The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s governor yesterday said the rise in COVID-related loan delinquencies is not as bad as feared with the increase set to fall “well below” the previous 15 percent peak.

John Rolle, speaking as the Central Bank unveiled its 2021 third quarter economic update, voiced optimism that the Bahamian commercial banking sector will not suffer the non-performing loan levels endured after the 2008-2009 recession “this time around”.

Non-performing loans, which represent facilities on which borrower payments are more than 90 days past due, peaked at around 15 percent of the banking industry’s total outstanding credit in that recession’s aftermath. However, according to the= Central Bank’s monthly economic report for September, they currently stand at 9.1 percent or $506.5m of all issued loans.

“I think a reasonable expectation is that we will see them settle at a peak over the course of 2022,” Mr Rolle replied, when asked to give a timeline by this newspaper. “Right now the average non-performing loan rate is just above 9 percent. We have not seen the level of uptick in the non-performing loan rate that we feared the pandemic would cause.

“At the same time we understand that until the job or labour market conditions are fully resolved for many persons who may owe loans to the banks, there won’t be full clarity around where the non-performing loan rate settles. But we do not anticipate that there’s a drastic amount of adjustment that remains to be done.”

Asked by Tribune Business how high he felt non-performing loan ratios might reach, as a percentage of total outstanding credit, Mr Rolle said: “I don’t want to speculate too much but we’re in the 9 percent range. We do not anticipate that the levels non-performing loans rose to after 2008 will be the levels we see this time around.

“We expect to be considerably below those levels in the past. The non-performing loan rates peaked just above 15 percent. We’re not expecting to be anywhere in that range from this current episode. We anticipate that beyond 2022 the industry will be in a position to focus again on reducing and working to get those rates lower.”

Loan arrears rates, which includes all credit more than 30 days past due, stood at 14 percent at end-September 2021 compared to 12.4 percent at the same point a year before. The Central Bank data revealed that 17.8 percent of all outstanding mortgages are in arrears, compared to 15.3 percent at the same point in 2020, while consumer loan arrears were up 10.4 percent at 11.9 percent.

Commercial loans were the only category to experience a year-over-year reduction, with loan arrears falling from 8.3 percent to 7.7 percent. Meanwhile, the governor described commercial bank lending to businesses and individuals as “mildly contractionary”, which he said reflected difficulties in finding good quality borrowers even before the COVID-19 pandemic started.

“It reflects risks and credit quality challenges that institutions were managing even prior to the pandemic. The credit bureau, having transitioned into operations, will help improve the climate for lending in the medium term,” Mr Rolle said.

“In the meantime, given the dominant nature of bank lending to the households and enterprises that rely on the fortunes of tourism, a necessary requirement for a stronger uptick in lending is also the pass-through benefits of tourism in expanding the pool of viable borrowers.”

Outstanding private sector credit contracted by $67.7m during the nine months to end-September, a fall-off more than six times’ greater than the $10.2m drop witnessed during the same period in 2020, highlighting the continued difficulties in accessing credit.

While commercial credit, meaning loans to businesses had expanded by $44.7m in the nine months to end-September 2021, outstanding consumer credit shrank by $86m over the same period while mortgage loans reduced by $26.4m.