By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank is pushing the banking sector to “speed up” resolving its remaining $742m loan arrears so that it can better fuel economic growth, its governor said yesterday.

John Rolle said the industry regulator was seeking “firmer direct interventions” by its commercial bank licensees to eliminate the “drag” bad loans are having on their ability to issue new credit and stimulate a faster expansion of the Bahamian economy.

He called for “more aggressive write-offs and recognition of losses” on credit that will prove difficult to recover, as well as the rapid sell-off of foreclosed properties and further restructurings with borrowers who still have some ability to pay.

“For the private sector, commercial banks experienced further reduction in loans delinquencies during the first quarter,” Mr Rolle said during a press conference called to discuss economic developments during the first three months of 2019. “However, this is still occurring at very gradual pace, and with month-to-month changes that sometime show no improvement.

“The more considerable reductions in recent years have still been from the bulk sales of delinquent loans to private investors and to the government’s Resolve entity. A growing economy will also generate the employment income necessary to push the credit delinquency rate lower.

“However, to eliminate the drag that defaulted loans have on new lending credit, the Central Bank is continuing to promote firmer direct interventions by commercial banks to speed up resolution of bad debts,” he continued.

“It means a more aggressive push to sell-off foreclosed properties, and more sustained efforts to restructure some debts, as well as more aggressive write-offs and recognition of losses on loans that are difficult to recover. These interventions are needed to position financial institutions in a healthier state for future negative shocks, which eventually do occur.”

The Central Bank’s analysis for the 2019 first quarter reveals that, while it has taken a decade, total loans in arrears - both those that are non-performing and ones between 31 to 90 days past due - are now below the $800m level they hit in March 2009 at the peak of the recession.

Non-performing loans, at just under $600m or 9.1 percent of all outstanding credit, remain higher than 10 years’ ago, though. With 4.1 percent in short-term arrears, some 13.2 percent of all outstanding Bahamian private sector credit remains at least one month past due, although this is down year-over-year compared to the 15.2 percent ratio achieved in the 2018 first quarter.

Still, private sector arrears edged up by $1.4m in March 2019, with the rise in loans between 31-90 days past due “negating the improvement” in non-performing loans. “An analysis of arrears by the various buckets showed that short-term delinquencies rose by $14.4m (6.6 percent) to $232.3m, and by 27 basis points to 4.1 percent of total private sector loans,” the Central Bank said.

“In contrast, non-performing loans contracted by $13m (2.5 percent) to $510.1m, and by 20 basis points to 9.1 percent of total private sector loans.” However, over the full first quarter the Bahamian commercial banking industry’s loan arrears fell by $67.4m or 8.3 percent.

“A breakdown of the various categories showed broad-based improvements, as mortgage arrears contracted by $49.5m (9.9 percent), owing to declines in both the short-term and non-performing loan components by $35.8m (21.9 percent) and $13.7m (4.1 percent), respectively,” the Central Bank said.

“Similarly, consumer arrears fell by $21m (9.1 percent), reflecting a $23.4m (24.5 percent) decline in short-term arrears, which negated a $2.5m (1.9 percent) increase in non-performing loans. However, commercial delinquencies edged up by $3m (3.7 percent), as a $4.4m (9.2 percent rise in the long-term category outpaced a $1.4m (4.1 percent) reduction in the short-term component.”

Elsewhere, Mr Rolle said the strength of the Bahamian economy could be measured by the 14 percent rise in foreign exchange purchased by the commercial banks from the private sector during the 2019 first quarter.

“On a net basis, the increase in foreign reserves during the first quarter benefited from almost $300m in net flows though the private sector,” he revealed. “Compared to the first quarter of 2018, commercial banks’ total foreign exchange purchased from the private sector rose by 14 percent to about $1.5bn.

“From these receipts, commercial banks fully accommodated higher spending by businesses and consumers on goods and services from abroad, and then sold a larger residual to the Central Bank that funded the increase in external reserves.”

Mr Rolle added that the tourism industry’s performance “still contains a sizeable one-time lift from Baha Mar, which did not have all its rooms available for sale in the first quarter of 2018”. However, sales and pricing at major properties still increased.

“Stopover data from the Bahamas Hotel and Tourism Association revealed that in the two months through February, estimated room revenues improved by 44 percent on sustained occupancy and pricing advances,” the Central Bank said.

“Healthy trends were also noted in the growing non-hotel based segment of the market, typically characterised by short-term vacation rentals. An analysis of data obtained from AirDNA showed that the total number of room nights sold firmed by 24.3 percent to 78,160 in March, as bookings for ‘entire place’ listings rose by 22.8 percent and for hotel comparable listings by 37.3 percent.

“Over the first quarter, total room nights booked firmed by 24.7 percent, underpinned by a 22.4 percent expansion in ‘entire place’ bookings and a 42.6 percent rise in the hotel comparable segment. Moreover, all of the significant markets tracked experienced quarterly sales expansions, as room bookings for Exuma firmed by 51.5 percent, New Providence by 26.9 percent, Abaco by 21.4 percent, and Grand Bahama by 2.1 percent.

“Further, the average daily rate (ADR) firmed slightly by 0.7 percent to $141.97 for hotel comparable listings, while the rate for entire place listings softened by 1.5 percent to $341.49.”