Bermuda’s banking sector is seeing a clear drop in loan activity with data showing a steady decline throughout 2024. Total loans fell for three straight quarters before levelling off at zero growth in the final quarter of the year.

“The overall trend in loans, good loans as well as non-performing loans, is down,” said Geoff Scott, the chief executive of the Bermuda Bankers Association.

While it might seem like banks are pulling back, Mr Scott said that was not the case. “Absolutely not. The banks are actually in business … it's pretty tough for the four banks here, because they're competing for what is really like a shrinking market."

Residential mortgages have stayed fairly steady, making up 54 per cent to 55 per cent of all loans. That suggests the housing market is holding up better than other areas. “Mortgages are at 54 per cent of total loans,” Mr Scott noted.

He added that banks relied on steady real estate activity to keep new business coming in.

So why is the market shrinking? “Because there are not enough real estate transactions happening. It's a slower market,” Mr Scott explained. Without those transactions, banks cannot issue as many new mortgages or business loans.

Still, there are some positives. The share of non-performing loans — those where borrowers are behind on payments — actually dropped from 5.5 per cent to 4.9 per cent between September and December, showing that most customers are keeping up with their debt.

Mr Scott said the bigger issue was simple: “Banks need houses to sell so they can provide mortgages, new mortgages. They need people to buy cars and furniture and equipment and small businesses to invest in their businesses."

The way forward, he believes, is economic growth. “Whatever we can do in Bermuda to spur economic growth would be the way to reverse that trend. We need more things happening in Bermuda, more growth, more local business, more construction."

For now, the industry is staying positive. “We need investments in business and assets and things like that, which will drive more business for the banks,” Mr Scott concluded.