The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

BAHAMIAN commercial banking industry profits surged by a collective $49m in 2025 to breach the $550m mark as regulators hailed the financial services industry’s stability despite a slight “ebb” on the bank side.

The Central Bank, unveiling the 2025 Financial Stability Report, revealed that commercial bank profits generated by the likes of Royal Bank of Canada, Scotiabank and CIBC Caribbean, as well as locally-owned Commonwealth Bank, Fidelity Bank (Bahamas) and Bank of The Bahamas, increased by more than $151m in two years as the industry’s post-COVID rebound continues. Last year’s combined net income rose by almost 10 percent,.

“Domestic banks’ net income strengthened in 2025 by $49.1m (9.7 percent) to $553.6m after a $102.2m (25.4 percent) expansion in 2024,” the Central Bank disclosed. “As a result, the ratio of net income to equity (return on equity) rose to 26.4 percent from 23 percent in 2024, while the ratio of net income to average monthly assets (return on assets) firmed to 4.36 percent rom 4.16 percent in the prior year.

“By components, the ratio of net interest income to average assets eased to 4.82 percent from 5.02 percent, while the ratio of commission and foreign exchange income to average assets firmed by 57 basis points to 1.45 percent. This resulted in a slightly strengthened gross earnings margin by four basis points to 6.4 percent.

“Meanwhile, as the operating costs ratio moved higher by ten basis points to 4.36 percent, the net earnings margin gained only 30 basis points to 1.9 percent. Improved credit quality trends enhanced the net income performance to a lesser extent than in 2024, as banks reduced total provisions for bad debt by approximately two-thirds less,” the banking regulator added.

“This outcome, alongside other, mainly fee-based income growth and steadied depreciation costs, supported a lessened contribution from other net earnings in the return on assets of 2.43 percent as compared to 2.55 percent the previous year.”

As for banking asset quality, the Central Bank said of the full-year 2025 outcome: “Domestic banks’ credit quality indicators continued to improve, undergirded by sustained economic growth and ongoing loan write-offs. Total private sector loan arrears fell by $7.7m (1.6 percent) to $461.8m, although a slowdown from the $92.2m (16.4 percent) contraction in 2024.

“The moderation was attributed to the reduction in mortgage arrears, outweighing the increases in commercial and consumer delinquencies. As a result, the ratio of arrears to total private sector loans narrowed by 51 basis points to 7.6 percent compared to the 2.2 percentage point fall-off in 2024. A breakdown by average age of arrears indicated that the non-performing loan (NPL) segment decreased by $14.7m (4.6 percent) to $303m, trailing the $43.8m 12.1%) retrenchment in the prior year.

“Reflecting this outturn, mortgage and consumer non-performing loans declined by $27.9m (13.5 percent) and $0.5m (0.6 percent), respectively. However, commercial non-performing loans grew by $13.8m (51.7 percent),” the Central Bank added. “Further, short-term arrears, 31–90 days past due, increased by $6.9m (4.6 percent) to $158.8m, a reversal from a $48.3m (24.2 percent) reduction in 2024.

“Contributing to this outcome, the commercial portion rose by $4.2m (72.5 percent) and consumer arrears by $3.1m (7.2 percent). In contrast, mortgage arrears edged down by $0.4m (0.4 percent). As a result, the ratio of non-performing loans to total private sector loans declined by 50 basis points to 5 percent, while the ratio for short-term arrears remained unchanged at 2.6 percent.”

The Central Bank, together with other Bahamian financial services regulators, said “financial stability risks within The Bahamas’ financial sector remained well contained” during 2025, and in the outlook for this year, despite the multiple geopolitical uncertainties impacting the world economy which are “underscoring slightly elevated risks over the near-term”.

It added that, while the Bank Stability Index eased slightly in 2025, it remains in strong, healthy territory. “In 2025, commercial banks maintained robust capital buffers and satisfactory provisioning levels, which resulted in no new concerns arising regarding stability in the banking sector,” the Central Bank asserted.

“The consolidated stress tests results, inclusive of credit, liquidity and interest rate risks, underscored resilience with capital ratios under simulated shocks staying above the regulatory minimum of 17 percent given a baseline average capital to risk-weighted assets ratio which fluctuated between 35 percent and 38.5 percent.

“However, the Bank Stability Index (BSI) ebbed slightly in 2025 as compared to 2024. Similarly, the Aggregate Financial Stability Index (AFSI) softened, relative to the previous year, reflecting the rise in global economic uncertainties.”

However, the Central Bank continued: “The stability within the domestic financial system remains buttressed by strong capital and liquidity buffers among systemically important institutions, improving balance sheet strength and strengthening co-ordination mechanisms among key Bahamian financial sector regulators and through the Bahamas Financial Stability Council (BFSC).

“In its first full year of proceedings, the Council agreed to pursue near-term priorities, which included strengthening the analytical framework for financial stability, particularly around interconnectedness across key sectors, assessment of climate and cyber security related risks and improving data coverage.

“Against this backdrop, the Central Bank, in collaboration with Council members, continues to monitor trends in the financial system with the aim of identifying any emerging risks - both domestic and external - to stability.”

The regulator added: “As to the level of interconnectedness in the banking system, network analysis revealed that despite some interconnectedness between domestic banks, the high capital and liquidity ratios mitigate any related systemic risk. In addition, contagion risks remained low as a result of banks’ small exposures relative to capital levels.

“The credit union sector continued to perform strongly, with improved credit quality and overall balance sheet indicators. Nevertheless, profitability was marginally reduced and average liquidity slightly moderated. Nevertheless, capital adequacy levels continued to exceed the international PEARLS benchmark.”