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Bermuda Banking Sector Assets Fall

by Jason Gorringe, Tax-News.com, London

17 September 2012


The Bermuda Monetary Authority (BMA) has reported that customer deposits and banking assets declined in the second quarter, although capitalization levels improved.

Total customer deposits declined by 4.5% during the quarter, from BMD21.1bn (USD21.1bn) to BMD20.2bn, and by 2.5% year-on-year (from 20.9bn), mainly as a result of the withdrawal of some US dollar-denominated deposits - these were down 5.4%, with the currency now accounting for 47.4% of locally-held deposits.

For the sector as a whole, total assets decreased by 4.2% during the second quarter, from BMD24.7bn to BMD23.7bn and are down 2.8% year-on-year. The quarterly decline was mainly as a result of lower deposits with other financial institutions, which were down some 18% during the quarter, and 38.8% lower than in June 2011.

The Authority reported that some banks are continuing to experience significant asset quality challenges driven by the recessionary environment. It said that, although non-performing loans relative to total loans declined from 8.3% to 8.1%, large exposures to the real estate sector have led to a rise in specific provisioning and charge-offs, which has affected the sector's profitability.

Provisions to Non-Performing Loans increased from 16.2% in Q1 to 26.2% in Q2 2012 as a result of efforts aimed at safeguarding against the impact of future asset impairments. As a result the sector's annualized Return on Equity ratio declined from 8.9% in the first quarter to 1.2% in Q2 2012, and the annualized Return on Assets ratio fell from 1% to Q1 2012 to 0.1% in Q2 2012.

The BMA reported that solvency for the sector remains high as capitalization improved slightly during the last quarter. The aggregate risk asset ratio rose to 22.1% in Q2 2012, as net capital rose by 0.6%, while risk-weighted assets declined by 0.7%.

The leverage ratio (equity to total assets) showed improvement during the quarter rising from 11.1% to 11.6% as total assets decreased compared to the slight increase in shareholder equity (up 0.3%).

TAGS: tax | investment | banking | international financial centres (IFC) | Bermuda | offshore | offshore banking | currency

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