After a period of relatively positive - if mildly so - news, The Central Bank of The Bahamas (CBOB) has reported a worsening of banks' credit quality reflective of "a deterioration in a few institutions' loan portfolios". And the bank reported a steep decline in tax receipts from real estate transactions, as property sales slumped.

Loan delinquencies rising
Total private sector loan arrears rose by just under one percent to $1.193 billion, accounting for 19.8 percent of total loans. In terms of the components, non-performing loans (NPLs) expanded by 0.8 percent to $900.5 million, and the attendant loan ratio rose to 15 percent. Short-term (31-90 day) delinquencies rose by 1.4 percent to $292.6 million, to account to 4.9 percent of total loans.

According to the CBOB Monthly Economic and Financial Developments report for October 2015, a disaggregation by loan type showed that the rise in total arrears was largely attributed to the commercial component, which increased by 6.3 percent to $219.7 million.

Consumer loan delinquencies rose slightly by 0.3 percent to $311.6 million, as arrears in excess of 90 days advanced by $11.3 million (5.4 percent), to offset the $10.3 million (10.1 percent) decrease in 31 to 90-day delinquencies. In contrast, the mortgage segment contracted by $3.2 million (0.5 percent) to $661.8 million, owing to declines in both the non-performing and short-term components, of $2.1 million (0.4 percent) and $1.1 million (0.7 percent), respectively.

"Given the rise in delinquencies, banks increased their total provisions for loan losses by $7.4 million (1.4 percent) to $531.1 million. As a result, the ratio of provisions to arrears firmed by 21 basis points to 44.5 percent, while the corresponding non-performing loan ratio grew by 37 basis points to 59 percent. During the review period, banks also wrote-off an estimated $14.0 million in bad debts and recovered approximately $1.7 million," the bank wrote.

Interest rates
The bank also reported that the weighted average deposit rate at banks declined by 37 basis points to 0.93 percent, with the highest rate of five percent offered on fixed balances of over 12 months. In contrast, the weighted average loan rate firmed by 11 basis points to 12.09 percent.

Revenue
The bank reported that the government's overall deficit narrowed sharply by $91.6 million - just over 60 percent - to $60.3 million during the first three months of FY2015/16, supported by a tax-led 38.1 percent rise in total revenue, to $437.1 million, which outpaced an increase in aggregate expenditure, to $497.4 million.

"In particular, buoyed by a net intake of $165.5 million in VAT, tax receipts surged by $113.7 million (40.8 percent) to $392.2 million. In a modest offset, taxes on international trade contracted by $15.8 million (11 percent) to $127.4 million, reflecting respective declines in import and excise taxes, of $10.1 million (13.3 percent) and $8 million (12 percent), which overshadowed a slight $2.3 million increase in export tax receipts.

"With the elimination of the hotel occupancy tax in January 2015, following the introduction of the VAT, selective taxes on services were almost negligible, at $0.1 million, compared to $12 million a year earlier. Nontrade stamp taxes declined by $10.5 million (30.3 percent), attributed mainly to a sharp $17.8 million (68.3 percent) falloff in tax receipts from real estate transactions, as property sales slumped, while timing-related factors led to a $10.1 million (63.4 percent) contraction in business and professional fees, to $5.8 million.

"In contrast, nontax revenue rose by $10.3 million (29.5 percent) to $45.2 million, as the payment of dividends by a major telecommunications provider contributed to a more than four-fold increase in income to $13.9 million," the bank reported.

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