By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Total loan arrears fell by $123.5m or 15 percent during 2019 to hit their lowest level for a decade at year-end, a Central Bank of The Bahamas presentation has revealed.

The monetary policy regulator, unveiling the status of credit quality within the Bahamian commercial banking system, said the ratio of arrears - loans that are 30 days or more past due - had declined by 2.2 percentage points during 2019 notwithstanding Hurricane Dorian's impact.

And non-performing loans, which are 90 days or more past due, represented just over half the decline with a $63m or 12.2 percentage point decrease over the 12-month period. The ratio of non-performing loans to total outstanding credit also dropped by 1.1 percentage point to hit eight percent at 2019 year-end.

"During 2019, total private sector arrears contracted by $123.5m (15.3 percent)," the Central Bank said. "The ratio of arrears to total private sector loans fell by 2.2 percentage points to 12.1 percent in response to enhanced debt collection efforts and the improvement in the economy.

"Short-term arrears fell by $60.5m (20.7 percent) resulting in a 1.1 percentage point decline in the arrears rate to 4.1 percent. Non-performing loans fell by $63m (12.2 percent), and the non-performing loan rate by 1.1 percentage points to 8 percent."

All three loan categories saw a double-digit decline in bad loans. Mortgage arrears fell by 15.3 percent year-over-year, while those for consumer and commercial loans were down by 13.5 percent and 20.3 percent, respectively.

John Rolle, the Central Bank's governor, this week indicated it had revised projections that the Bahamian commercial banking industry's non-performing loan ratio will rise by several percentage points to hit the ten to 12 percent range in Dorian's aftermath.

He said the sector's low exposure to the two Dorian hit islands, which collectively account for around 10 percent of its outstanding loan portfolio, meant the Central Bank no long saw "as major a push back as we anticipated initially" in terms of an increase in bad credit.

Mr Rolle added that the Central Bank had also seen "millions of dollars paid down on loan balances in those islands" as a result of hurricane insurance settlements, and the reduction in outstanding debt by "sizeable chunks" could ensure the loan arrears ratios keep going downwards.

Elsewhere, the Central Bank reported that excess liquidity in the commercial banking system expanded by $433.4m during 2019 to hit $2bn by year-end, reversing the previous year's $209.3m decline.

Excess reserves in the system jumped by a similar $434.9m to reach $1.1bn, again reversing the prior year's $186.2m contraction. "At end-December 2019, bank liquidity increased, as the growth in deposits outpaced the rise in domestic credit. Inflows were provided from tourism and re-insurance proceeds," the Central Bank said.

"Total private sector credit increased by $1.4m, tempering the prior year's decline of $121.4m." Loans to businesses drove this modest growth, expanding by $68.8m, while consumer credit and mortgages declined by $39.7m and $27.7m respectively.

"The external reserves grew by $560m to $1.8bn at end-December 2019," the Central Bank said. "Balances fell by $209.2m in 2018. Balances were equivalent to approximately 5.9 months of current year's total merchandise imports versus four months of coverage in 2018. The international benchmark is three months.

"The external reserves represented 95.3 percent of the Central Bank's demand liabilities, compared to 88.8 percent at the end of 2018. The target range is 90 percent to 100 percent."