Bermuda’s banks saw non-performing loans edge higher in the first quarter of 2025, even as profits more than doubled, according to the Bermuda Monetary Authority’s Quarterly Banking Digest.

The ratio of non-performing loans to total loans climbed to 5.1 per cent, up from 4.9 per cent at the end of 2024. At the same time, provisions to cover bad loans fell to 23.8 per cent of NPLs, down from 25.7 per cent. The figures suggest banks are carrying slightly more credit risk with thinner buffers against potential losses. The BMA said while profitability and capital buffers are strong, the increase in non-performing loans indicates continuing risks in the loan book.

Despite the uptick in loan stress, the sector recorded a dramatic turnaround in earnings. Net profit after-tax reached $115.1 million, a 138.9 per cent increase over the previous quarter, lifting the annualised return on equity to 26 per cent. Return on assets also improved to 0.5 per cent.

Capital adequacy remains strong, with the risk asset ratio at 28.3 per cent and the common equity tier 1 ratio at 26.8 per cent, well above Basel III requirements.

Total assets rose to $24.4 billion, up 3.4 per cent over the quarter, led by a $1.2 billion (50 per cent) jump in interbank deposits. Loans and advances grew modestly by 1.3 per cent, while investment holdings fell by 4.8 per cent.

Customer deposits increased by 3.8 per cent ($0.8 billion), with strong growth in demand and savings accounts offset by a decline in time deposits. Liquidity strengthened, with the loan-to-deposit ratio easing to 36.7 per cent.