The number of loans being approved by banks has begun to improve over 2018 numbers, Governor of The Central Bank of The Bahamas (CBOB) John Rolle said yesterday, adding that just 15 percent of loan applications were denied during the first half of 2019.
Rolle, who was speaking at a press conference on the CBOB’s Quarterly Economic and Financial Developments Report for September 2019, said banks also do not anticipate a rise in non-performing loans (NPLs) as a result of Hurricane Dorian, though he said it could increase by one or two percentage points.
Rolle said yesterday that new lending has begun to outpace ongoing repayments.
“Prior to the hurricane, there were signs of a marginal turnaround in private sector lending, as the contraction in credit tapered off,” he said.
“Some results from the Lending Conditions Survey released today [yesterday] show that demand for credit is now trending stronger than in 2018.
“Banks have also approved a larger share of recent applications than in the past. The most common reason for unsuccessful loan applications continue to center around households already carrying too much debt or putting up insufficient collateral to secure the debt.”
In terms of NPLs as a result of Hurricane Dorian, Rolle explained that Grand Bahama and Abaco represent only 14 percent of banks’ overall credit exposure, while Abaco, the hardest hit of both islands, represents less than five percent of that number.
“It is the Abaco economy that will be in a more protracted experience in terms of the recovery process,” he said.
“It puts some upper limit in terms of the total deterioration in the non-performing loans situation that banks can expect to encounter.
“So in the case of Grand Bahama, to the extent that banks have already built in at least a six-month moratorium on loan repayments, today they’re working on customers to help them get back on their feet.
“All of those interventions will help the banks manage over the medium term their credit quality and exposure, because it gives them the time for economic activity to begin to return.”
Rolle said the situation with banks’ NPLs will have to be monitored over the next several months, especially after the moratorium on payments has expired.