Business
Central Bank of Barbados issues new report analyzing financial services
The Bank of Barbados said Monday that the principal impact of the weak economic environment on the local financial sector continues to be anaemic loan growth across the sector.
The Bank of Barbados said there has been no overall growth in commercial bank lending to the non-financial private sector since September 2011.
It said residential mortgages, which comprise about half of all personal loans, grew by 6.5 percent over the past year, but loans and advances to firms in tourism and construction fell by 2.4 and 8.7 percent, respectively.
Credit card debt fell by about one per cent since September 2011.
“The majority of commercial banks’ credit continues to be concentrated in the personal sector, which accounts for almost half of total loans outstanding. Loans to the professional services are the second largest component of total credit.”
Outside of loans, banks’ asset portfolios consist largely of Treasury bills. There has been no significant change in banks’ foreign assets since September 2011.
“The banking industry remained profitable over the first quarter of 2012. The annualized rate of return on assets and rate of return on equity were 1.6 percent and 7.6 percent, respectively, compared with an average return on equity of 9.5 percent and on assets of 1.1 percent, over the past 2 years,” the CBB added.
The Bank of Barbados, along with the Financial Services Sector, has released the first update of the Financial Stability Report that analyses a range of financial stability indicators for banks and other financial institutions, as well as balance sheet and income and expenditure trends.
It said commercial banks and other deposit taking institutions remained profitable and well capitalized, although there continues to be some deterioration in credit quality.
“In response to the increase in credit risk since the onset of the crisis, banks have increased the level of provisioning, enhancing their capital buffer as a result. The major insurance companies were generally profitable although there was only modest growth in their Barbadian-based business.”
It said the major publicly listed insurance companies in the Caribbean were all profitable over the first quarter of 2012.
Sagicor Financial Corporation, the largest provider of insurance, recorded an increase in earnings to US$0.2 cents per share at the end of March 2012, compared to a loss of US$0.6 cents per share in the first quarter of 2011.
The Bank of Barbados said the improved performance was as a result of the absence of extraordinary claims impacting the company’s European business, which drove the 2011 out-turn.
Guardian Holdings Limited, the parent company of Guardian General Limited, reported a 16.7 percent increase in basic earnings to US$0.7 cents per share in the first quarter of 2012, with increased profitability across all segments of its business.
“However, the Insurance Corporation of Barbados reported a decline in the earnings per share to US$0.15 cents per share at the end of 2011, compared to US$0.18 cents per share at the end of 2010. The company noted the weak demand for insurance stemming from difficult economic conditions in 2011 as the primary cause of the reduction in its profitability,” the central bank said.
The Bank of Barbados said that the regulatory and supervisory framework was enhanced by the passage of the Anti-Money Laundering and Financing of Terrorism (Prevention and Control) Act 2011-23 in November last year, while the Central Bank issued new policy guidelines on its intervention policy and on the management of credit risk. – CMC