Jul 2010 Financial News

Demand for loans still weak

Jul 19, 2010

The banking industry normally mirrors what happens in the national economy; therefore, just as the economy is going up and down, the performance of the bank will also fluctuate.

Nonetheless, Managing Director and CEO of Barbados National Bank, Robert Le Hunte, has assured, “Despite the turbulent economy most of the banks operating in Barbados are here for the long haul and we are confident about the banking industry.”

He stated, “BNB, we are here for the long haul. [But] We expect that there will be some contraction in the economy, in the bank’s profitability. We expect to see some reduction in loans as the economy does not have as much activity.”

Le Hunte told Business Monday, “In terms of loans there isn’t that demand. Interest rates are very low, you could pick up mortgages at 5.5 per cent. The problem is there is a situation where unemployment is increasing, reduction of income for those who are working and therefore people are using their money to survive or [are] using savings. They don’t have the capacity to want to borrow, which is expected.”

He added, “It is very little that you can do; what happens here in Barbados is driven by what happens internationally. We are hearing about growth, the world economy is growing by about 4 per cent, but a lot of that growth is in China, India, but it is not happening with our major trading partners and they are not growing by that amount.
Our recovery will take a little longer, but we know it will happen.”

The Governor of the Central Bank of Barbados, Dr. Delisle Worrell, in the recent review of the economy for the period January to June 2010, had also weighed in on the issue of weak demand for loans in Barbados.

He had stated, “It is not necessary that the Central Bank lower interest rates because the problem is not the cost of loans, the problem is that is if you get a loan, you have to know where you are going to get the income which is going to enable you to service the loan. The demand for the products and services is not there and therefore that is why people are not borrowing.”

Le Hunte recommended, “At this time it is important that we do improve the banking industry. For example at BNB we are using this time to retool ourselves – we have a new computer system in place, refurbishing our branches, so we are doing our part to try to stimulate our economy but also prepare ourselves for when the economy grows.”

“We have moved the BNB branch from Lower Broad Street to where it is now – that building will be sold. However, the new BNB has been well accepted, we have great reviews and it is fulfilling the role we wanted it to play in terms of revitalising Bridgetown,” he remarked.


Source:
Nadia Brancker
Barbados Advocate
Monday July 19, 2010

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