By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Excess liquidity in the Bahamian commercial banking system increased by $271.3 million in the year to end-July 2016, with the new $1.586 billion high illustrating the continuing difficulties in finding suitable borrowers.
The Central Bank’s report on July’s economic developments showed that surplus liquid assets rose by $76.26 million that month, a 41.5 per cent increase upon the $53.89 million growth in July 2015.
And for the 12 months to end-July 2016, they grew at a pace 24 per cent higher than the expansion for the same period length the year before.
“Bank liquidity is poised to remain at robust levels, as the softness in domestic demand and sustained conservative lending practices continue to restrain credit growth,” the Central Bank said with deft understatement.
The huge ‘overhang’ in excess liquid assets in the Bahamian commercial banking system also helps to explain why deposit rates are so low, pushed down by an expanded money supply.
“External reserves firmed by $4.5 million to $1.058 billion, after a similar $6 million gain a year-earlier,” the Central Bank added, with the 12-month figures showing a more robust $249.36 million increase compared to $177.34 million the year before.
As for credit quality in the Bahamian commercial banking system, ‘bad loans’ remained relatively stable compared to their June levels.
“In July, total private sector loan arrears expanded by $13.2 million (1.2 per cent) to $1.121 billion, and by 15 basis points to 18.8 per cent of total private sector loans,” the Central Bank said.
“Underlying this outturn, the non-performing component - loans in excess of 90 days in arrears - rose by $8.3 million (1 per cent) to $851.7 million, and by nine basis points to 14.3 per cent of the aggregate.
“Similarly, short-term delinquencies (31 to 90 days) firmed by $4.9 million (1.8 per cent) at $269.6 million, resulting in a seven basis points uptick in the attendant ratio to 4.5 per cent of total private sector loans. For the year-over-year comparisons, the total arrears rate stood 1.2 percentage points lower, while the non-performing loans rate fell by 88 basis points.”
The increase in private sector arrears was led by mortgages, which increased by $7.8 million (1.3 per cent) to $616.2 million, reflecting a $9.5 million (2.1 per cent) gain in the non-performing segment, offsetting the $1.7 million (1.1 per cent) reduction in the 31-90 day category.
“More muted increases were recorded in the commercial and consumer arrears components,” the Central Bank said, “which firmed by $4.9 million (2.1 per cent) to $232.8 million, and by $0.5 million (0.2 per cent) to $272.3 million, respectively.
“In terms of the former, the overall growth was driven by a $7.6 million (23.4 per cent) expansion in the short-term segment, which outpaced a $2.7 million (1.4 per cent) decline in non-accruals, while consumer loan delinquencies firmed marginally as a result of a $1.5 million (0.8 per cent) increase in the over 90 days category.”
The Central Bank added that this “overshadowed a $1 million (1.2 per cent) fall-off in the short-term segment. Annually, the non-performing loans ratios narrowed for mortgages by 1.3 percentage points, and for consumer credit, by 65 basis points, while the rate for commercial credit firmed by 60 basis points.”
Banks lowered their total loan loss provisions by $13.6 million (2.5 per cent) to $535.1 million in July, reducing the ratio of provisions to both non-performing loans by 2.2 and 1.8 percentage points, to 62.8 per cent and 47.7 per cent, respectively.
The banks also wrote-off $7 million in overdue loans and recovered $3.3 million.
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