After three straight quarters of contraction in 2024, Bermuda’s banks are reporting tentative signs of growth in lending, with new activity emerging in the commercial sector.

Total loans edged up 1.3 per cent in the first quarter of 2025, according to the Bermuda Monetary Authority’s Quarterly Banking Digest. Neville Grant, the chief executive of the Bermuda Bankers Association, said the uptick reflects the state of the wider economy.

“Typically lending tracks to economic growth,” Mr Grant said. “Residential mortgages remain constrained by the lack of inventory and activity in the real estate market. However, commercial lending has seen recent activity, and there are other bankable potential opportunities on the horizon. Bermuda’s banks remain focused on supporting quality bankable loans.”

The lending increase comes as total banking assets rose to $24.4 billion, up 3.4 per cent on the quarter, fuelled by a sharp rise in interbank deposits and steady growth in customer deposits. Demand deposits rose nearly 10 per cent, helping to push the sector’s loan-to-deposit ratio down to 36.7 per cent.

Mr Grant said the lower ratio is not a sign of weak appetite to lend but reflects Bermuda’s role as a small financial centre. “Lower loan-to-deposit ratios are common in jurisdictions such as Luxembourg or Ireland, where large institutional deposit balances outweigh lending opportunities,” he said. “Bermuda’s banks have a strong appetite for both local and international lending, balanced with conservative and rigorous underwriting.”

The report also showed the ratio of non-performing loans rising slightly to 5.1 per cent, up from 4.9 per cent in December. But Mr Grant emphasised the longer trend: “Non-performing loans are down year over year … so there should be no need for concern.”

He emphasised that Bermuda’s banks remain “strongly capitalised above required ratios, conservatively managed and subject to robust regulatory oversight, which together mitigates systemic risks”.