By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Persistent private sector and consumer weakness was further exposed by July's $18.8m credit contraction, with total banking sector loan arrears also slightly increasing to $835m
The Central Bank, in its July economic update, said: "Private sector credit fell by $18.8m, a turnaround from an $11.1m uptick recorded in 2017, as consumer credit and mortgages contracted by $11.5m and $7.9m vis-à-vis respective gains of $4m and $0.8m in the preceding year. In addition, the increase in commercial and other loans narrowed to $0.5m from last year's $6.3m."
The regulator released data showing that non-performing (NPL) and arrears loans were trending back towards 2008-2009 levels, from where they exploded upwards following the lingering effects of the global recession on unemployment and incomes.
"Reflecting an increase in short-term arrears, banks' credit quality indicators softened during July," the Central Bank said. "Total private sector loan delinquencies firmed by $10.5m (1.3 percent) to $834.8m, and by a corresponding 25 basis points to 14.7 percent of total private sector loans.
"Arrears in the short-term segment (31-90 days) rose by $14.8 million (5.3 percent) to $291.8m, resulting in a 28 basis point increase in the attendant ratio to 5.1 percent. In a partial offset, total non-performing loans (NPLs) contracted by $4.3 million (0.8 percent) to $543m, with the corresponding ratio decreasing by 3 basis points to 9.6 percent.
"An analysis by loan type showed that the increase in total loan delinquencies was concentrated in mortgages, which rose by $16.1m (3.3 percent), attributed to an $18.9m (12.4 percent) rise in the short-term segment, which eclipsed a $2.8m (0.9 percent) reduction in the non-accrual category," the regulator continued.
"Conversely, consumer loan arrears decreased by $4.7m (1.9 percent), with reductions in both short-term and long-term delinquencies. In addition, commercial arrears softened by $0.8m (0.9 percent), also reflecting declines in both set of accounts."
The Central Bank added that commercial banks increased loan loss provisions by $4.5m or 1.1 percent in July, taking their ratio as a percentage of non-performing loans to 79 percent.
"On a year-on-year comparison, the total private sector arrears rate was consolidated by 2.8 percentage points in comparison to July 2017, amid a 16.2 percentage point fall-off in the commercial arrears rate, with more muted decreases on the mortgage and consumer loan portfolios of 80 and 41 basis points, respectively," the Central Bank said.
"Meanwhile, the non-accrual rate for total private sector credit was 2.8 percentage points lower than in 2017, although the short-term arrears rate firmed marginally by six basis points."
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