By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian financial services industry's economic impact "remains subdued", the Central Bank revealed yesterday, with Bahamian banking jobs falling in 2024 while expatriate numbers increased.

The industry regulator, in its annual assessment of the sector's contribution to the Bahamian economy, said that while its overall spending rose "modestly" last year its near to medium-term outlook "remains mixed" due to ongoing international regulatory pressures plus other developments restricting business activity over which this nation has no control.

Offering a tepid forecast for a sector long-branded as the "second pillar" of the Bahamian economy, and contributing 15 percent to the country's annual gross domestic product (GDP) or output, the Central Bank said: "During 2024, indications are that expenditures tracking the financial sector’s contribution to the Bahamian economy rose modestly.

"However, the sector’s overall activities remained subdued against a continuing backdrop of global regulatory changes and other externalities, which restrained new licensing activities. At the domestic level, intermediation, particularly among banks, credit unions and insurers, continued to increase.

"Nevertheless, ongoing efficiency pursuits continued to limit near-term employment prospects with the international sector impacted for both efficiency reasons and ongoing adjustments to the external regulatory environment," the Central Bank added.

While the number of firms providing international products and services reduced incrementally, in both the banking and non-bank sectors, the product vehicles supporting fiduciary, securities and investment services continued to expand. Banks and insurers also noted balance sheet growth, while combined fiduciary and assets under management were stable to slightly increased."

Total bank and trust company employment contracted by 35 positions, or 1 percent, to around 3,646 persons in 2024. This, the regulator added, was a reversal of the 0.5 percent workforce expansion enjoyed during the prior year.

"A breakdown by nationality showed that Bahamian positions declined by 39 (1.1 percent) to 3,448. However, non-Bahamian jobs grew by four (2.1 percent) to 198. Disaggregated by assigned functions, the majority of Bahamians were employed in local banking sector roles (66.6 percent), followed by offshore banking (15.3 percent), trust administration (10.8 percent) and other wealth management related activities (7.3 percent)," the Central Bank said.

"During 2024, total employment in the domestic banking sector fell by 69 (2.3 percent) to 2,952 in contrast to the 0.4 percent gain a year ago, and outpacing the average yearly decrease of 1.4 percent over the past five years.

"In contrast, total international sector employees increased by 34 (5.2 percent) to 694, exceeding the 0.6 percent uptick in 2023, and contrasting with an average yearly decline of 5 percent over the preceding five year period."

Breaking this down further, the Central Bank added: "As it relates to the composition of staffing for the domestic banking sector, the total number of Bahamians decreased by 66 (2.2 percent) to 2,888, contrasting with the 0.8 percent increase in the previous year.

"Similarly, the total non-Bahamian employees fell by three (4.5 percent) to 64, curtailing the 13 percent fall-off in 2023. However, the ratio of Bahamian to non-Bahamian workers rose to 45:1 from 44:1 in 2023.

"Within the international sector, total Bahamian staff firmed by 27 (5.1 percent) to 560, outpacing the year earlier 2.9 percent growth. Meanwhile, the non-Bahamian component grew by seven (5.5 percent) to 134, a turnaround from the 8 percent fall-off in the prior year. As a result, the ratio of Bahamian to non-Bahamian employees held steady at 4:1."

When it came to bank and trust company salaries, the Central Bank said: "Movements in average salaries varied across the banking sectors. Specifically, the average salary for the domestic banks moved higher by $2,713 (3.5 percent) to $64,444 per annum. Conversely, average compensation in the international sector, excluding bonuses, reduced by $7,943.8 (6.9 percent) to $107,320 per annum....

"[Total] salaries rose by $11.6m (3.6 percent), although trailing the 5.6 percent increase in the previous year." The combined number of Bahamas-based banks and trust companies fell by five to 192 in 2024, matching the decrease seen during the prior year.

"Total expenditure in the banking sector expanded by $73.1m (8.5 percent) to $930.1m in 2024, lower than the 10.1 percent increase in the preceding year but surpassing the average annual spending gain of 2.6 percent over the last five years," the Central Bank said.

"Underlying this development, total operational costs advanced by $76.7m (9.1 percent) to $916.1m following a growth of the same magnitude in the prior year. Specifically, non-staff administrative costs expanded by $55.6m (13.6 percent) to $463.6m exceeding last year’s 10.3 percent growth....

"In addition, government fees grew by $9.2m (8.5 percent) to $117.1m owing primarily to a rise in license (11.4 percent) and work permit (5.9 percent) fees. In addition, spending on staff training improved by $0.3m (17.4 percent) to $2.3m, albeit slowed from the 22.8 percent expansion in the preceding year."

When it came to total taxes and fees generated by the Bahamian financial services industry, the Central Bank added: "Based on fiscal estimates, total taxes and fees received by the Government increased by $19.6m (8.5 percent) to $249.9m in 2024, largely attributed to increased bank and trust companies licence fees.

"Of receipts to the Government, license and registration fees increased by $9.4m (9.9 percent) to $104.3m, with an $8m (11.4 percent) increase in receipts from banks and trusts companies to $77.9m."

However, offering a cautious outlook for the Bahamian financial services industry's growth prospects, the Central Bank said: "The near to medium-term outlook for financial services sector remains mixed. Although strengthened intermediation prospects are expected to expand the expenditure profile of domestic firms, operations are expected to continue to target increased efficiencies through digital innovations that limit jobs expansion.

"In the international sector, prospects are expected to remain more impacted by growth opportunities from new products favouring the securities industry, and niche growth markets in private banking and trusts outside of Europe. That said, further consolidation among the European clientele could continue to mute these gains in the medium-term."