The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian commercial banks collectively enjoyed a 30 percent year-over-year profit increase to $109.2m during the 2023 second quarter due to rising interest income, it was revealed yesterday.

The Central Bank, unveiling its quarterly review for the three months to end-September, said the industry’s net interest margin for the second quarter expanded as a result by $23.2m to almost $148m in comparison to the same period in 2022.

“During the second quarter of 2023, the latest period for which data is available, banks’ net income grew by $25.2m (30.1 percent) to $109.2m vis-à-vis the comparative 2022 period, owing primarily to an increase in interest income,” the industry regulator said.

“The net interest margin widened by $23.2m (18.6 percent) to $147.7m as interest income expanded by $22.9m (17.1 percent) to $156.8m, while interest expense fell by $0.2m (2.6 percent) to $9.1m. Further, income from commission and foreign exchange fees rose by $1.2m (7.7 percent), resulting in a $24.4m (17.4 percent) growth in the gross earnings margin to $164.2m.”

Growth in the industry’s interest income and the net interest margin outpaced that of expenses for the three months to end-June 2023. “As it relates to non-interest expense, banks’ operating costs advanced by $15m (15.2 percent) to $114m. Underlying this outcome, non-staff related operating costs, inclusive of professional and rental expenses, increased by $10.9m (18.5 percent) to $69.4m.

“In addition, staff costs grew by $5m (13.4 percent) to $42.1m. However, occupancy costs fell by $0.8m (25.6 percent) to $2.4m. Further, banks’ other net earnings on their ‘non-core’ activities strengthened to $58.9m from $43m in 2022 as depreciation costs decreased by 4.4 percent.

“In addition, other non-interest earnings moved higher by $8.3m (15.5 percent) to $62m. Providing some offset, provisions for bad debt rose by 61 percent to $7.7m.” As a consequence of all this, the Centra; Bank said the commercial banking sector’s profit ratio strengthened during the 2023 second quarter.

“As a percentage of average assets, the gross earnings margin rose by 99 basis points to 5.62 percent, as the interest margin ratio grew by 94 basis points to 5.06 percent and the commission and foreign exchange income ratio firmed by six basis points to 0.56 percent,” the Central Bank added.

“Further, banks’ net earnings margin ratio moved higher by 38 basis points to 1.72 percent despite the 62 basis points rise in the operating costs ratio to 3.9 percent. Moreover after allowing increased contribution from other income sources, net of depreciation and bad debt expenses, the net income ratio expanded by 96 basis points to 3.74% percent.”

Mortgage lending, though, remained sluggish during the 2023 third quarter. “Data obtained from domestic banks, insurance companies and the Bahamas Mortgage Corporation showed that the total value of outstanding mortgages fell further by $16.8m (0.6 percent) to $2.866bn during the third quarter after the $0.6m decline in the comparable period of 2022.

“The residential component, which comprised 93.8 percent of the total, decreased at a tempered pace of $1.2m vis-à-vis $9.9m (0.4 percent) a year earlier for an ending balance of $2.687bn. However, the commercial segment recorded a $15.6m (7.5 percent) reduction to $179.1m, a downturn from a $9.3m (5.6 percent) growth in the previous year.

“At end-September, domestic banks held the majority of outstanding mortgages (86.5 percent), followed by the Bahamas Mortgage Corporation (7 percent) and insurance companies (6.5 percent).” As for The Bahamas’ foreign currency reserves, which support the one:one exchange rate peg with the US dollar, the Central Bank said the third quarter reduction was over three times’ greater than the prior year comparison.

“The external reserves seasonal reduction widened to $121m (4.5 percent) from a $36.2m (1.1 percent) fall-off in the same period of the previous year,” the Central Bank said. “Contributing to this development, the bank’s net foreign currency sales increased to $97.8m from $23.5m in the comparable period of 2022.

“The position with commercial banks reversed to a net sale of $32.3m from a net purchase of $2.4m in the preceding year, while net purchases from the Government decreased to $12.8m from $73m in the year prior. In an offset, the [Central] Bank’s net foreign currency sales to public corporations - mainly for fuel purchases - declined moderately to $78.4m from $98.9m in the previous year.

“At end-September, the stock of external reserves, at $2.577bn, was equivalent to an estimated 30.5 weeks of the current year’s total merchandise imports (including oil purchases), as compared to 43.3 weeks in the same period of 2022,” the Central Bank report added.

“After adjusting for the 50 percent statutory requirement on the bank’s demand liabilities, ‘useable’ reserves decreased by $73.7m (5.9 percent) to $1.172bn vis-à-vis the corresponding quarter in 2022.”