The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank (Bahamas) yesterday disclosed it had managed to restructure more than $80 million worth of mortgages, held by over 500 customers, within the last 18 months, telling Tribune Business just 5-6 per cent of that number had fallen back into delinquency.

Indicating that the bank’s own initiative aimed to create lasting, “sustainable” restructured solutions for its troubled borrowers, Kevin Teslyk, its managing director, indicated that changes to the qualifying criteria for the Government-sponsored Mortgage Relief Plan were being considered to enhance its effectiveness.

His comments came as fellow commercial lender, Commonwealth Bank, reported a 24.5 per cent net income decline for the first nine months of 2012 due to the factors that have impacted Bahamian bank profits and balance sheets across the board - non-performing loans and associated provisions. (See Story on Page 3B).

Commonwealth Bank’s net income would have been higher year-over-year had it not been for an 88.3 per cent increase in loan loss provisions to $30.699 million, compared to $16.305 million, during the year to end-September 2012.

The bulk of those loan loss provisions, $15.529 million or more than half the total amount, were taken in the 2012 third quarter.

Meanwhile, data released yesterday by the Central Bank of the Bahamas showed that while the Bahamian commercial banking industry’s non-performing loans situation as a whole may have stabilised, it has not begun to materially improve.

For October 2012, total loan delinquencies rose by $48.6 million or 4.2 per cent to $1.211 billion, the latter figure a sum equivalent to 19.4 per cent of all outstanding private sector loans.

The biggest chunk of the October increase came in credit between 31-90 days past due, which increased by $47.9 million to $373.7 million or 6 per cent of all outstanding loans.

Non-performing loans, those more than 90 days past due, and upon which banks have stopped accruing interest, rose only slightly by $0.7 million to $837.7 million, a sum equivalent to 13.4 per cent of total issued credit.

Mr Teslyk, meanwhile, gave an insight into the work Scotiabank (Bahamas) had done to assist its own distressed borrowers since the financial crisis struck in September 2008, and before the Government’s Mortgage Relief Plan was conceived.

He said: “As part of this effort, Scotiabank (Bahamas) formally launched a new Rehabilitation Unit – a dedicated team providing an individualised approach to evaluating customers’ personal financial positions, with a view to delivering a customised solution to rehabilitating a customer’s delinquent or non-performing mortgage or loan.

“Through these initiatives, Scotiabank (Bahamas) has assisted over 500 customers by restructuring in excess of $80 million in mortgage loans during the past 18 months alone.”

Expanding on this, Mr Teslyk told Tribune Business that mortgage restructurings had to ensure borrowers stayed current.

“It’s going to be sustainable situations, as opposed to short-term managed solutions before they fall back,” he explained.

“Of those 500 customers we had, $80 million worth of mortgages we had, less than 5-6 per cent rolled back into some form of delinquency or experienced early signs of distress. The vast majority of restructurings have stayed good.”

Mr Teslyk said Scotiabank (Bahamas) non-performing loans had started to “trickle down” during the 2012 third and fourth quarters, while those 31-90 days past due were “well below the industry average”.

Disclosing that the bank’s 31-90 days arrears loans were about half the industry’s levels, Mr Teslyk added: “It speaks to the sustainability of the programme that the mortgages and clients are not falling into default.”

Scotiabank (Bahamas) Rehabilitation Unit had some 16 staff members dispersed throughout its branch network, including the Family Islands. Many had been moved from sales, with an eight person centralised, management and administration unit, overseeing their work.

The Government’s Mortgage Relief Plan excludes home borrowers who were in arrears prior to June 2008, or fell behind after August 2012, and Mr Teslyk indicated that the latter deadline might be altered to ensure the $10 million allocated to the programme by the Christie administration was used up.

Analysing the non-performing loan situation by category, the Central Bank’s October report said: “A breakdown of the components showed that the deterioration in delinquencies was led by a $37.3 million (5.7 per cent) expansion in mortgage arrears to $697.3 million, as the short-term category grew by $29.8 million (16.7 per cent), while the non-performing component rose by $7.5 million (1.6 per cent).

“Consumer arrears were higher by $23.8 million (9.3 per cent) at $280.9 million, attributed to a $15.1 million (16.4 per cent) advance in the 31-90 day segment, while arrears in excess of 90 days firmed by $8.7 million (5.3 per cent).

“In contrast, commercial loan arrears improved by $12.6 million (5.1 per cent) to $233.2 million, as a $15.6 million (8.2 per cent) reduction in the non-accrual segment outweighed the $3.0 million (5.4 per cent) rise in short-term delinquencies.”

And the Central Bank added: “Given the rise in arrears, banks increased their total provisions for loan losses by $19.9 million (5.8 per cent) to $364.5 million, elevating the ratio of provisions to total delinquencies and non-accrual loans by 0.5 of a percentage point and 2.3 percentage points, to 30.1 per cent and 43.5 per cent, respectively.

“Further, banks wrote-off an estimated $36 million in bad debts and recovered approximately $5.3 million.”