Loan delinquency continues to plague banks amid weak economic recovery

Tuesday, August 9, 2011

The hangover from the financial crisis continues to plague the Bahamas' commercial banks, as loan delinquencies refuse to leave the balance sheets.

Total private sector loan arrears in the Bahamas stood at US$1.14bn at the end of June, representing 18.44% of the total portfolio. This represents a mere 0.9% decline on the same period last year, according to the latest economic statistics published by the country's central bank.

The non-performing loan ratio, defined as 90 days overdue, stood at 10.7% at end-June, barely moving from the 11.1% mark in June 2010.

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Mortgage lending arrears have become the most entrenched, falling just 0.6% year-on-year in June, to US$629mn. This underscores the long-term effects of the US-linked housing bust that hit the Bahamas in 2008.

Conversely, commercial loan delinquency is fast improving, falling 12.9% in the same period to US$247mn.

The central bank foresees "the expected persistence of high levels of banking sector loan arrears, amid unfavorable employment conditions and the current narrowness of the recovery."

"However, any related concerns from a financial stability perspective are muted, given domestic banks' high levels of capital," the bank's statement added.