The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian financial services industry shed almost 160 jobs in 2020, a Central Bank report has revealed, with the banking sector suffering multi-billion dollar declines in “balance sheet” and “fiduciary” assets.

The regulator, in its annual assessment of the industry’s contribution to Bahamian economic output, acknowledged that the “business footprint of the sector remained structurally challenged” with the challenges posed by the COVID-19 pandemic adding to the ever-escalating regulatory pressures on the international segment.

The survey also noted a significant drop in the number of Bahamians working in the international financial services industry compared to expatriates. Total Bahamian workers declined by 90 in 2020, while the sector’s collective expatriate staff expanded by three, thus dropping the ratio of Bahamian staff to expatriates from 3.8:1 (close to four to one) to 3.2:1 (closer to three to one).

However, despite the fall-off in employment, plus client and balance sheet assets, the Central Bank’s survey findings painted a somewhat mixed picture by noting that the financial services industry’s total spending rose by $9m in 2020 to just under $780m while also generating a 4.4 percent year-over-year increase in government fees and taxes to $164.4m.

“Increased operations efficiency remained a focus, including for supplies of domestic financial services, with gradually reducing levels of employment,” the Central Bank said of 2020. “The annual outcomes nevertheless continue to indicate incremental gains in value-added from expenditures in the economy, given modest increases in taxes and government fees and a firming in other operating costs.

“In 2020, the estimated balance sheet size of financial sector operations reduced, evidenced by a decline in assets holdings within the banking sector. Specifically, on balance sheet assets contracted by approximately $13.5bn (7.2 percent) to $172.8bn, as the fall-off in international bank assets outweighed the growth in domestic bank assets. With regard to fiduciary assets, a reduction of $39.4bn (15 percent) was registered in 2020 for an end balance of $223.2bn.

“Nevertheless, the sound regulatory regime and pool of professionals supporting the industry continue to promote The Bahamas as a choice jurisdiction, adding value for clients in varied dimensions.”

Confirming the continual attrition, or whittling away, of an industry that provides some of The Bahamas’ most lucrative high-paying jobs and has driven the growth of a Bahamian middle class, the Central Bank report said: “Total employment within banks and trust companies declined by 158 (3.9 percent) to approximately 3,843 in 2020, extending the 1.2 percent decrease in 2019 and an average yearly fall-off of 2.2 percent over the past five years.

“An analysis by nationality revealed that both Bahamian and non-Bahamian positions reduced by 155 (4.1 percent) and three (1.2 percent) to 3,599 and 244, respectively. Consequently, the ratio of Bahamians in the banking sector narrowed by ten basis points to 93.7 percent, vis-à-vis the same period in 2019.

“A disaggregation by assigned functions showed that a majority of Bahamians were engaged in local banking sector roles (66.6 percent), followed by international banking (13.9 percent), trust administration (11.3 percent) and other wealth management related activities (8.2 percent).”

Breaking this down between the domestic (commercial banks) and international financial services, the Central Bank report found: “During the year, total employment in the domestic banking sector decreased by 71 (2.2 percent) to 3,124, a turnaround from a 0.4 percent increase in 2019 and an average yearly reduction of 0.4 percent between 2015 and 2019.

“Similarly, international sector employees contracted by 87 (10.8 percent) to 719, extending the 7 percent fall-off in the year prior and an average yearly contraction of 7.8 percent over the past five years. In terms of the composition, the total number of Bahamians within the domestic banking sector fell by 65 (2.1 percent) to 3,051, after remaining unchanged during the previous year.

“In addition, total non-Bahamian employees declined by six (7.6 percent) to 73, contrasting with a 19.7 percent growth in 2019. As a result, the ratio of Bahamian to non-Bahamian employees firmed to 41:1 from 39:1 in the prior year,” the report added.

“In the international sector, total Bahamian staff lessened by 90 (14.1 percent) to 548, compared to a 6.7 percent fall-off in 2019. However, the number of non-Bahamians rose slightly by three (1.8 percent) to 171, vis-à-vis an 8.2 percent decline last year. Consequently, the ratio of Bahamian to non-Bahamian employees narrowed to 3.2:1 from 3.8:1 a year earlier.”

The Central Bank report noted that “significant severance payouts” were made by the financial services industry in 2020, and that the reduction in staffing numbers was offset by gains in earnings and general salaries.

“Average compensation in the international sector grew by $10,807 (9.6 percent) to $123,227 per annum. In addition, the average salary for the domestic banks rose by $3,703 (6.6 percent) to $59,411 per annum,” the survey added.

The total number of licensed banks and trust companies in The Bahamas declined by four to 217 in 2020, after a ten-strong decrease the prior year. “Total domestic assets within the banking sector grew by 2 percent to $10.9bn in 2020, albeit lower than the 7.4 percent growth in 2019, and average annual growth of 2.1 percent over the past five years, largely explained by an expansion in credit to the Government,” the Central Bank report said.

“In contrast, total assets of the international banking sector contracted by 8.7 percent to $153.3bn, a reversal from a 1.1 percent gain in the previous year. This, however, continued an average annual decrease of 4.9 percent over the last five years.”

Turning to bank spending, the report added: “During 2020, total expenditure in the banking sector grew by $9m (1.2 percent) to $779.8m, just below the 1.4 percent increase a year earlier, and average annual spending gains of 1.5 percent over the last five years.

“Contributing to this outturn, total operational costs - representing 97.8 percent of expenditure - increased by $10.4m (1.4 percent) to $762.7m, although below the 2.4 percent growth last year. In terms of the components, salaries were higher by $4.4m (1.4 percent) at $319.5m, a turnaround from a 4.4 percent reduction in 2019.

“This reflected a 2.1 percent gain in base salaries, which offset the 2.6 percent decline in bonuses. Further, other administrative costs advanced by $11.1m (3.1 percent) to $364m, albeit lower than the 7.2 percent growth last year, attributed to a rise in local banking merchant fees,” the Central Bank added.

“In contrast, Government fees reduced by $3.7m (4.6 percent) to $78m, a reversal from a 12 percent increase in 2019, underpinned by decreases for work permits and stamp duty. In addition, spending on staff training lessened by $1.4m (53.2 percent) to $1.2m, extending the 13.8 percent fall-off in 2019.”