Even though there is little evidence of any strong uptick in economic activity to date, Bermuda’s economy has stabilised, LOM (Holdings) Ltd CEO Scott Lines said yesterday.

And he sees policy changes to attract more international capital into the real estate market as a way of boosting the Island’s economic fortunes.

Mr Lines was speaking after LOM posted a half-year profit of more than $90,000 amid a “gradual upturn in business activity”.

In a letter to shareholders, Mr Lines wrote: “There are emerging signs that confidence by foreign investors in Bermuda has improved and that improved sentiment is resulting in activity that should somewhat help the beleaguered construction sector and the general economy.

“The credit situation in Bermuda remains a concern. Lending in Bermuda remains restrained due to conditions in the local property market.

“Depressed prices and illiquidity continues to severely impact the Bermuda banking sector’s mortgage loan books.

“In reviewing statistics from the Bermuda Monetary Authority as of the end of 2013, annualised net charge-off of loan losses and impairments remained at 1.9 percent, almost the same level of 2.1 percent in the prior year.

“More importantly non-performing loans (NPLs) rose to 12 percent of total loans and remained at almost 45 percent of bank sector capital. Residential mortgages are 54.6 percent of total loans.

“I have pointed out before and it remains a fact that Government policy is needed to spur the housing market. As pointed out a year ago, “with property prices down at least 30 percent over the past six years, the banks have serious concerns over their mortgage books and are unwilling to lend; and home buyers feel they are checking into the roach motel — they can get in but not out”.

“Until such time as property prices start to rise, and the banking sector becomes less concerned over their mortgage loans, they will be reluctant to lend; and without credit expansion the economy will find it difficult to grow.”

A year ago in a similar letter Mr Lines urged action to stimulate the housing market and the economy, because he said, most Bermudians’ wealth is tied up in their homes.

Yesterday, in response to questions as to what actions he felt were appropriate for Government to take to improve housing sales, he replied that he had two recommendations when questioned last year.

He recommended the creation of a path to citizenship for long-term residents.

Yesterday he added: “Given what we are seeing in recent announcements, the Government appears to be doing some things in that regard.”

His second main suggestion was to lower the annual rental value (ARV) level at which point international buyers can participate in the Bermuda property market, back to previous levels of the 1990s.

Yesterday he said: “This would widen the pool of properties available and as a result attract more international capital.

“As you must appreciate my opinions and observations are just those of a private individual. There are a plethora of differing opinions on how to improve Bermuda’s economic performance. I am sure that many of them have validity.

“The Government’s role is to sift through myriad different options, opinions and beliefs and find a way forward that the majority of people can accept. That is not an easy task at the best of times and takes longer in difficult times.”

In a correspondence to shareholders, the company presented their interim financial results to 30 June, 2014 and stated: “LOM continues to see a very gradual upturn in business activity. Due to this increased activity and as a result of the cost containments we made over the last year, LOM made a $90,605 profit in the first half of 2014 as compared to a loss of $315,834 for the same period in 2013.

Revenues overall rose 11 percent as management and advisory fee revenues rose five percent to $1.09 million (32 percent of revenues).

Broking fees rose 15 percent to $1.17 million (34 percent of revenues), while fees from corporate finance work fell 47 percent to $39,899 (1.1 percent of revenues).

Investment Services income rose 11 percent to $480,169 (14 percent of revenues) and the gain on securities held in inventory was $89,627.

LOM reduced operating expenses by 2.3 percent, while employee expenses rose six percent.

LOM’s assets under administration were $589 million at June 30, 2014, up from $587 million at the end of 2013.

The company has net equity of $16.4 million and no debt and holds cash and equivalents of $3.93 million, representing 24 percent of net equity.

The board of directors of LOM have decided not to pay a dividend given current business conditions, however given the discount the share price trades to book value, the board has decided to increase the size of the share buy-back.

The current share price on the Bermuda Stock Exchange is $2.10 and current market capitalisation is $12.71 million. As of June 30, LOM’s book value was $2.69 per share.

The board has given approval for LOM to continue to buy back shares for cancellation for a total not to exceed 200,000 shares. Over the first half of 2014, the company purchased for cancellation 2,500 shares at an average price of $2.25.