Bermuda's Banking Sector Assets Decline by $500 Million in Q4 2023

Bermuda's banking sector experienced a 2.1% decrease in assets, amounting to a $500 million decline, during the fourth quarter of 2023, as reported by the Bermuda Monetary Authority's quarterly banking digest. The contraction in total assets was primarily driven by an 18.8% ($600 million) decrease in interbank deposits and a 10% ($100 million) reduction in other assets. These declines were partially offset by a modest 1.8% ($200 million) increase in investments.

On a year-over-year basis, the banking sector's total assets saw a more significant decline of 8.8%, or $2.3 billion, largely attributed to a decrease in customer deposit liabilities. Despite the overall contraction, the sector's net after-tax income rose by 5.7% ($7.5 million), while net interest income decreased by 5.9% ($9.6 million). Non-interest income, on the other hand, increased by 11.9% ($9.2 million).

The banking sector's efficiency ratio improved, with a 2.4 percentage point decline to 50%. The ratio of provisions to non-performing loans also decreased by 1.1 percentage points to 26.3%. Notably, the capital adequacy and leverage measures remained well above the minimum regulatory requirements, indicating the sector's resilience.

Why this matters: The decline in Bermuda's banking sector assets reflects the ongoing challenges faced by the industry in the current economic climate. As a key pillar of Bermuda's economy, the performance of the banking sector has broader implications for the country's financial stability and growth prospects.

In a related development, the Bank of NT Butterfield & Son Ltd, a Hamilton, Bermuda-based bank, reported a net income of $53.4 million for the first quarter of 2024, with earnings of $1.13 per diluted common share. This compares to $53.5 million ($1.11 per diluted common share) in the previous quarter and $62.2 million ($1.24 per diluted common share) in the first quarter of 2023. The bank's return on average common equity stood at 21.5%, down from 22.5% in the previous quarter and 28% in the first quarter of 2023.

Michael Collins, the bank's chairman and CEO, expressed confidence in the bank's strong profitability and its ability to deliver top-quartile returns relative to US regional banks. "The bank remains highly liquid with strong capital levels and has a loan portfolio primarily comprised of well-collateralized residential mortgages," Collins stated, highlighting the bank's resilience in the face of the sector's challenges.

Key Takeaways

• Bermuda's banking sector assets fell 2.1% ($500M) in Q4 2023 due to declines in interbank deposits and other assets.
• Year-over-year, the sector's total assets declined 8.8% ($2.3B) due to lower customer deposit liabilities.
• The sector's net after-tax income rose 5.7% ($7.5M), while net interest income fell 5.9% ($9.6M).
• The banking sector's efficiency ratio improved, and capital adequacy remained well above regulatory requirements.
• Bank of NT Butterfield reported Q1 2024 net income of $53.4M, down from $62.2M in Q1 2023, with a 21.5% return on equity.