Bajans boosting savings while they borrow

Barbadians are growing their savings accounts even as they continue to borrow.

However, their personal loans are accounting for almost three-quarters of non-performing loans at the island’s financial institutions, according to the latest data from the Central Bank of Barbados.

Domestic currency deposits reached $13.4 billion at the end of December 2022, up from $12.8 billion at the end of the previous year. Meanwhile, foreign currency deposits totalled just over $1.036 billion at the end of the review period, compared to $887 million at the end of 2021.

“Total deposits increased by 5.5 per cent, reflecting gains in both domestic and foreign currency deposits,” the Central Bank data noted.

“Individuals, non-financial private sector firms, Government, and financial corporations were the main sources of the build-up in domestic deposits, while foreign-currency balances, which generally account for less than nine per cent of the total deposits, grew because of increased real estate and tourism activity.”

As far as loans were concerned, there was a slight decline in delinquency during 2022, while there was an increase in commercial bank lending to some sectors as well as increased lending to households “owing to new lending by credit unions and finance and trust companies”.

“While new credit to households from the banking sector was up 10 per cent over 2021, higher repayments eroded this growth, resulting in lower outstanding loan balances of households at these institutions for the period,” it explained.

The Central Bank added: “The combined delinquency rate of banks and finance and trust companies fell to 6.9 per cent from a peak of 9.2 per cent during the post-COVID period.

“The personal sector, which accounts for 59 per cent of lending, accounted for 70 per cent of these non-performing loans (NPLs), but there were also NPLs in the real estate and hotels and restaurants sectors. Credit to the non-financial private sector grew by 3 per cent, the strongest performance since 2017.”

Further reporting on the financial sector’s performance for last year, the recently released Central Bank economic performance report noted that buoyed by the improvement in economic and labour market conditions, new mortgages issued by banks for private dwellings experienced modest growth.

“However, repayments on outstanding balances led to a small contraction in the banks’ mortgage portfolio. On the other hand, outstanding mortgage lending of credit unions grew by around six per cent for the period, as more individuals continue to look to cooperatives for their borrowing needs,” it said.

Additionally, the statistics showed that due in part to the recovery of outbound travel, credit card activity trended upward during the year, with total new credit extended via credit cards being almost 50 per cent higher than in 2021.

“However, timely repayments tempered these increases to result in only a modest expansion in credit card balances,” the Central Bank said. (MM)