By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian banker last night said “stability is sometimes better than a bubble about to burst” after the Central Bank unveiled double-digit increases for both loan approvals and rejections in the 2024 second half.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that the regulator’s latest six-month lending conditions survey revealed no “monumental” swings in either a positive or negative direction with borrowing trends staying consistent with the previous 18 months.

Despite what it described as a slight decrease in credit approval rates, the Central Bank said applications for new loans rose by 22.7 percent in the 2024 second half compared to the same six-month period in 2023 at 20,145. And, of those submissions, some 16,280 - representing a 20 percent jump compared to the 2023 second half - were approved by Bahamian commercial banks for an 80.8 percent approval rate.

However, loan application denials increased by a similar 17.2 percent year-over-year to hit 1,863. And of those rejections, one in every four (25 percent) of spurned consumer loan applications, and one in every five (almost 20 percent) of denied mortgage loans, occurred because the potential borrowers had existing debt exceeding 50 percent or more than half of their income.

Mr Bowe, noting that the survey results highlighted both positive and negative trends in the Bahamian credit market, told this newspaper: “There’s optimism that we are still seeing the applications and we are seeing new loans being disbursed. But the pace at which it is being disbursed is going to take a period of three to five years to return to 2019 credit levels.

“Although the number of applications declined from the previous survey, we still have positive numbers. It’s encouraging when you at least have persons confident to put themselves forward for new borrowing. The challenge, when you look, is the Central Bank’s in tempered language says its going to be challenging period going forward when you look at the US economy.

“The loan approval rate certainly is not extremely high, so we’re still seeing the banks remain very cautious in lending practices. I don’t think that will change in the immediate future.” Mr Bowe pointed to the global economic and stock market turmoil unleashed by Donald Trump’s tariff policies, and uncertainty over what the ultimate outcome will be, as one factor behind why Bahamian banks are unlikely to change this stance.

“I take it from the positive side that we have application rates up, new money being disbursed but at a much slower pace than would be necessary to recover what was lost in COVID,” he added. “There is nothing remarkably positive or negative. It’s not like another boom in lending or another crash in lending. It’s consistent with the pace seen over the last 18 months.

“We haven’t seen anything monumental in one direction or the next. Sometimes that’s good. People may not appreciate that, but sometimes stability is better than what what I’m going to call massive expansion. It’s similar to weight loss. You are far better losing the weight in a measured fashion, because you tend to keep it off, rather than having a rapid decrease in weight.

“Similarly, you don’t want to see a rapid expansion in loans if there’s a bubble about to burst. You want sustained growth in lending. While there are some ups and downs, the average growth rate remains consistent.” The Central Bank, in its survey report, said that while consumer loan approval rates in the 2024 second half were down slightly from prior year comparatives they remained consistent with long-term trends.

“Consumer lending remained the primary credit component, accounting for 94 percent of total credit applications,” the Central Bank said. “Loan requests increased by 25.4 percent year-on-year for the six months to December 2024 over the same period in 2023, reflecting applications received from New Providence (25.3 percent), the Family Islands (73.6 percent) and Grand Bahama (6.3 percent).

“Of the 18,936 consumer loan applications received, requests were primarily for ‘other’ miscellaneous purposes (36.3 percent), credit cards (21.8 percent), consolidation of debt (15.2 percent) and travel (10.8 percent). A disaggregation by component revealed that the number of financing requests rose more than five-fold for taxis and rented cars, while ‘other’ miscellaneous applications nearly doubled (93.4 percent) and credit cards requests rose by 51 percent.

“Further, applications also firmed for private cars (22.1 percent), land purchases (20 percent) and travel (5.6 percent). In contrast, fewer requests were recorded for commercial vehicles (87.6 percent), education (55.8 percent), medical (35.4 percent), furnishings and appliances (22.6 percent), consolidation of debt (21.1 percent) and home improvements (15.5 percent).”

The Central Bank added: “Corresponding with the trend in requests, the number of approved loan applications increased by 21.9 percent after a 4.5 percent rise in the previous year. As the volume of approvals maintained fairly close pace with requests, the average approval rate narrowed by 2.3 percentage points to 81.6 percent.

“Regarding loan denials, only 9.3 percent of consumer requests were declined. Reasons frequently cited were aggregated under ‘other’ miscellaneous factors (50.4 percent) - inclusive of low credit scores, purposes outside of banks’ policy and low risk rating - high debt service ratios (25.5 percent), delinquency in prior loans (7.9 percent) and insufficient time on the job (7.7 percent).”

As for mortgage lending during the 2024 second half, the Central Bank said: “Lending institutions processed 725 mortgage applications, all of which were for residential properties.

“The number of residential mortgage applications declined by 6.8 percent year-on-year, albeit a slowdown from the 14.6 percent contraction in December 2023. Submissions for rehabilitations and additions, and new construction, posted respective declines of 54.2 percent and 13.9 percent. However, financing requests for existing dwellings grew by 58 percent.

“Of the applications received, financing secured against existing residential dwellings constituted 59 percent of mortgage demand, while rehabilitations and additions and new construction accounted for 22 percent and 19 percent, respectively. Meanwhile, commercial financing applications registered a flat outturn.”

Turning to mortgage approval rates and denials, the Central Bank said: “Total mortgage applications recorded an approval rate of 54.6 percent in the latter half of 2024, indicative of a 1.8 percentage point increase relative to the same period in 2023. The approval rate for new construction and existing dwellings were 66.9 percent and 66.1 percent, respectively, while 12.7 percent of renovation projects were approved.

“In terms of requests, 10.1 percent of mortgage applications were denied. The primary reason cited for denials - in 50.7 percent of instances - was varied ‘miscellaneous’ factors.  These may include, but are not limited to low credit scores, lending outside of bank policy and missing information.

“Other explanations included debt service ratios surpassing the revised threshold of 50 percent (19.2 percent), delinquencies in prior loans (13.7 percent), underemployment (8.2 percent) and unverifiable income (8.2 percent).”