Wednesday, July 16, 2025
By Fay Simmons
Tribune Business Reporter
The Bahamian commercial banking industry enjoyed a nine-figure year-over-year increase to $509.9.m in collective profits for 2024, the Central Bank revealed yesterday.
The regulator, unveiling its 2024 Financial Stability Report, said domestic banks saw a 26.7 percent increase in net income compared to 2023 due to an increase in non-interest income and a reduction in bad debts.
“In particular, net profits expanded by $107.5m (26.7 percent) to $509.9m, significantly boosting the year earlier $5.4m (1.4 percent) rise. As a result, the ratio of net income to equity (ROE) rose to 23.2 percent from 18 percent in 2023, while the ratio of net income to average monthly assets (ROA) increased to 4.2 percent from 3.4 percent in the prior year,” said the Central Bank.
“Total provisions for bad debts fell by $28.2m (8.6 percent) to $301.8m, albeit lower than the previous year’s $41.8m (11.2 percent) decline. Consequently, the associated ratio to average assets narrowed by 56 basis points to 0.39 percent. Meanwhile, the rise in depreciation costs moderated to 5.2 percent in 2024 from 6.2 percent last year, although the attendant ratio edged up by one basis point to 0.21 percent.
“Also, the ratio of net interest income to average assets firmed to 5 percent from 4.9 percent, while the ratio of commission and foreign exchange income to average assets rose by 17 basis points to 0.88 percent. Further, total operating costs increased by 9.6 percent, but trailed the 12.4 percent rise in the previous year, with the corresponding ratio higher by 24 basis points at 4.25 percent.”
The Central Bank said the banking system remained stable during 2024 with commercial banks maintaining “robust capital buffers and satisfactory provisioning levels”.
“During 2024, no new financial stability concerns arose within the banking system, as commercial banks continued to maintain robust capital buffers and satisfactory provisioning levels,” the regulator added.
“The results of the consolidated stress tests, which comprised credit, liquidity and interest rate risks, revealed that Domestic Systemically Important Banks (DSIBs) remained buoyant to sudden shocks, with banks’ capital ratios exceeding the regulatory minimum of 17 percent.
“In particular, the banking sector’s average capital to risk-weighted assets ratio fluctuated between 29.4 percent and 38.5 percent. Further, the Bank Stability Index (BSI) showed that financial sector stability strengthened in 2024, as compared to 2023. Meanwhile, the aggregate financial stability index (AFSI) revealed that overall financial stability continued to normalise in line with the improvement in the domestic economy.”
As to the Government’s fiscal deficit, Central Bank revealed it was “reduced significantly” from $534.6m to $194m during the 2023-2024 fiscal year, and from $515.5m to $339.4m during the 2024 calendar year. The regulator attributed this reduction to 10.6 percent increase in revenue collections that was “overshadowing” the 3.9 percent increase in spending.
“During the fiscal year 2023-2024, the Budget deficit reduced significantly to $194m from $534.6m in fiscal year 2022-2023. Underlying this outturn was VAT-led growth in aggregate revenue by $213.7m (7.5 percent) to $3.069bn, combined with a $126.9m (3.7 percent) decrease in total expenditure to $3.263bn relative to the previous fiscal year,” said the Central Bank.
“For the calendar year, the overall budget deficit reduced to $339.4m from $515.5m in 2023. Leading this development, aggregate revenue rose by $308.8m (10.6 percent) to $3.208bn, overshadowing the $132.7m (3.9 percent) rise in total expenditure to $3.547bn.”
Comments
ExposedU2C says...
Wow! And the controlling shareholders of the commercial banks derive the benefit of these hefty profits by seeing to it that the banks continue to pay their depositors little to no interest while they reap the benefit of investing the deposits they receive from their customers in short-term treasury bills issued by the Bahamas government that earn interest at over 4% per annum.
Now that a sweet deal for the government that gets to print more money to fund its borrowing needs using the deposits of bank customers that pay little or no interest with the controlling shareholders of the banks pocketing the difference.
The only losers here are the poor customers whose deposits earn little or no interest while the purchasing power of their hard earned savings are ravaged by the eroding effects of high inflation. And the government and the banks will try tell all of the poor depositors that the economy is doing well. Yup, the economy is certainly doing well for everyone but the poor bank depositors!
Posted 16 July 2025, 3:17 p.m. Suggest removal
ExposedU2C says...
Got timed out.... above should read in it's entirety as follows:
Wow! And the controlling shareholders of the commercial banks derive the benefit of these hefty profits by seeing to it that the banks continue to pay their depositors little to no interest while they reap the benefit of investing the deposits they receive from their customers in short-term treasury bills issued by the Bahamas government that earn interest at over 4% per annum.
Now this is a sweet deal for the government because it gets to print more money to fund its insatiable borrowing needs using the deposits of bank customers who receive little or no interest. It is also a sweet deal for the controlling shareholders of the banks who get to pocket as dividends the enormous difference between the interest the banks received from government and the interest they pay to their depositors.
The only losers here are the poor customers whose deposits earn little or no interest while the purchasing power of their hard earned savings are ravaged by the eroding effects of high inflation. And the government and the banks will try tell all of the poor depositors that the economy is doing well. Yup, the economy is certainly doing well for everyone but the poor bank depositors!
But as the government keeps borrowing by rolling over and increasing the total amount of its issued short-term treasury bills, the balance sheets of the commercial banks, pension asset management funds, insurance companies, etc. are becoming saturated with investments in short-term government debt that creates unhealthy structural risks for these financial institutions.
Government issuing only short-term debt instruments in an exchange control regime in an attempt to use inflation to eventually monetize and reduce its over-all domestic debt is not going to end well for many holders of government debt in the next severe economic downturn.
Posted 16 July 2025, 3:41 p.m. Suggest removal
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