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Profitability for banks rises

Profitability for local banks increased 34 percent to$62.3 million according to the latest quarterly report from the Central Bank of The Bahamas, with the former minister of finance saying more loan payments by customers could have been a contributing factor.

James Smith toldGuardian Businessyesterday that clients that are making more payments played a role in the growth in banks’profit rise, along with other factors.

“The banks are probably getting bigger spreads now,”Smith said.”Customers are probably paying a little bit less on deposits and a little more on loans. Bad loans were providing for them but in spite of that they are still doing quite well with the good customers.”

The figures were revealed in the Central Bank’s Quarterly Economic Review for September 2010, which compiled data between April and June. Net interest income increased by 2.2 percent compared to the same period last year, and commission and forex income also rose 62.8 percent, which played a big part in widening the gross earnings margin by 3.9 percent to$132.2 million.

Losses on non-loan activities for banks decreased by$15.7 million to$0.6 million, which the report attributes to a$26.5 million decrease in provisions for bad debts. Operating expenses also rose during that period, with a 7.5 rise to$69.3 million coming from increased staff levels and a 14.2 percent growth in operating costs.

While Smith mentioned that Bahamians are probably making less deposits and more payments over the past couple of months, figures in the report reflect such a trend, with foreign currency deposits by residents decreasing 8.8 percent–which was a 14.5 percent increase during the same period last year. Private sector savings deposits dropped$6.4 million, and demand deposits fell by$11 million.

Despite an upturn in bank profitability, financial institutions still buffed up their loan loss provisions, which increased to$264.2 million, indicating that a rise in delinquencies made banks take more precautionary measures. But Smith said financial institutions are usually prepared for these situations in terms of debt.

“Banks are always one step ahead and they are pretty good on who they lend to in most cases,”he said.

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