‘Less borrowing in mortgages and credit cards’

Barbadians seem to be easing up on their borrowing from commercial banks as they continue to pay off existing loans and boost their savings.

The latest Central Bank report revealed that commercial banks’ overall lending declined by almost three per cent last year, when compared to 2020.

“Credit to the non-financial private sector by deposit-taking institutions fell by 1.7 per cent, a marginally faster rate than recorded in 2020. Lending by commercial banks fell by 2.8 per cent, but there were modest increases by other institutions,” Central Bank Governor Cleviston Haynes reported on Wednesday.

He said: “The decline in commercial bank lending was mainly reflected in personal loans for mortgages and credit cards. Total credit card balances outstanding to the personal sector declined by 13.9 per cent, a slightly deeper decline than the 9.8 per cent of 2020.

“This reduction was the result of repayments outpacing the growth in new credit extended, as consumers continued to reduce short-term credit balances throughout the year. However, there were increases in credit to the business sector, particularly for utilities,” he added.

As borrowing took a dip last year, the liquidity in the banking system went up. During 2021, banks and credit unions continued to accumulate excess liquidity as Government utilised “counter-cyclical spending” to offset the negative economic fallout from COVID-19, according to the central bank.

“The loan-to-deposit ratios of banks and credit unions continued to fall, but the build-up of liquidity at the Central Bank slowed, with the excess cash holdings of commercial banks reaching 26.7 per cent of domestic-currency deposits, compared to 22.8 per cent a year earlier,” said the report.

The profitability of banks also strengthened over the last year although overall credit declined and interest rates on deposits and loans stayed at historically low levels.

In 2021, Barbadians continued to increase their savings at the deposit-taking institutions, albeit at a slower rate than the previous year.

The Central Bank reported that domestic-currency deposits grew by 2.5 per cent, compared to a 7.8 per cent increase during the previous year.

“Household savings, which constituted 46.5 per cent of domestic-currency deposits, increased by 4.1 per cent in 2021, while corporate deposits grew by 3.2 per cent compared to 10.6 per cent in 2020.”

Provisional data showed that domestic currency deposits reach $12.688 billion at the end of last year, compared to $12.283 billion at the end of 2020.

“Foreign currency accounts, which represented approximately 6.4 per cent of total deposits, also increased – the result of higher foreign currency holdings of the real estate, tourism and household sectors,” the report noted.

Foreign currency deposits reached $911 million last year, compared to $693 million a year prior.

At the end of last year, a small share of loans remained under moratoria, principally in the real estate and tourism sectors as financial institutions increasingly utilised increased loan restructuring or as clients resumed regular payments. At the same time, there was evidence of increased access to working capital, particularly for the tourism and distribution sectors.
(MM)