NASSAU, BAHAMAS: The Bahamas’ banking sector remained resilient in 2025, with domestic banks recording higher assets, increased profits and improved loan performance, while the Central Bank reported no immediate financial stability concerns.
The 2025 Financial Stability Report found that total domestic banking assets grew by 4.6 percent to $12.7 billion last year, driven by continued expansion in lending and stronger investment in securities. Loans and advances rose by 3.9 percent to remain the largest asset class, accounting for 56 percent of banks’ portfolios, while holdings of securities increased by 11 percent.
Despite a slight decline, banks’ capital positions remained well above regulatory requirements. The average capital adequacy ratio stood at 29.1 percent at the end of 2025, comfortably exceeding the Central Bank’s minimum requirement of 17 percent and the international benchmark of 8 percent.
The banking sector also recorded further improvements in credit quality, with total private sector loan arrears falling by $7.7 million, or 1.6 percent, to $461.8 million. Non-performing loans declined by 4.6 percent to $303 million, pushing the ratio of non-performing loans to total private sector lending down to 5 percent.
However, the report noted some emerging pressure in commercial lending, as commercial non-performing loans increased by 51.7 percent, while short-term commercial arrears also rose during the year.
Banks’ profitability continued to strengthen, with net income climbing 9.7 percent to $553.6 million. Returns on equity improved to 26.4 percent, while returns on assets increased to 4.36 percent, reflecting stronger fee income and continued loan growth.
Liquidity across the banking system also remained robust. Liquid assets accounted for 38.2 percent of total assets, while deposits continued to significantly exceed loans, with the deposits-to-loans ratio rising to 141.2 percent.
The Central Bank said stress tests showed the banking system remains resilient even under severe economic shock scenarios. Simulated increases in non-performing loans of up to 200 percent did not reduce banks’ capital below the regulatory minimum, meaning no additional capital injections would be required.
The report concluded that there are “no immediate financial stability concerns”, citing commercial banks’ strong capital buffers, ample liquidity and satisfactory provisioning levels.
Beyond the banking sector, the report showed credit unions expanded their total assets by 5.6 percent to $546.7 million, while member loans increased 7.5 percent and deposits rose 4.8 percent. Capital levels remained above international benchmarks despite the sector’s continued concentration in tourism-related lending.
The insurance sector also maintained steady growth, with life insurers’ assets increasing 6.5 percent to $1.4 billion, while non-life insurers’ assets grew 7.4 percent to $633.7 million. Profitability improved across both segments, and the insurance penetration ratio remained stable at 2.9 percent of GDP.
The report also highlighted continued growth in digital payments. The value of transactions processed through the Real Time Gross Settlement system rose 1.2 percent to $31.3 billion, while retail electronic payments processed through the Bahamas Automated Clearing House increased 9.9 percent to $11.4 billion.
Debit card transaction volumes surged 19.7 percent to 34.3 million, although their overall value declined as consumers increasingly used cards for smaller purchases. Credit card issuance also increased 5.6 percent, with outstanding balances rising 7.1 percent to $272.4 million.
The Central Bank said the expansion in electronic payments reflects growing consumer confidence in digital banking and ongoing efforts to promote cashless transactions, alongside continued work toward introducing a national Fast Payment System.
