The Tribune

By NEIL HARTNELL Tribune Business Editor ALMOST one-third of commercial bank loans to Bahamian businesses are in arrears, something the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chairman described as a sign that economic recovery was "extremely slow, if at all". The Central Bank of the Bahamas' report on monthly economic and financial developments for October 2011 revealed that commercial loan delinquencies, meaning bank loans to Bahamian businesses, hit $300.8 million worth at the end of that month. Given that total outstanding Bahamian dollar loans to businesses stand at $1.027 billion, some 29 per cent - almost one out of every three dollars - of this sum is now either in arrears (31-90 days past due) or non-performing (more than 90 days past due). "I guess it's safe to say that the recovery is extremely slow if at all at this stage, and that's very indicative of a sign of the times, I guess," Winston Rolle told Tribune Business, when contacted about the Central Bank data. In its October report, the Central Bank said: "By major loan categories, the growth in total arrears was led by a $16.1 million (5.7 per cent) expansion in commercial loan delinquencies to $300.8 million, with 31-90 day arrears increasing by $10.1 million (14.4 per cent), and those in excess of 90 days by $6 million (2.8 per cent)." Mr Rolle told Tribune Business the Central Bank's figures tallied with his own research, which was based on speaking to members of the Bahamian business community. "I think it's continued weakness," he added. "Based on discussions I'm having with a number of businesses, things are relatively slow. While we see increases in some areas, like the tourism numbers, there are still other areas that are very slow and sluggish business wise. It's been across the board." While access to credit remained an issue for many Bahamian companies, Mr Rolle said few were "properly structured", and did not have the necessary accounting records to give commercial banks a "comfort level that monies will be repaid timely". Still, on the brighter side, Bahamian commercial bank lending to companies increased by $35.1 million to $38,.9 million, year-over-year, during October. That provides something of a bright spot, and may indicate a renewed enthusiasm for extending credit to Bahamian businesses in the run-up to Christmas. The Central Bank, meanwhile, said the continued deterioration in asset quality in the Bahamian commercial banking sector reflected "the ongoing weakness in the job market and constrained business conditions". During October 2011, total private sector loan arrears increased by $6.1 million or 0.5 per cent to $1.22 billion, raising the ratio of total arrears to outstanding loans to 19.6 per cent - meaning that almost $1 out of every $5 lent by Bahamian commercial banks is in arrears. October's increase was driven largely by an increase in short-term delinquencies (31-90 days past due), which rose by $6.6 million or 1.7 per cent to hit $392.1 million, a sum equivalent to 6.3 per cent of total outstanding loans. Non-performing loans, those 90 days past due and upon which banks have stopped accruing interest, declined slightly by $0.5 million or 0.1 per cent to $827.5 million. The latter figure is equivalent to 13.3 per cent - more than $1 out of every $10 - lent to Bahamian households and businesses by commercial banks. For October, consumer loan arrears increased by $6.4 million or 2.3 per cent to $286.3 million, as a $7.5 million or 6.9 per cent increase in the 31-90 days past due category outweighed a $1.1 million drop in the non-performing component. On the mortgage side, total arrears declined by $16.4 million or 2.5 per cent to $632.6 smillion, with the short-term and non-performing categories declining by $11 million (5.3 per cent) and $5.4 million (1.2 per cent) respectively. Mr Rolle said that with the real estate market oversaturated by the supply of available properties, and few buyers able to qualify for credit, it did little good for Bahamian banks to exercise the power of foreclosure contained in the mortgage document. "It's very much a vicious circle and catch-22 situation," the Chamber chairman told Tribune Business. "All we can do is continue to hope for the best and hope things pick up in 2012." Bahamian commercial banks, according to the Central Bank, wrote off some $26.6 million in delinquent loans during October, recovering some $5 million for a net $21.6 million deficit. Meanwhile, bank lending to consumers showed "broad-based declines". Lending for private cars fell by $2.8 million, with sums extended for land purchases, credit cards and household purchases falling by $2.1 million, $1.6 million and $0.9 million respectively. The biggest consumer lending gain, by contrast, came in debt consolidation, which posted a $12.6 million increase. "I don't see it being a consumer-led recovery," Mr Rolle told Tribune Business. "There's too many people unemployed for it to be driven by the consumer side. "We still have a long way to go to recover. Again, we all need to pay a little more attention to our businesses, and how we sustain and grow our businesses, and do what we can to turn the economy around...... We have to put things in place not only to sustain us now, but into the future."