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Nearly $50m Loans Fall Into Delinquency

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Almost $50m worth of loans became delinquent during May 2021 as COVID-19 payment deferrals continued to expire, the Central Bank of The Bahamas has revealed.

The regulator, in its monthly economic assessment for May, disclosed that the $49.8m increase in non-performing loans that were 90 days or more past due was offset somewhat by an $11.2m reduction in short-term arrears. This is credit between 31-90 days past due, and this helped keep the net increase in troubled loans to $38.6m.

“Banks’ credit quality indicators weakened in May, largely attributed to growth in non-performing loans (NPLs), amid continued unwinding of loan payment deferral schemes that were introduced as a result of the COVID- 19 pandemic. Specifically, total private sector arrears rose by $38.6m (five percent) to $818.6m, while the accompanying ratio firmed by 72 basis points to 14.72 percent,” the Central Bank said.

“Contributing to this outturn, non-performing loans expanded by $49.8m (10.5 percent) to $526.4m, corresponding with a 91 basis points rise in the attendant ratio to 9.5 percent, with increases in the NPL rates for consumer loans by 1.5 percentage points to 8.3 percent; commercial loans by 1.2 percentage points to 5.7 percent; and for mortgages, by 0.3 percentage points to 11.6 percent.

“In contrast, short-term arrears contracted by $11.2m (3.7 percent) to $292.3m, while the associated ratio narrowed by 19 basis points to 5.3 percent.” 

Breaking this down, the Central Bank added: “An analysis by loan category revealed that the growth in arrears was led by commercial loan delinquencies, which expanded by $19.4m (32.1 percent) to $79.6m, as both the short and long-term segments rose by $9m (38.9 percent) and $10.4m (28 percent), respectively.

“Similarly, mortgage arrears advanced by $12.6m (2.7 percent) to $477.3m, owing to an accumulation in non-accrual loans by $7.3m (2.5 percent) and the short-term category by $5.3m (3.1 percent). Further, consumer credit moved higher by $6.7m (2.6 percent) at $261.7m, as the $32.1m (22 percent) rise in NPLs overshadowed the $25.5m (23.4 percent) reduction in the short-term arrears.”

Detailing the consequences, the Central Bank said: “Given these developments, banks increased their loan losses provisions by $8.6m (1.5 percent) to $581.9m in May. Nevertheless, the ratio of total provisions for NPLs declined by 9.8 percentage points to 110.6 percent.

“Similarly, the ratio of total provisions to arrears fell by 2.4 percentage points to 71.1 percent. Also, the coverage ratio of specific provisions to NPLs declined by 6.6 percentage points to 80.4 percent. During the month, banks wrote-off an estimated $7m in bad loans and recovered approximately $1.5m.

“In comparison to the corresponding period in May 2020, the total private sector arrears rate rose by 3.1 percentage points, reflecting growth in both the short-term (1.5 percentage points) and non-accrual segments (1.6 percentage points). Increases were registered across all loan segments, consumer, mortgages and commercial loans by 4.0, 2.8 and 1.6 percentage points, respectively.”

As for the still-muted tourism sector, the Central Bank disclosed: “Official data provided by the Ministry of Tourism (MOT) revealed that total foreign arrivals by first port of entry recovered to 68,582 during the month of April, from just 43 visitors during the same period last year, when the closure of international borders and lockdowns were initially imposed.

“In the underlying developments, air traffic totalled 60,305 compared to only 11 visitors in the previous year, albeit representing just 35.2 percent of the arrivals recorded in 2019, reflective of the reopening - although with restrictions - of international borders to travellers. Meanwhile, sea traffic amounted to 8,277 in comparison to 32 visitors in 2020.”

The report added: “A breakdown by major port of entry showed that arrivals to New Providence recovered to 41,358 from just 43 in the comparative period of the preceding year. Contributing to this outturn, air traffic reached 40,183 from 11 in the previous year, while sea passengers totalled 1,175 versus 32 visitors in 2020.

“Further, visitors to Grand Bahama amounted to 2,481 following the virtual absence of tourists in the same period last year. Underpinning this outcome, both air and sea arrivals totalled 1,390 and 1,091, respectively, relative to no visitors in the prior year.

“In addition, visitors to the Family Islands recovered to 24,743, from no recorded activity in 2020, as both the air and sea segments posted respective gains of 18,732 and 6,011 vis-à-vis nil tourists last year.”

Turning to an analysis of the first four months of 2021, the Central Bank said: “During the four months to April, the reduction in total arrivals extended to 89.2 percent from 35.9 percent in the same period in 2020, which had included robust first quarter activity ahead of the pandemic.

“Contributing to this development was a 98.4 percent contraction in sea passengers, exceeding the 32.3 percent decline a year earlier. Similarly, air arrivals fell by 53.1 percent vis-à-vis a 46.9 percent decrease in 2020.” There was a slight improvement in air arrivals to the Family Islands (6.2 percent) when compared to the same period in the previous year.

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