the government becomes a minority shareholder” that investors and the Bahamian public will gain confidence the possibility of political interference has been removed from its decision-making.
CIBC, the Canadian banking giant, has done just that by agreeing to see a two-thirds interest in its FirstCaribbean subsidiary to Colombia’s GNB Financial Group. It will become a minority partner with an ownership interest just below 25 percent, and Mr Cash said the deal provided an example for the government to follow with Bank of The Bahamas now that its financial position has “stabilised”.
“In my view, the fact that CIBC FirstCaribbean has turned over a significant portion of its equity should be an indication to the Government of The Bahamas that it needs to be more aggressive in its efforts to find new, progressive owners for Bank of The Bahamas,” Mr Cash told Tribune Business.
“The level of passion, concentration and focus that will come from an independent non-government owner you will not see from the Ministry of Finance, who will be less aggressive about exploring new means to generate new business or taking well-calculated risks.
“That’s not their focus, and I daresay it is not going to be the focus of the Board of Directors who are going to be concerned as to what the Ministry of Finance may be thinking over the decisions they make. True autonomy means getting out of the business,” he continued.
“The government will have a lot more information on the extent of interest Bahamians have about going into opening a bank, and they ought to invite those Bahamians to seriously consider taking majority ownership of Bank of The Bahamas at the right price.
“There are progressive, smart, capable Bahamians who are interested in getting into the banking business and providing effective competition among the dinosaurs that exist presently. Government ought to be bending over backwards to accommodate them. That ought to be where they look.”
The Government owns Bank of The Bahamas through the Public Treasury and National Insurance Board (NIB), and Mr Cash accused it of “looking in the rear view mirror and thinking naively of means to recoup what they’ve spent” on rescuing the BISX-listed institution since 2014.
Warning that this is “not going to happen”, the former FNM chairman added that the Government could argue its actions have prevented Bank of The Bahamas from being formally wound-up and liquidated - a development that would have threatened $80m in losses for large depositors, as well as potentially undermining the wider banking system’s integrity and consumer confidence in it.
“Now that’s done and there’s a degree of stability, it’s time for them to get out the business,” Mr Cash told Tribune Business. “Bank of The Bahamas ought not to be a sacred cow. There’s nothing special about it. It’s time to move on and turn it over to people who are able to provide better competition to the dinosaurs.
“My caution from a valuation standpoint is that the Government should not be naive in thinking it will be able to fully recoup what it’s pumped into the bank to save it. Those are sunk costs that are not going to come back.
“I confess to you that the more significant concern I have is the kind of money the Bahamian people have put into Bank of The Bahamas that they are not going to get a meaningful return on. I am most concerned that we need to get to a point where the Government says this far and no further when it comes to putting money into Bank of The Bahamas,” he continued.
“The safest way to go no further is for the Government to get out of that business. If the Government stays in as owner there will be a repeat. There will be a repeat. It’s time to cut our losses.”
Bank of The Bahamas has been profitable since its 2018 financial year, although those earnings have been dwarfed by the $140m-plus losses it accumulated over the five prior years. Net income for the 2020 first quarter was down 75 percent year-over-year, although this was blamed on provisions taken to cover a $6m default judgment claim against it.
Mr Cash, meanwhile, said he was “encouraged” by Mr Turnquest’s comment that Bank of The Bahamas was open to seeking strategic partners, even though the deputy prime minister did not fully explain what he meant and the term has multiple meanings.
“I think that would be a positive step in the right direction,” he added. “In order for Bank of The Bahamas to get to a position of stability it really needs to increase its loan book a lot more substantially than it has been doing over the last few years.
“The inherent weakness the bank has had is that there will continue to be concerns as to whether or not we’ve seen the bottom of the non-performing loan portfolio.... Until such time as the Government gets out of the majority ownership there will continue to be the concern that there’s a general sense that folks are not as obligated to settle debts to the Government.
“It will only be when the Government is a minority shareholder that people will have stronger confidence that government intervention, and the possibility of government intervention, will have been removed.”
Mr Cash said exiting the Bank of The Bahamas would be consistent with the Government’s policy thrust to get out of business, as he expressed concern that the institution’s management may only feel the need to be accountable to its majority shareholder rather than all.
The former FNM chairman also backed the BISX-listed institution’s decision to sell its $103m trust portfolio to Leno Corporate Services in a $561,000 deal that has finally closed. He argued that this will enable management to better focus on its core lending business.