By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commercial banks saw a 5.3 percent increase in their collective profitability to $126.8m for the 2025 first quarter as rising commission and foreign exchange earnings offset lower net interest income.

The Central Bank of The Bahamas, unveiling its quarterly economic review for the three months to end-June 2025, said the sector also enjoyed an improvement in its profitability ratios as gross earnings margins rose by 0.59 percent as a percentage of average assets. And the increase in the net earnings margin outpaced the rise in the sector’s operating costs margin.

“During the first quarter of 2025, the latest period for which data is available, banks’ net income increased by $6.4m (5.3 percent) to $126.8m as compared to the same period of 2024, largely attributed to a strengthening in commission and foreign exchange income,” the industry regulator disclosed.

“The net interest margin reduced by $1.9m (1.3 percent) to $147.2m given the $2.4m (1.5 percent) fall-off in interest income as opposed to the $0.5m (5.1 percent) decline in interest expense. However, commission and foreign exchange fees more than doubled to $45.6m from $19.8m in the comparable period last year, contributing to a $24m (14.2 percent) rise in the gross earnings margin to $192.8m.”

Turning to Bahamian commercial bank costs, the Central Bank added: “With regard to non-interest expense, banks’ operating outlays grew by $8.5m (7 percent) to $128.8m. In particular, non-staff related operating costs, including professional and rental expenses, rose by $8.1m (10.5 percent) to $85.3m.

“In addition, occupancy costs increased marginally by $400,000 (18.5 percent) to $2.4m, while staff costs remained relatively unchanged at $41.1m. Further, banks’ other net earnings on their ‘non-core’ activities declined by $9.1m (12.7 percent) to $62.8m, explained by a $6.2m provisioning for bad debt. However, other ‘non-interest’ income rose by $6.1m (8.8 percent), while depreciation costs fell by $400,000 (5.8 percent).”

Summing up what this meant for Bahamian commercial banks, the Central Bank said: “Against this backdrop, banks’ profitability ratios improved overall. As a percentage of average assets, the gross earnings margin rose by 59 basis points to 6.25 percent as the commission and foreign exchange income ratio grew by 82 basis points to 1.48 percent,while the interest margin fell by 22 basis points to 4.77 percent.

“However, the net earnings margin firmed by 45 basis points to 2.07 percent, outpacing the 14 basis points increase in the operating costs margin to 4.18 percent. Overall, the net income margin rose by eight basis points to 4.11 percent, buoyed by slightly firmer contributions from other income sources, net of depreciation and bad debts.”

The Central Bank said domestic construction activity remained “subdued” during the three months to end-June 2025 as foreign direct investment (FDI) related projects continued to drive most of the industry’s activity and business.

“On the domestic side, total mortgage disbursements for new constructions and repairs - as reported by banks, insurance companies and the Bahamas Mortgage Corporation - decreased by 19.7 percent ($6m) to $24.6m, a reversal from a 51.2 percent growth in the comparative 2024 period,” it added.

“Underlying this outturn, residential disbursements fell by 7.7 percent ($1.7m) to $20.4m, a switch from a 9 percent gain a year earlier. Likewise, commercial disbursements reduced by 50.6 percent to $4.3m, a shift from a considerable increase in the year prior.”

Looking ahead, the Central Bank said: “Total mortgage commitments for new buildings and repairs, a forward-looking indicator of domestic activity, declined by nine to 82 vis-à-vis the same period in 2024, with the accompanying value reducing by 25.5 percent to $17.4m.

“Disaggregated by loan type, the number of approvals for commercial commitments for new buildings and repairs fell to one from three, with the corresponding value decreasing to $100,000 from $2.9m a year earlier. Similarly, the number of undisbursed approvals for residential commitments contracted by seven to 81, with the associated value lower by $3m (14.6 percent) at $17.4m.

“With regard to interest rates, the average financing costs for residential mortgages firmed by ten basis points to 6.0 percent, vis-à-vis the same quarter in the previous year. In contrast, the average interest costs for commercial disbursements narrowed by 34 basis points to 6.4 percent.”

As for the Government’s debt liabilities, the Central Bank noted: “The national debt, inclusive of contingent liabilities, rose by $30.7m (0.3 percent) over the three-month period and by $426.2m (3.7 percent) on an annual basis to $12.079bn as at end-June 2025.

“As a ratio to GDP, the direct charge firmed by an estimated 0.8 percentage points on a yearly basis to 73.4 percent at end-June. Further, the national debt-to-GDP ratio increased to an estimated 75.4 percent from 74.9 percent in the second quarter of 2024. The Government’s contingent liabilities reduced by $19.8m (6 percent) over the quarter, and by $29.2m (8.6 percent) year-on-year to $309.8m.”