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Jamaicans defaulting on loans at record levels
Published: Wednesday | June 8, 2011
The Bank of Jamaica - File
Jamaicans with unserviced loans over three months totalled a record J$25.6 billion at March this year, or 32.6 per cent higher over year earlier levels, newly released Bank of Jamaica (BOJ) data indicates.The rise in these non-performing loans (NPLs) come at a time when deposit takers, comprised of banks, near-banks and building societies, have reduced their appetite for lending, reflected in a two per cent drop in total loans.
It is the largest NPLs on record in absolute terms, but it does not threaten the viability of the financial institutions, as it represents 7.5 per cent of total loans; and even less - at about three per cent - once provisions for bad debts are factored.
Contextually, in the financial crisis of the 1990s, NPLs represented, at times, half of the total loan portfolio.
In the review quarter, according to Prudential Indicators published by the BOJ, near-bank NPLs grew a whopping 258 per cent to J$3 billion; followed by commercial bank NPLs, up 31 per cent to J$17 billion; and building society NPLs, up 2.4 per cent to J$5.6 billion.
Data on individual company NPLs was not disaggregated.
However, in April, Capital & Credit Financial Group, which runs a near-bank, defended its merchant bank subsidiary's underperforming loan portfolio, pointing out that a large portion of its NPLs was actually restructured.
Curtis Martin, deputy group president, banking and investment services, and chief executive officer of Capital and Credit Merchant Bank, said at the time that "Of the J$2.86 billion classified as non-performing under the GOJ regulations, J$2.3 billion of those facilities were performing as per the rescheduled arrangement."
Despite the restructuring of the majority of the loans, Martin said the debt must remain classified as non-performing for 12 months, under BOJ regulations.
The aggregate financial sector saw NPLs rise in the June 2008 quarter amid the global downturn.
It resulted in job cuts and the crash of Ponzi schemes. Part of that downturn is reflected in the 2 per cent decline in gross loans across the aggregate financial sector to J$343.7 billion at March 2011, relative to the similar period in 2010.
steven.jackson@gleanerjm.com
NPL growth:
J$25.6 billion at March 2011;
J$22.4 billion at December 2010;
J$19.75 billion at September 2010;
J$20.4 billion at June 2010
J$19.4 billion at March 2010;
J$16.4 billion at December 2009;
J$14.2 billion at September 2009
J$14.6 billion at June 2009
Source: Bank of Jamaica
Published: Wednesday | June 8, 2011
The Bank of Jamaica - File
Jamaicans with unserviced loans over three months totalled a record J$25.6 billion at March this year, or 32.6 per cent higher over year earlier levels, newly released Bank of Jamaica (BOJ) data indicates.The rise in these non-performing loans (NPLs) come at a time when deposit takers, comprised of banks, near-banks and building societies, have reduced their appetite for lending, reflected in a two per cent drop in total loans.
It is the largest NPLs on record in absolute terms, but it does not threaten the viability of the financial institutions, as it represents 7.5 per cent of total loans; and even less - at about three per cent - once provisions for bad debts are factored.
Contextually, in the financial crisis of the 1990s, NPLs represented, at times, half of the total loan portfolio.
In the review quarter, according to Prudential Indicators published by the BOJ, near-bank NPLs grew a whopping 258 per cent to J$3 billion; followed by commercial bank NPLs, up 31 per cent to J$17 billion; and building society NPLs, up 2.4 per cent to J$5.6 billion.
Data on individual company NPLs was not disaggregated.
However, in April, Capital & Credit Financial Group, which runs a near-bank, defended its merchant bank subsidiary's underperforming loan portfolio, pointing out that a large portion of its NPLs was actually restructured.
Curtis Martin, deputy group president, banking and investment services, and chief executive officer of Capital and Credit Merchant Bank, said at the time that "Of the J$2.86 billion classified as non-performing under the GOJ regulations, J$2.3 billion of those facilities were performing as per the rescheduled arrangement."
Despite the restructuring of the majority of the loans, Martin said the debt must remain classified as non-performing for 12 months, under BOJ regulations.
The aggregate financial sector saw NPLs rise in the June 2008 quarter amid the global downturn.
It resulted in job cuts and the crash of Ponzi schemes. Part of that downturn is reflected in the 2 per cent decline in gross loans across the aggregate financial sector to J$343.7 billion at March 2011, relative to the similar period in 2010.
steven.jackson@gleanerjm.com
NPL growth:
J$25.6 billion at March 2011;
J$22.4 billion at December 2010;
J$19.75 billion at September 2010;
J$20.4 billion at June 2010
J$19.4 billion at March 2010;
J$16.4 billion at December 2009;
J$14.2 billion at September 2009
J$14.6 billion at June 2009
Source: Bank of Jamaica