Non-performing loans (NPLs) continued to decrease at the end of 2019, Governor of The Central Bank of The Bahamas (CBOB) John Rolle said yesterday and while it is expected that fallout from Hurricane Dorian could slow the reduction in the amount of NPLs, it is not expected to be dramatic, should it occur.
Rolle, who was speaking to the media at the Central Bank’s Monetary Policy Committee press briefing, explained that at the end of 2019 the number of NPLs was approaching eight percent of all loans in the country.
Rolle said last year that five percent is a “terrifying” number for a country’s NPLs to stand from an international perspective. He added that the Central Bank would like to see the number below five percent.
“NPLs at the end of 2019 was approaching eight percent, so it continued to drop, even though you do notice the important increase in the rates for Grand Bahama, which is understandable given that the economy is still recovering,” said Rolle.
“There may be a transitional period where there is a pause in the national average, but the national average is only impacted by the ten percent exposure to Abaco and Grand Bahama. We’ve already seen some of the increased pressure on the higher NPL rates from those two islands, so to the extent that we get strong improvement from elsewhere in The Bahamas, you can still have the overall average continuing to move down.
“But we would not be taken aback if there was a temporary pause in that process. But we do not see it as a significant pushback as we may have projected initially.”
Rolle explained that the likely reasons for the positive movement of NPLs is that there has been very aggressive efforts within financial institutions to work with their customers to continue to get repayments; a more proactive approach to the credit collection process in general; and a greater move to write off bad debt.
“What gives us the extra comfort is we know the banks are making almost full provision for potential losses that could result if they never recover those balances,” he said.
He added that some Grand Bahamians and Abaconians have been using their reinsurance payouts to pay down sizeable chunks of their loan balances.
“We have seen million of dollars paid down in loan balances on those islands,” Rolle said.
“So that has helped to cushion the banks against the impact and as is typical in these cases, banks would normally give the customers extra time or a repayment holiday, so the average customer in Abaco and Grand Bahama would have had some moratorium on their loan payment. In cases where they had the capacity to take on more debt, banks would have given some of the customers additional financing to help them address some of their recovery needs.”