The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s governor yesterday warned that the “true extent” of COVID-19 loan delinquencies will soon reveal itself as the final 8.5 percent of credit balances in deferral exit these arrangements.

John Rolle, unveiling the Central Bank’s analysis of 2020’s pandemic scarred economic performance, said commercial banks only recorded a slight decrease in loan delinquencies last year as nearly $2bn worth of credit - around one-third of all that was outstanding - was placed into payment deferral initiatives.

“As these arrangements have mostly expired, a truer extent of delinquencies will become evident in 2021. Up to the end of 2020, only 8.5 percent of loan balances remained in a deferral state, compared with about two-thirds of balances in June 2020. Nevertheless, commercial banks have continued to show forbearance with borrowers who are facing difficulties,” he added.

“Again, it is estimated that the financial system will emerge from the pandemic in a stable fashion. Banks have more than sufficient capital to absorb potential losses, whilst credit unions now have the protection of deposit insurance and a clearer timeline around which their borrowing members in the hotel sector will begin to see their earnings recover.”

The Central Bank yesterday reported that commercial bank loan delinquencies enjoyed an improvement in December, with arrears dropping by $23.2m (2.9 percent) to $773.1m, although the situation deteriorated when measured on a full-year basis.

“On an annual basis, total private sector arrears grew by $86.7m (12.6 percent), elevating the ratio of arrears to total private sector loans by 1.7 percentage points. The outcome was led by a $66.2m (28.5 percent) growth in short-term delinquencies, with the relevant ratio higher by 1.2 percentage points,” it added.

“Similarly, non-performing exposures rose by $20.6m (4.5 percent) as the accompanying ratio firmed by 48 basis points. Disaggregated by loan type, mortgage arrears increased by $63m (14.9 percent), reflecting a $63.3m (46.9 percent) expansion in the short-term category. In contrast, long-term arrears edged down by $0.3m (0.1 percent).”