The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian commercial banks suffered a further credit quality deterioration in November, as delinquent loans increased by $23.5 million to a new $1.343 billion record.

The Central Bank of the Bahamas, in its latest monthly review, reiterated that commercial lenders were unlikely to experience a turnaround until the existing 15.9 per cent unemployment rate declined.

“Banks’ credit quality indicators worsened over the review month, due primarily to a rise in mortgage delinquencies,” the Central Bank said.

“Total private sector loan arrears increased by $23.5 million (1.8 per cent) to a revised $1.343 billion, with the corresponding ratio of arrears to total loans firming by 36 basis points to 21.8 per cent.”

The grim statistics underline the continuing difficulties many borrowers are having in keeping current with their debt obligations, and there appears little relief in sight for many who are hard-pressed.

The November deterioration, with more than $1 out of every $5 lent by banks now in default, is potentially a grim foreboding of what lenders might face in the New Year post-Christmas. It also raises questions about the impact Value-Added Tax (VAT) may have on consumer spending.

“In terms of the average age of delinquencies, short-term (31 to 90-day) arrears grew by $6.7 million (1.9 per cent) to $370.5 million, up 10 basis points to 6 per cent of total loans,” the Central Bank said of November’s performance.

“Similarly, the non-performing category - arrears over 90 days and on which banks have stopped accruing interest - increased by $16.8 million (1.8 per cent) to $972.1 million, corresponding to a 25 basis points rise in the loan ratio to 15.8 per cent.”

The Central Bank added: “The growth in delinquencies was largely attributed to the mortgage component, which advanced by $18.7 million (2.7 per cent) to $713.5 million, as both the short-term and non-accrual segments expanded by $13.4 million (7 per cent) and $5.3 million (1 per cent), respectively.

“In addition, consumer loan delinquencies were up by $4.5 million (1.7 per cent) to $265.8 million, reflecting a $1 million (1.1 per cent) increase in short-term arrears and a $3.5 million (2 per cent) rise in non-performing loans.

“The commercial component advanced by $0.4 million (0.1 per cent) to $363.3 million, as the $8 million (2.8 per cent) expansion in the non-accrual segment eclipsed the $7.7 million (9.6 per cent) decrease in short-term delinquencies.”

The Central Bank added growth in Bahamian dollar credit slowed significantly by $36.0 million to $5.4 million in November.

Most of this was due to the Government, with private sector credit growth of $6.8 million in line with the prior year’s advance, as consumer credit strengthened by $7.4 million.

Mortgages, though, fell by $2.8 million, a turnaround from the prior year’s $3.8 million expansion.

“Expectations are that the domestic economy will continue to post positive growth in the near-term, as the tourism sector positions to benefit from the improving economic conditions in key source markets,” the Central Bank said.

“The outlook is also for modest gains in foreign investment activity, providing for some broadening of employment opportunities. However, headwinds persist, in the context of the still uncertain durability of the global recovery, the challenges to the tourism sector from intensified market competition, and the elevated unemployment rate, which continues to limit the rebound in private sector demand and recovery in borrowers’ ability to service their debt obligations.”