Net interest income drives Q1 bank profits
Bermuda’s banks recorded growth in their combined net income as the sector’s net after-tax income amounted to $154.2 million in the first quarter of 2023.
That was up by $18.2 million from the prior quarter or a 13.4 per cent improvement.
The Bermuda Monetary Authority’s quarterly banking digest said this was primarily driven by the increase in net interest income, which amounted to $205.9 million at the end of the first quarter, a 7.3 per cent or $14.1 million increase compared to the prior quarter.
The report said: “Banks continue to benefit from the rising interest rate environment, contributing to higher net interest income.
“Non-interest income totalled $77.8 million, down 3.9 per cent (or $3.1 million) from last quarter. Total income for the quarter was $283.7 million, representing a 4 per cent (or $10.9 million) increase from the prior quarter.
“Total expenses for the quarter amounted to $128.9 million, a decline of 5.3 per cent (or $7.2 million) compared to the prior quarter.
“The sector’s efficiency ratio stood at 45.4 per cent, an improvement of 4.5 percentage points over the previous quarter.”
The report notes, however, that banking sector assets contracted by 6.2 per cent (or $1.6 billion) to $24.4 billion for the quarter.
The decline is reflected entirely, it says, in the decrease in interbank deposits (down 31.7 per cent) and investments (down 2.5 per cent) for the quarter.
Stability ratios remained conservatively strong, as the capital position continues well above the minimum regulatory requirements and buffers.
The ratio of non-performing loans to total loans increased to 5.7 per cent in the first quarter of 2023 from 5.1 per cent the previous quarter, while the ratio of provisions to NPLs fell marginally to 25.8 per cent from the 26.8 per cent the previous quarter.
The quarterly compilation of statistics also showed the third drop in customer deposits of foreign currency in the last five quarters, and the largest one yet, as foreign currency assets also dropped for the third time over the same period.
The report stated: “FX assets stood at $21.1 billion, a 7 per cent (or $1.6 billion) decline from the previous quarter. FX customer deposit liabilities amounted to $17.9 billion, a decrease of 9.1 per cent (or $1.8 billion) from the prior quarter and down 16.4 per cent (or $3.5 billion) compared to the same quarter last year.
“The quarterly decline was driven by lower FX demand deposits which fell by 17.9 per cent (or $1.9 billion) to $8.7 billion, partly offset by an increase in FX time deposits which grew by 3.1 per cent (or $0.1 billion) to $3.8 billion while FX savings deposits remained unchanged.”
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