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Durrant Pate/Contributor

The loan portfolio in Jamaica’s credit unions is slowing down based on the latest numbers coming out of the Bank of Jamaica (BOJ).

The data shows that the loan portfolio for 2025 grew at a slower pace of 7.2 per cent ($9.8 billion) to $147.1 billion, down from an expansion of 12.5 per cent ($15.2 billion) recorded in 2024. Notwithstanding the slowdown in loan growth, loans remained the dominant asset category for credit unions, accounting for 68.2 per cent of total assets at end-2025, compared with 69.1 per cent recorded at end-2024. 

The BOJ says “the outlook for loan growth in the near-term is positive based on the expectation that there will be increased demand to assist with reconstruction and recovery activities arising from the passage of Hurricane Melissa. Liquid funds held with the Jamaica Co-operative Credit Union League Limited increased by 8.5 per cent ($1.3 billion) to total $17.0 billion at end-2025 compared with 10.0 per cent ($1.4 billion) in 2024.”

Total investments improve

At the same time, total investments increased by 8.7 per cent ($2.2 billion) to $27.1 billion at end-2025, in contrast to a contraction of 7.7 per cent ($2.1 billion) in 2024. During 2025, there was a deterioration in credit quality in the sector. 

This deterioration was in the context of significant growth of 15.9 per cent ($0.6 billion) in non-performing loans (NPLs) to $4.5 billion at end-2025. The higher level of NPLs resulted in an increase in the ratio of NPLs to total loans to 3.1 per cent at end-2025, up from 2.9 per cent a year earlier. 

Loan loss provisions for the sector went up 19.0 per cent ($0.7 billion) to $4.1 billion at the end of 2025. This resulted in an increase in the coverage of NPLs by provisions to 90.1 per cent at year-end, from 87.8 per cent at end-2024. 

NPLs are projected to continue to rise as borrowers’ repayment capacity is expected to be impaired by dislocation caused by Hurricane Melissa. 

Dwindling profitability

For the 2025 financial year, credit unions’ surplus declined significantly by 22.7 per cent ($0.7 billion) to $2.2 billion, in contrast to the growth of 57.8 per cent ($1.1 billion) in 2024. The decline in profitability was primarily due to the combined effect of increases of 14.8 per cent ($2.2 billion) and 18.6 per cent ($0.5 billion) in overhead expenses and interest expenses, respectively. 

The growth in total expenses for 2025 outpaced revenue growth of 10.0 per cent ($2.0 billion) to $22.3 billion. According to the 2025 Annual Report of the BOJ, recently released, “this growth was largely influenced by a 12.1 per cent ($1.8 billion) increase in interest income on loans to $16.8 billion, up from the 5.5 per cent ($0.8 billion) growth recorded in 2024, tempered by a 7.1 per cent ($0.2 billion) contraction in interest income on investments to $2.0 billion.”

Non-interest income recorded a significant increase of 12.7 per cent ($0.3 billion) to total $2.9 billion at end-2025, down from the 7.7 per cent ($0.2 billion) contraction in 2024. The increase in overhead costs during the review year was largely driven by increased provisions for loan losses and administrative expenses of 45.9 per cent ($0.7 billion) and 16.7 per cent ($0.9 billion), respectively. 

These increases were largely due to the deterioration in the loan portfolio as well as increases in information technology and security costs. Staff expenses also recorded an increase of 7.9 per cent ($0.6 billion) to $7.9 billion. 

Consequently, operating efficiency deteriorated to 89.1 per cent at end-2025, from 84.3 per cent at end-2024. In the context of the reduction in surplus, profitability indicators for the sector declined in 2025. The credit unions’ net profit margin, return on equity and return on assets declined to 10.6 per cent, 6.5 per cent and 1.1 per cent, respectively, from 14.2 per cent, 9.3 per cent and 1.6 per cent in 2024. 

Profitability indicators going south 

In the context of the reduction in surplus, profitability indicators for the sector declined in 2025. The credit unions’ net profit margin, return on equity and return on assets declined to 10.0 per cent, 6.6 per cent and 1.1 per cent, respectively, from14.2 per cent, 9.3 per cent and 1.6 per cent in 2024. 

The net interest margin remained stable at 9.0 per cent for both years, as the increase in interest income kept pace with the growth in earning assets. Assets within the credit union sector grew by $17.1 billion (8.6 per cent) to $215.6 billion in 2025. This growth was largely in line with the $18.1 billion (10.0 per cent) growth recorded in the prior year.

The capital base for the sector increased by 4.7 per cent ($1.1 billion) to $24.3 billion during the year. This outturn was lower than the growth of 16.3 per cent ($3.2 billion) to $23.2 billion for 2024. The primary ratio moderated to 11.4 per cent at the end of 2025, from 11.9 per cent at end-2024, due to a greater than proportionate increase of 8.6 per cent in assets vis- à-vis the growth of 4.7 per cent in capital. 

Asset growth continued to be largely funded by saving deposits, which rose by 9.2 per cent ($14.2 billion) to $168.4 billion in 2025, slightly lower than the growth of 10.1 per cent ($14.2 billion) in 2024.