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Loan loss provisions still increasing

Loan loss provisions increased to$264.2 million according to the latest Central Bank of The Bahamas report, indicating that a rise in delinquencies made banks take more precautionary measures.

The latest figures were released in the Central Bank’s Monthly Economic Financial Developments report for November, which revealed a$6 million increase in loan loss provisions during November. It follows a$12 million rise during the first nine months of the year, a 4.9 percent increase.

“Banks’credit quality indicators worsened during the review month, as high unemployment levels and the general weakness in economic conditions continued to constrain borrowers’ability to service their debt obligations,”the report said.”These challenges were

evidenced in total private sector loan arrears growing by$34.3 million(3.0%)to$1,169.3 million, for a 0.4 percentage point rise in the corresponding arrears ratio to 18.6%.

“Arrears between 31 and 90 days advanced by$21.7 million(4.3%)to$521.0 million–for an increase of 0.3 percentage points to 8.3%in the arrears ratio. Non-performing loans–those on which banks stopped accruing interest–grew by$12.6 million(2.0%)to$648.4 million, and to 10.3%of aggregate loans.”

The statement from the Central Bank echoed former Minister of Finance James Smith’s sentiments about how loan loss provisions will continue to increase as long as unemployment levels remain high. In an earlier interview withGuardian Business, Smith said that Bahamians who lost their jobs may have been able to handle the payments for the first couple of months, but with no employment opportunities surfacing those loans will go into arrears or become non-performing after several restructuring efforts.

According to the report, the rise in arrears was led by a$14.9 increase in mortgage delinquencies to$608.6 million, with$10.9 million of the hike coming from the 31-90 day segment and the remaining$4 million in the non-performing category. Consumer arrears grew by$12.3 million to$279.6 million, with short-term and non-accrual loans surging by$6.5 million and$5.8 million respectively.

Although the most recent report didn’t reveal any data on loan recoveries or restructuring, for the first nine months of the year banks wrote off$17.5 million in loans and$3.7 million in recoveries. It also indicated that financial institutions restructured an estimated$20.7 million in private sector loans during that period.

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