The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian commercial banks saw their bad loans increase by a collective $101.7 million during 2013 to hit a new record high of $1.352 billion come year-end.

The Central Bank of the Bahamas report on December’s economic developments revealed that, for 2013 as a whole, total private sector loan arrears increased by 8.1 per cent.

And, as a percentage of all outstanding Bahamian commercial bank credit, arrears and non-performing loans increased by almost two percentage points to hit 21.9 per cent - meaning that more than $1 our of every $5 lent by the industry has gone bad.

“The deterioration was led by the non-performing segment, which expanded by $98.4 million (11.4 per cent) to $966 million - for an elevated 15.7 per cent of total loans,” the Central Bank said.

“Delinquencies in the short-term, 31-90 day component, advanced slightly by $3.2 million (0.8 per cent) to $386.2 million, resulting in a marginal 13 basis point rise in the corresponding loan ratio to 6.3 per cent.”

The Central Bank added: “The increase in arrears was mainly attributed to growth in the commercial and mortgage components.

“Commercial arrears rose by $83.1 million (30.7 per cent) to $353.9 million, as the $86.1 million (45.1 per cent) rise in non-accrual loans outstripped the $3.0 million (3.8 per cent) reduction in the short-term segment.

“Similarly, mortgage arrears grew by $31.4 million (4.5 per cent) to $730.9 million, with both the 31-90 day and non-performing components firming by $10.5 million (5.2 per cent) and $21 million (4.2 per cent), respectively.

“In contrast, consumer loan delinquencies fell by $12.9 million (4.6 per cent) to $267.4 million, attributed to respective declines in the short-term segment by $4.2 million (4.2 per cent) and in non-performing loans, by $8.6 million (4.8 per cent),” the Central Bank added.

“Faced with a persistence of deteriorating credit quality indicators, banks augmented their total provisions for loan losses by $70 million (18.8 per cent) to $442.7 million in 2013.” Meanwhile, Value-Added Tax (VAT) figured in the Central Bank’s economic analysis for the first time, warning that it would impact inflation trends this year.

“The domestic economy’s growth momentum is expected to be sustained, with the potential for an improved outcome in 2014, based on gains in the tourism sector amid the ongoing strengthening in several key source markets, increased room capacity and greater airlift,” the Central Bank said.

“Construction sector output is also anticipated to remain relatively brisk, as a number of varied-scale foreign investment projects gain traction. A potential upside of these developments is a gradual improvement in employment conditions, especially in the services sector, and recovery in domestic demand.

“Meanwhile, inflation trends will continue to mirror the evolution of international oil prices and be influenced, to some extent, by the implementation of Government’s new Value Added Tax (VAT) regime.”

The Central Bank added that data from a sample of large hotels in New Providence and Paradise Island showed “a marginal uptick in room revenue” of 0.4 per cent in December, due to a 2.3 per cent rise in the average daily room rate (ADR) to $280.87, and a 0.8 percentage point increase in the average hotel occupancy rate to 58.8 per cent.

“This represented the second monthly gain in room revenues for the year, and occurred despite the reduction in inventory at seven properties and the temporary closure of one hotel,” the Central Bank said.

“Developments throughout 2013 were influenced by sustained weakness in several of the main source markets, modest reductions in airlift and room capacity and ongoing regional competition.

“As a consequence, total room revenue declined by 7 per cent over the previous year, as the 5.1 percentage point reduction in the occupancy rate, to 63.2 per cent, outpaced the 2.9 per cent firming in the ADR to $235.87.”