NASSAU, BAHAMAS — With some COVID-19 loan deferral programs coming to an end, the Central Bank has reported that banks are now seeing an uptick in private sector arrears and non-performing loans.
The regulator in its Monthly Economic and Financial Developments Report noted that banks’ credit quality indicators weakened during the month of August, led by an increase in short-term delinquencies.
“Specifically, total private sector arrears rose by $82.8 million (13.1 percent) to $714.0 million, while the accompanying ratio moved higher by 1.5 percentage points to 12.64 percent. Contributing to this development was an $80.6 million (42.3 percent) growth in short-term arrears (31-90 days), to $271.2 million—signaling the conclusion of some banks forbearance programs— corresponding to a 1.4 percentage point firming in the attendant ratio to 4.80 percent,” said the regulator.
It continued: “In addition, non-performing loans grew by $2.3 million (0.5 percent) to $442.8 million, resulting in a 4 basis points rise in the relevant ratio, to 7.84 percent. Disaggregated by loan type, the increase in total delinquencies was led by a $48.4 million (26.7 percent) expansion in consumer loan arrears, to $230.1 million, as both the short and long-term segments increased by $45.2 million (81.3 percent) and $3.2 million (2.5 percent), respectively.
“Similarly, commercial loan delinquencies rose by $18.3 million (30.7 percent) to $77.9 million, owing to a $17.5 million (106.8 percent) rise in short-term arrears and a $0.8 million (1.9 percent) uptick in non-accrual loans. Further, mortgages delinquencies advanced by $16.1 million (4.1 percent) to $406.0 million, attributed to a $17.9 million (15.1 percent) growth in the short-term component, which outstripped the $1.8 million (0.7 percent) decline in non-performing loans.”
Kenrick Brathwaite, chairman of the Clearing Bank’s Association told Eyewitness News earlier this month that credit relief for borrowers who have suffered reduced income as a result of the COVID-19 pandemic will be assessed on a “case by case” basis.
In March, the Central Bank announced that it had arranged with domestic banks and credit unions to provide a three-month deferral against repayments on credit facilities for businesses and households that were negatively impacted by the COVID-19 pandemic.
The regulator noted in its MEFD report that monetary trends for the month of August were “marked by a build-up in liquidity, as the decline in domestic credit outpaced the contraction in the deposit base”.
“Specifically, given inflows from Government debt proceeds, excess liquid assets—a broad measure of liquidity—expanded by $69.2 million to $2,152.0 million, a turnaround from a $44.9 million reduction a year earlier. Similarly, excess reserves—the narrow measure of liquidity– rose by $54.8 million to $1,325.3 million vis-à-vis a $35.2 million decrease in 2019,” the Central Bank reported.
It read: “During the review month, external reserves grew by $145.3 million to $2,128.1 million, a reversal from a $35.8 million contraction last year. Reflecting the receipt of proceeds from the Government’s external borrowing activity, the Central Bank’s transactions with the public sector shifted to a net purchase of $225.6 million, from a net sale of $32.1 million in 2019.”
