The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ foreign currency reserves closed May 2022 above $3bn despite a $65m drop-off during the month, with the Central Bank reiterating its belief that they remain “more than adequate” to sustain the US dollar peg.

The regulator, yesterday unveiling its economic report for May, said: “External reserves contracted by $64.6m to $3,002bn, a switch from a growth of $126.6m a year earlier. Reflective of this outturn, the Central Bank’s transactions with the public sector reversed to a net sale of $154.8m from a net purchase of $102.7m in the previous year.

“By contrast, the Central Bank’s net purchase from the commercial banks broadened to $88.2m from $15.3m in the preceding year. Further, commercial banks’ net intake from their clients widened to $102.3m from $16.2m in the prior year.” This indicates further recovery in the Bahamian economy and private sector’s foreign exchange earning capacity, with the external reserves drawdown in May driven by the Government side.

The Central Bank’s 2022 outlook was little changed from previous, as it said: “Monetary sector developments should continue to feature high levels of banking sector liquidity, as commercial banks maintain their conservative lending posture.

“Further, external reserves are forecasted to remain robust over the year, undergirded by anticipated foreign currency inflows from tourism and other net private sector receipts, thus ending 2022 above international benchmarks. Consequently, external balances should remain more than adequate to sustain the Bahamian dollar currency peg.”

Meanwhile, the Central Bank said the commercial banking industry’s credit quality improved in May with total private sector loan arrears dropping by almost 4 percent to below the $700m mark. “Total private sector arrears decreased by $28.3m (3.9 percent) to $697.3m, with the attendant ratio narrowing by 55 basis points to 12.8 percent,” it added.

“An analysis by average age of delinquency showed that short- term arrears (31-90 days) reduced by $29.5m (12.5 percent) to $205.8m, lowering the associated ratio by 55 basis points to 3.8 percent. In contrast, non-performing loans (NPLs) increased marginally by $1.2m (0.3 percent) to $491.4m, with the corresponding ratio remaining unchanged at 9 percent.”

Breaking this down, the Central Bank added: “Disaggregated by loan category, mortgage arrears contracted by $16.6m (4 percent) to $400.8m owing to declines in short-term arrears by $14.2m (9.5 percent) and NPLs by $2.4m (0.9 percent). Likewise, consumer delinquencies fell by $9.4m (3.9 percent) to $230.8m as the short-term segment decreased by $5.6m (8.9 percent) and the non-accruals component by $3.8m (2.1 percent).

“Similarly, commercial arrears reduced by $2.4m (3.5 percent) to $65.7m, attributed to a $9.8m (42.2 percent) fall-off in short-term arrears, which outstripped the $7.4m (16.5 percent) growth in the long-term segment.”

As for loan losses, the Central Bank said: “Banks reduced their total provisions for loan losses by $4.7m (1 percent) to $473.4m in May. Consequently, the ratio of total provisions to non-performing loans moved lower by 1.2 percentage points to 96.3 percent.

“However, the ratio of total provisions to arrears rose by two percentage points to 67.9 percent. Meanwhile, the coverage ratio of specific provisions to non-accruals fell by 1.2 percentage points to 76.6 percent. During the review month, banks wrote-off an estimated $8m in bad loans and recovered approximately $4.4m.

“In comparison to May 2021, the total private sector arrears rate reduced by 1.9 percentage points. In particular, the short-term component decreased by 1.5 percentage points and the long-term category by 0.4 percentage points. By loan type, the arrears rate on mortgages declined by 2.6 percentage points; commercial credit, by 2.4 percentage points; and consumer loans by 0.7 percentage points.”