Barbadians saving more, borrowing less

by Marlon Madden

Barbadians continue to increase their savings in the banking system as they soften their borrowing from those banking institutions over the past year.

Of the total local currency savings in the deposittaking institutions, residents account for nearly half. Total domestic currency deposits reached just over $12.7 billion at the end of September while foreign currency deposits were $911.1 million, according to the Central Bank economic review for the first nine months of 2021.

This compared to $12.1 billion for domestic currency deposits and $650.2 million for foreign currency deposits at the end of September last year.

“Deposits grew by 4.8 per cent on account of higher domestic and foreign currency deposits. The main driver for domestic deposits was the household sector, which accounted for 48.1 per cent of the domestic currency growth,” the central bank report noted.

Foreign currency accounts, which represented approximately 6.7 per cent of total deposits, were mainly driven by the business and financial sectors, the financial institution said.

“Foreign currency deposits grew as a result of activity in households and the business sector. The business sector’s increase in foreign currency deposits resulted from the legal and construction industries,” it added.

At the same time, the Central Bank said loans to householders continued to decline. “Loans to households continued on a downward trend as outstanding personal debt from mortgages continued to decline.
Despite the increase in new credit card debt extended during the third quarter, outstanding credit card debt for the nine-month period was lower than the similar period last year,” said the report.

“Credit to the non-financial private sector during the first three quarters of 2021 fell by 1.4 per cent. Modest growth in new lending related to working capital for the hotel and restaurant and distribution sectors were outpaced by loan repayments. Loan growth was recorded in the real estate sector primarily due to the extension of new credit,” it added.

The central bank noted that deposit-taking institutions continued to experience elevated credit risk associated with the pandemic, pointing out that the loan delinquency ratio stood at 7.5 per cent as loans classified as non-performing declined from the previous quarter.

“This was driven mainly by improvements in the distribution and personal mortgage related sectors.

Additionally, the banks’ efforts to assist their customers continued to avert pressure on loan impairments.
Banks supported their customers on a case-by-case basis, but loans subject to moratoria were substantially reduced, with the majority mainly situated in the hospitality, household and real estate, renting and other business activity sectors. Additionally, the personal sector took advantage of restructured loans.

Pointing out that the financial system remained stable during the first nine months of the year, the report noted that banks continued to maintain large cash balances with the Central Bank while registering improved capital buffers.

It said: “interest rates for deposits and loans remained at historic lows but with loan balances falling further, the net interest income of banks was lower than in 2020.

Reduced provisioning expenses enabled banks to improve their profitability as measured by the return on average assets”.
marlonmadden@barbadostoday.bb