The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian jobs in the commercial banking sector contracted by 7 per cent in 2015, as outsourcing and technology continued to take a toll on employment levels.

The Central Bank of the Bahamas’ annual financial services industry survey found that the banking sector remained “in retrenchment mode”, although sectors such as insurance and investment funds showed improved signs of recovery.

However, some 244 Bahamian jobs in the commercial banking industry were eliminated in 2015, exceeding the 4.3 per cent ‘attrition rate’ seen in the prior year.

“As firms continued to streamline their operations through, inter alia, the use of technology and outsourcing arrangements, employment in domestic banks fell by 7.2 per cent to 3,253 persons, extending the 4.4 per cent fall-off in the prior year,” the Central Bank said.

“In terms of the composition of employment, the number of Bahamians working in domestic banks decreased by 244 persons (7 per cent) to 3,224, exceeding the 4.3 per cent loss registered in 2014. The number of non– Bahamians also contracted to 29 from 39 persons, extending the 9.3 per cent reduction in the previous year.”

The survey results suggest that Bahamas-based commercial banks continued to ‘right-size’ staffing levels 2015, bringing them into line with market conditions still dominated by high non-performing loan levels and reduced profitability.

As for the international bank and trust company sector, the Central Bank survey found that Bahamian employment “steadied” at 850, while there was a small decline of eight in its expatriate component.

The findings suggest that the Bahamian financial services sector’s ‘slow burning’ decline continues, with the ‘second pillar of the economy’ struggling for growth that appears increasingly elusive.

Reviving the industry is key to a Bahamian economic rebound, given that it has the greatest concentration of high-paying jobs, has driven the creation of a middle class, and generates between 20-30 per cent of gross domestic product (GDP).

“Preliminary evidence from the 2015 survey suggests that banks and trust companies’ expenditure contribution to the economy rose at a mild pace in 2015, although operations and, consequently, employment remained in a retrenchment mode,” the Central Bank added.

“The non-bank financial sector - inclusive of insurance companies, credit unions, mutual funds administrators and financial and corporate service providers - sustained a more broad-based, positive growth trajectory.”

The total number of licensed bank and trust company operators fell by five to 249 in 2015, following a 14-strong contraction the previous year.

“Balance sheet retrenchment continued in both sectors,” the Central Bank survey found. “Although total assets of domestic banks grew mildly by 1.8 per cent to $9.8 billion, the private sector credit portfolio continued to contract, given persistent lending risks summarised in above trend non-performing loan rates.

“Meanwhile, with ‘re-domiciling’ activities, the total assets of the international bank and trust sector fell by 6.4 per cent to $180.5 billion, moderating the 22.1 per cent decline recorded in 2014, when one institution transferred its treasury portfolio to its home jurisdiction.

“ Similarly, due principally to the result of a reclassification exercise by reporting institutions, the value of fiduciary assets under management declined sharply by an estimated 64.5 per cent to $79.2 billion, following an 8.2 per cent fall in the prior year.”

The banks also endured a 23.6 per cent increase in total fees paid to the Government, which hit $64 million in 2015. The rate of increase, though, was much less than the 56.9 per cent recorded in 2014, when the Christie administration introduced its 3 per cent Business Licence fee.

Some $51.3 million of this sum was paid by the domestic commercial banks, who saw their tax and fee payments rise by 25.9 per cent - a rate “significantly lower than the almost two-fold increase in 2014”.

“Domestic banks and trusts companies’ total expenditures grew by 4.4 per cent to $442.4 million, exceeding the year earlier 3.2 per cent expansion,” the Central Bank said.

“In terms of the components, operational costs - at 95.3 per cent of the total - rose by 4.3 per cent to $421.6 million, surpassing the 2.4 per cent gain recorded in the prior year....

“ In contrast, salary payments declined by 1.3 per cent to $176 million, reflecting a fall-off in base pay that outstripped the higher bonus payments.”

Commercial banks increased their staff training budgets slightly to a collective $1.2 million, while their capital spending rose by 6.2 per cent year-over-year in 2015 to $20.8 million - extending the 23.2 per cent increase in 2014.

Employees of Bahamas-based international bank and trust companies, meanwhile, saw a 2.8 per cent reduction in salary compensation to $125 million.

The Central Bank also reiterated that it was monitoring correspondent bank ‘de-risking’ trends, as these had forced to Bahamas-based commercial banks, and four international institutions, to find new partner relationships during the 2015 first half.

As for other sector, the Central Bank survey found that domestic Bahamian insurers enjoyed a 6.5 per cent increase in their total asset base to $1.769 billion. This was generated by 9 per cent growth increase in life insurance assets, which account for 74.2 per cent of the total.

“The total number of persons employed rose by an estimated 3.5 per cent (47 persons) to 1,383 during the review period, owing primarily to growth in the dominant Bahamian segment - at 97.9 per cent of the total - to 1,354 persons, while the total number of non-Bahamians steadied at 29 persons,” the survey found.

Data supplied by the Securities Commission showed that the total number of Bahamas-domiciled investment fund administrators rose by five to 67 in 2015, with funds under management growing by 54 to 858.

“Active mutual funds under management expanded by 22 (2.6 per cent) to 863, reflecting an increase in SMART fund registrations by 31 (6 per cent) to 544,” the Central Bank said.

“In contrast, professional funds and recognised foreign funds, fell by eight (3.2 per cent) and 1 (2.2 per cent) to 239 and 44, respectively, while standard funds remained unchanged at 36.”