Bahamas: Loan Arrears Hit $1 Billion

LOAN ARREARS HIT $1 BIL
By CANDIA DAMES
Guardian News Editor
candia@nasguard.com:



Bahamians are now more than $1 billion in arrears on their loans as the public continues to struggle with keeping up mortgage payments.

In its latest economic report, the Central Bank said the banks'credit quality indicators deteriorated further in July.

According to the report--"Monthly Economic and Financial Developments July 2010"--this was buoyed by sustained high unemployment levels and a challenging business environment.

While there are no recent numbers on unemployment, it is widely agreed by those in government and in business that the rate of joblessness remains in the double digits.

With regard to the main components, the expansion in total arrears was due primarily to a rise in the dominant mortgage segment, which accounts for 52.0 percent of delinquencies.

The report said total private sector loan arrears rose by$22.4 million(two percent)to$1.2 billion, with a corresponding increase to 18.6 percent of total loans.

"The current numbers evidence the fact that the economy is still under some pressure and will probably continue to be for the near future,"said Barry Malcolm, chairman of the Clearing Banks Association and Managing Director of Scotiabank Bahamas Ltd., in an interview with The Nassau Guardian last night.

"Notwithstanding the current levels of delinquencies we're confident that the situation is stabilizing and will improve into 2011."

The Central Bank said that in terms of the average age of delinquencies, arrears in the short-term 31-90 day segment grew by$13.3 million(2.6 percent)to $534.2 million, resulting in an expansion in the corresponding loan ratio to 8.6 percent.

In addition, non-performing loans--those more than 90 days in arrears and on which banks have ceased accruing interest--rose by $9.1 million(1.5 percent)to $629.5 million, firming in the ratio to total loans to 10.1 percent.

Smaller gains were noted for the commercial and consumer categories, which comprise 23.3 percent and 24.6 percent of arrears, respectively.

Mortgage delinquencies expanded by $20.0 million(3.4 percent)to $606.8 million, owing to growth in both the 31-90 day, and non-performing segments of$11.3 million(3.5 percent)and $8.7 million(3.2 percent)respectively, the report added.

Malcolm told The Guardian that the absence of significant growth in the economy right now and the likelihood that growth will be slow in coming over the next year speaks to the need for prudence in how consumers save and spend.

In the United States, the economic outlook remains much more subdued than originally forecast.

Last week, Chairman of the Federal Reserve Ben Bernanke confirmed this.

Malcolm said,"To the extent that is the case in the U.S., it will as it always does have some direct effect on us."

Patricia Birch, who heads the Bahamas Real Estate Association, noted that it is impossible to tell from looking at the new numbers whether the majority of loans in arrears are for first-time property owners.

"Some of these may be properties that are not primary residences of Bahamians but may have been investment properties that they bought at a time when they were working steady and these may be lots or properties in the out islands or even here in Nassau,"Birch said.

"Certainly people are going through difficult circumstances, but in my opinion the banks do try to work with people as much as they can because banks are not interested in owning houses or property."

9/2/2010

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