The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The proportion of non-performing loans more than six months’ past due has almost doubled from pre-recession levels to 60 per cent, reflecting both borrower struggles and bank repossession difficulties.

The Bahamian banking industry’s continuing credit quality woes have been brought into stark relief by the Inter-American Development Bank’s (IDB) 2013-2017 country strategy, which noted that delinquent loans more than 180 days past due only accounted for 35 per cent of the non-performing portfolio in 2007.

With non-performing loans (those 90 days past due) accounting for 20 per cent of the Bahamian commercial bank’s total loan portfolio, the IDB report added: “Moreover, the average delinquency period increased in the last couple of years.

“Before the economic crisis, around 35 per cent of delinquent loans were overdue more than 180 days. By September 2012, almost 60 per cent of the non-performing loans were delayed more than 180 days.”

Given the depressed real estate market, and subsequent difficulty in finding new buyers who will meet their tougher lending criteria, Bahamian commercial lenders have often preferred to let delinquent mortgage borrowers stay in their homes rather than exercise their ‘power of sale’. Some defaulters have remained in these properties for as long as three years.

“This situation reflects both the worsening of the portfolio, and also the decision of the banks to withhold loans and not to move forward in the foreclosure process in the case of delinquent mortgages,” the IDB country strategy acknowledged.

The statistics revealed by the IDB show just how long it will take the Bahamian economy, chiefly the banks and their borrowers, to work themselves out of this ‘debt default’ situation - an issue that continues to hamper growth and new lending.

Elsewhere, the Bank returned to the Bahamas’ vulnerability to climate change and rising sea levels, noting that the 10 worst hurricanes to hit this nation in the past three decades had caused a combined $2.65 billion in economic damage.

“Three of its islands (Andros, Abaco and Grand Bahama) are ranked within the top 10 of all cities, islands and countries affected by tropical storms in the North Atlantic Basin,” the IDB said of the Bahamas.

“Furthermore, climate change exacerbates disaster risk by increasing the frequency and intensity of recurrent and catastrophic events.

“With 80 per cent of The Bahamas’ land mass within 1.5 metres of mean sea level, its low lying topography, and the small size of the islands, the territory is essentially coastal. Sea level rise scenarios of one metre and five metres will effectively inundate 11 per cent and 60 per cent of the total land mass of the country, respectively.”

Citing the “low level of public awareness” regarding disaster risk management and climate change, the IDB said a 2010 study it financed had exposed weaknesses in the Bahamas’ ability to deal with these issues, and its short-term response.

Noting that “deficiencies exist in integrated coastal zone management (ICZM)”, the Bank added that the Bahamas “lacks an appropriate legal, regulatory and institutional framework for ICZM that adequately incorporates disaster risk management and climate change considerations into planning and development at national and sub-national levels”.

Apart from this, the IDB said the Bahamas had a “constrained financial capacity to recover from a catastrophic climatic event despite access to post-disaster recovery and reconstruction financial resources”.

It also suffered from “limited information on coastal vulnerability, which is also not linked to a national risk information system that could be used for evaluation, updating, monitoring of coastal processes and associated risks, and insufficient consideration is given to natural hazard and climate risk in land use and urban planning”.

To help combat this, the IDB promised to “promote the design and construction of climate and other hazard-resilient coastal infrastructure, with a view to reducing vulnerability and controlling erosion, flooding and other hazard impacts”.