Despite the shadow of rising unemployment and reduced wages cast over the economy, Bahamians by and large kept up with their loan commitments during the month of April, according to the most recent data from The Central Bank of The Bahamas.
In particular, banking sector arrears contracted around four percent in April, a month after country borders were closed and tens of thousands of Bahamians applied for unemployment benefits and assistance.
“An analysis by the average age of delinquency shows that short-term arrears (31-90 days) reduced by $42.5 million (17.7 percent) to $197.5 million, resulting in the attendant ratio declining by 76 basis points to 3.5 percent,” the CBOB’s Monthly Economic and Financial Developments report for April noted.
On the other hand, non-performing loans (NPLs) crept up nearly three percent to settle at $460.5 million.
As a precaution in the current economic state of the country, banks instituted a 17 percent increase in provisions for loan losses to $500.3 million in April.
“Consequently, the ratio of total provisions to both arrears and NPLs firmed by 13.8 and by 13 percentage points to 76 percent and 108.6 percent, respectively. During the month, banks also wrote off an estimated $7.6 million in bad loans and recovered approximately $1 million,” the CBOB report states.
Compared to April 2019, private sector arrears are down 1.3 percent, with consumer and mortgage loan categories recording decreases in arrears at a ratio of one and two percentage points.
However, commercial loan arrears rose by 0.2 percentage points.
“Disaggregated by loan category, the contraction in arrears was led by a $24.2 million (5.8 percent) decrease in mortgage delinquencies to $395.7 million, owing to a $30.1 million (19.9 percent) falloff in the short-term segment, which outweighed the $5.9 million (2.2 percent) increase in the non-accrual component,” the report states.
“Similarly, consumer loan arrears fell by $12.3 million (6.2 percent) to $187.5 million, as short-term arrears moved lower by $20.4 million (25.6 percent), outstripping the $8.1 million (6.7 percent) growth in the long-term segment. In contrast, commercial loan arrears rose by $6.6 million (9.7 percent) to $74.9 million, attributed to an $8.0 million (90 percent) rise in short-term arrears, which outpaced the $1.4 million (2.3 percent) decline in non-performing commercial loans.”
At a media briefing last month, Central Bank Governor John Rolle said while it is too early to determine how much of an impact the COVID-19 pandemic would have on the ability of borrowers to maintain repayments, banks remained well-positioned to withstand any negative impacts.
Additionally, the CBOB arranged with domestic banks and credit unions to provide a three-month deferral against repayments on credit facilities for businesses and households that were negatively impacted by the COVID-19 pandemic.