"When I tell the truth, it is not for the sake of convincing those who do not know it, but for the sake of defending those that do." - William Blake
For more than a year now, Bahamians from various walks of life, especially those in opposition to the government, have been relentlessly critical of the Bank of The Bahamas. The latter have treated the bank as a political football because the Bahamas government is the largest shareholder, owning approximately 65 percent of its common shares.
Some of those critics have targeted the bank because they maintain that, on occasion, large loans were extended to politicians, friends of politicians, and high profile business persons, in some instances, for business proposals that were under-collateralized or simply were not financially feasible. The crescendo of criticism has been exacerbated by the intensely politically polarized environment that presently exists in the country - another symptom of the perpetual political campaign. Therefore this week, we would like to Consider This... is the cacophony of clamorous criticism of the Bank of The Bahamas justified?
The history of the bank
The forerunner of the Bank of The Bahamas was the Bank of Montreal (Bahamas & Caribbean) Limited which was incorporated in The Bahamas on April 17, 1970. In 1983, its name was changed to Bank of Montreal Bahamas Limited. Then, in 1988, the Bank of The Bahamas was formed as a joint venture with Euro Canadian Bank Limited, with the government purchasing 51 percent of the shares.
In 1990, the government purchased all of the shares of Euro Canadian Bank Limited and issued an additional 7,000,000 shares, bringing the total number of shares issued to 10,000,000. Four years later, in 1994, the government sold 20 percent of its shareholding or 2,000,000 shares to the Bahamian public.
In 1995, the government offered a further 3,000,000 shares of the bank to the Bahamian public. Both offerings in 1990 and 1995 were substantially oversubscribed, indicating overwhelming public support for and confidence in this institution.
Five years later, in 2000, the bank launched a wholly-owned subsidiary, the Bank of The Bahamas Trust Limited, becoming the first in our financial services sector to offer trust services for Bahamians.
In 2003, the Bank of The Bahamas acquired the assets of Workers Bank Limited, increasing its branches in New Providence. The bank also acquired Citibank N.A. Bahamas' mortgage portfolio of $22,459,682 at a cost of $20,995,859. The closing of the contract, which included full payment to the seller, occurred on July 1, 2003.
By 2005, the bank continued to experience extraordinary success and announced an oversubscribed rights offering of $25 million. It also hosted an Incredible Dream Mortgage Fair, the first of its kind in the nation. The fair was a stunning success, resulting in a doubling of the bank's loan portfolio.
In 2006, a $15 million private placement preference share offering was held, resulting in the bank's authorized capital of 150,000,000 shares of B$1 par value. The Bank embarked on a multimillion dollar technology investment to overhaul the back end of data entry and storage which enabled it to provide the best possible business solutions with ongoing analysis.
By 2007, Bank of The Bahamas had become the first Bahamian bank with a financial services center in Florida, and Bahamians who do business there every day were able to do so with greater efficiency and ease.
From 2008 to 2011, the Bank of The Bahamas grew its Private Banking and Trust Services Division, assisting clients with personalized banking to free up their most valuable asset: time. Another $20 million preference share offering in 2009 further increased the bank's capital to support expansion and by 2012, the bank completed its new Carmichael Road branch which was opened in December of that year. By 2013, the bank bolstered its capital to 22.89 percent in compliance with the Central Bank and Basel III requirements. In the same year, the Bank of The Bahamas became the first bank in the country to offer non-envelope ATM transactions.
Financial performance
Recently, the Bank's financial performance has encountered relentless and some would say unwarranted criticism, particularly under the leadership of its managing director Paul McWeeney. A brief review of its financial performance during McWeeney's tenure at the bank is nothing short of astounding.
When he joined the Bank of The Bahamas in 1993, the bank's total assets were $93 million, with equity of $11 million, net income of $291,000 with less than 100 employees serving five branches. McWeeney became the bank's managing director on January 1, 2001. At that time, the Bank's total assets were $229 million, its equity was $19 million, earned net income of $4.6 million, and its employees had grown to 150 with eight branches.
By the end of 2014, the bank's total assets had grown to $771 million, with total equity of $70 million, which rebounded to $123 million after the transfer of certain loans to Bahamas Resolve Ltd., and for the first time in its history, after earning uninterrupted profits, incurred a net loss of $66 million, principally due to loan loss provisions. By that time, its personnel expanded to 375 employees, serving 13 branches.
During McWeeney's tenure as managing director, the bank achieved incrementally impressive milestones. Bank of The Bahamas was:
o First to introduce trust and private banking services to Bahamians;
o First to have executed a massive residential mortgage campaign that attracted $100 million in applications;
o Established an office in Miami;
o First to establish a stand-alone credit card issuing and processing center in The Bahamas;
o First to introduce prepaid VISA branded cards;
o First to introduce e-commerce;
o First to introduce e-notifier;
o The only bank to have Bahamian currency certified that permits actual cash deposits at ATMs;
o Paid over $50 million in dividends.
Also during his tenure, McWeeney chaired the Bahamas Automated Clearing House (BACH) from infancy to actually going live. Today, BACH is fully functional and extremely profitable. McWeeney also served as president of the Bahamas Institute of Financial Services for several years.
International recognitions
During his tenure as managing director, the Bank of The Bahamas received numerous international awards in recognition of its outstanding performance. The Bank received Euromoney's Best Bank Award in 2006, 2008, 2009, 2011 and 2012. It also received the prestigious Bracken Award, which is presented by the Financial Times Group, in 2005, 2010 and 2011.
In 2006, the Bahamas Financial Services Board conferred two prestigious awards on the Bank of The Bahamas. The first was the BBI Award for Financial Services Development and Promotion in The Bahamas and the second was conferred on McWeeney as the Executive of the Year.
Two awards that are not restricted to financial services, but open to all businesses in The Bahamas that recognized them for being the very best, were won by the Bank of The Bahamas: the IAAP Award for Corporate Excellence in 2006 and The Bahamas Chamber of Commerce Business of the Year in 2007. It is commendably noteworthy that no other financial institution in The Bahamas has achieved such recognition, either locally and internationally.
Conclusion
In part 2 of this series, we will compare and contrast the recent performance of other commercial banks in The Bahamas, the Caribbean and elsewhere with Bank of The Bahamas. For now, however, we believe that it is time to not only recognize and commend the historic and exemplary performance of our very own Bank of The Bahamas, but also to consider the advisability and benefits of not only supporting our indigenous institutions but more importantly defending them.
o Philip C. Galanis is the managing partner of HLB Galanis and Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in parliament. Please send your comments to pgalanis@gmail.com.
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