Banks pull back slightly on lending

Commercial banks pulled back generally on their lending last year, but amid a high level of liquidity in the local sector, consumer loans grew by $73 million, according to the latest Financial Stability Report released today by the Central Bank and the Financial Services Commission.

Of that amount $29 million of which was representative of personal mortgages, while loans to the bread-and-butter tourism sector rose by $11 million.

“The marginal uptick in credit to the tourism sector primarily reflects the reclassification of an existing loan previously captured under ‘Professional and Other Services’,” the report explained.

However, loans were down overall by 1.5 per cent, with reductions seen in all other sectors, including construction, personal and other services, as well as to Government and the distribution sector.

Nonetheless, funding by way of deposits rose five per cent, although there was slow growth of savings deposits, as interest rates continued to slide.

The average rate on deposits in September last year was estimated at 0.3 per cent, which is less than half of what it was one year earlier.

However, there was an overall higher net income as a result of the net interest income generated from falling deposit rates.

As for non-performing loans (NPLs), there was an overall decline of 9.4 per cent last year, even this remains an area of concern particularly for local credit unions.

“The persistence of loans in this category remains an area of active monitoring as these NPLs tend to be concentrated in mortgages which involve a lengthy legal resolution process. The sector continued to make progress with respect to provisions for NPLs, which ended the period up 3.5 percentage points, to 33.4 percent of NPLs,” the report said.

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