NASSAU, BAHAMAS — The Central Bank’s most recent survey of commercial banks revealed that bank lending conditions and demand for credit improved during the latter half of 2022, with the number of loan applications approved rising nearly 20 percent year-on-year.
The results of the regulator’s Bank Lending Conditions Survey (BLCS) survey on which sought information on the number of loan applications received, approved and denied during the latter half of 2022 revealed that local applications received increased and the rate of approval on loan applications continued to trend upward. For personal credit applications however lenders continue to cite high debt service ratio (DSR), delinquency in prior loans, underemployment and no collateral, as the top identified reasons for rejections in the review period
According to the Central Bank, total loan applications amounted to 16,037 which was a 10.4 percent from the six months to June 2022 and a 12 percent from the six months to December 2021. There were 12,970 loan applications approved in the second half of 2022 and 1,789 loan denials.
“Concurring with the rise in requests, the number of approved loan applications rose by 18.8%, year-on-year, and by 13.8 percent relative to June 2022. Similarly, the average approval rate firmed by 1.6 percentage points to 83.2 percent relative December 2021. However, compared to the prior six- months, the approval rate decreased by 20 basis points,” the regulator noted.
It pointed out that in terms of loan denials, common identified reasons cited by banks were various “miscellaneous” factors (41.5 percent), including low credit scores, purposes outside of banks’ practices, and non- permanent employment. Other reasons for denial were noted as high debt service ratios (33.1 percent), delinquency in prior loans (6.3 percent) and underemployment (5.9 percent).
Over the latter half of 2022, lending institutions processed 911 residential mortgage applications; which represented 99.3 percent of the total mortgage applications received (917).
“Residential mortgage applications contracted by 21.6 percent year-on-year, extending the 20.9 percent reduction in June 2022. By classification, credit requests for existing dwellings declined both year- on-year (47.3 percent) and in the six–months to June (26.2 percent). However, in the second half of the year, applications increased for new construction (10.2 percent) and rehabilitations & additions (1.1 percent ), reversals from respective decreases in the first half of the year, “ the Central Bank noted.
During the six-months to December, respondent banks processed 542 applications for commercial credit.
The Central Bank also noted that of the seven banks surveyed, most reduced lending rates during the second half of 2022, in an attempt to bolster lending conditions. Institutions, specifically, decreased mortgage and consumer rates in the third and fourth quarters. In addition two of the seven lenders lowered down payment requirements and extended payment terms, while no lender offered new deferral arrangements were disclosed for monthly payments.
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