The Central Bank is “waiting” to determine whether delinquencies on COVID-related loans have peaked despite a $22.4 million reduction in non-performing loans during the first quarter of 2022, its governor revealed yesterday.
John Rolle, in written responses to questions from Tribune Business, said that although it was too early to determine whether the three months to the end of March represented “an entrenched trend of reduction”, it signaled that the worst of the fallout of the pandemic for the banking sector and its borrowers may have succeeded, although non-performing loans still total more than half a billion dollars.
“As the system progressed in the first quarter, there was a $22 million reduction in non-performing loans,” the governor told this newspaper. “While it is too early to conclude that this is an entrenched downward trend, it does point to significant moderation and stabilization in the environment since the peak of the pandemic.
“We are waiting to conclude whether there has been a peak until after the summer months. As things stand, the non-performing loan rate was 9.3% in March 2022 compared to 9.6% at the end of 2021, but it is still higher than in March 2021, when the rate was 8.7%.
Meanwhile, although the Bahamas’ first-ever credit bureau is now up and running, Mr Rolle said his reports on existing and potential borrowers – and their creditworthiness – will not be complete until the data acquisition process is complete. from sectors such as credit unions and utilities is comprehensive. No timetable was provided for this as one of the Central Bank’s commercial banking licensees has yet to start providing customer data to the credit bureau.
“The credit bureau is now operational. All but one of the commercial banks have started submitting data. The last bank will start transmitting information this month. This submission should correspond to the same length of historical series as that submitted by the other institutions”, affirmed the Governor of the Central Bank.
“Some banks have also started polling the office for reports, which they use to supplement their internal information systems. However, completeness of credit reports is not guaranteed until all major suppliers are on board, including credit unions and utilities. This process is ongoing.
The creation of the credit bureau is designed to provide banks and other formal lenders with a more complete and accurate history of a borrower’s credit history – whether they are up to date with their loan obligations; if they comply fully and on time; and the amount of debt they currently carry as well as their ability to service existing and future borrowings.
The centralized database provided by the bureau will mean that Bahamians will no longer be able to bounce from one lending institution to another, obtaining credit from each. Improved information should also help lenders better assess and assess borrower risk, so those with good credit histories end up with lower interest (debt service) costs. The Bahamian loan market, in theory, should become more transparent and efficient with better access for good borrowers.
Meanwhile, Central Bank data showed that total private sector arrears – loans 30 to 90 days past due, as well as past 90 days and non-performing – fell by 38.9 million. dollars or 5% in the first quarter of 2022. Non-performing loans, which accounted for most of the reduction, fell 4.3% in the first three months of 2022.
“Disaggregated by loan category, consumer arrears were reduced by $27 million (10%) corresponding to a decrease in long and short term arrears of $17.9 million (8.9%) and $9.1 million (13.3%) respectively,” the Central said the bank said.
“Similarly, residential mortgage arrears decreased by $17.1 million (3.9%) while the short-term segment decreased by $14.1 million (8.8%) and the balance non-performing of $3.1 million (1.1%). Conversely, commercial arrears increased by $5.2 million (7.3%) while the short-term component increased by $6.7 million (28.2%), eclipsing the reduction in $1.5 million (3.1%) of outstanding loans.
“During the three-month period, total commercial bank loan loss provisions contracted by $17.7 million (3.5%). However, the ratio of total provisions to arrears increased by 1.1 percentage points and the ratio of total provisions to non-performing loans by 0.8 percentage points. For the quarter in review, banks wrote off about $21.5 million in delinquent loans and recovered about $12.8 million.
Non-performing loans totaled $505.5 million at the end of March 2022, after declining $29 million that month – a development that more than offset the $7 million rise in the first two months of the year. ‘year. “Focused on short-term delinquencies, banks’ credit quality indicators weakened in March, with total private sector arrears rising $15.6 million (2.1%) to 740.9 million, with the accompaniment ratio being 34 basis points higher at 13.6%,” the central bank said. mentioned.
“By age, short-term arrears (31-90 days) increased by $44.5 million (23.3%) to $235.3 million, with the associated ratio increasing by 83 basis points to 4 .3%. By contrast, non-performing loans decreased by $29 million (5.4%) to $505.5 million, resulting in a reduction in the ratio of 50 basis points to 9.3% – with a lower non-performing loan rates for consumer loans by 95 basis points to 9.1. percent; mortgages by 21 basis points to 10.9%; and commercial loans by 30 basis points to 5.2%”.