Nov 2010 Financial News

Loans grow again, bad debt falls

Nov 17, 2010

During the three months to September 30, 2010, the stock of outstanding loans and advances to the private sector increased for the first since the March quarter of 2009, while at $220.1 billion, private sector credit totalled the highest since December 2009.

What's more, according to the recent data released by the Bank of Jamaica (BOJ), non-performing loans -- loans that have not been serviced for more than three months -- fell by approximately $800 million during the three-month period.

Lending to the productive sector in the review quarter increased marginally, after four consecutive quarters of decline, which means that private sector credit growth was largely driven by the expansion in personal lending.

Personal Loans increased by $2 billion, or by 2.4 per cent over year-earlier levels, reflecting the larget quarterly expansion since December 2008 quarter, reflecting a 3.6 per cent increase in credit card receivables and a 0.4 per cent increase in foreign currency-denominated loans for personal and other.

The stock of loans for the purchase of motor cars declined by 0.9 per cent, following a reduction of 0.5 per cent in the previous quarter.

More than half of the increase in net lending to the business sectors were attributed to growth in outstanding loans to construction and land development; transport, storage and communication, and distribution.

Loans to construction and land development increased by $422.1, or 2.1 per cent, and transport, storage and communication loans increased by $473.8 million, or 5.2 per cent.

Distribution loans increased by $297 million.

Net repayments of loans recorded for manufacturing and professional and other services, almost wiped out net lending to the other sectors, as manufacturing, which experienced its third consecutive quarter of repayments, saw total loans and advances fall by $665.8 million, or 7.9 per cent.

Professional and other services, the outstanding loan stock for the September 2010 quarter fell by $448 million, or 2.5 per cent.

The agriculture and fishing and electricity sectors saw net lending as well -- $37.4 million and $228 million -- but all other industries reflected net repayments for the review quarter.

According to the BOJ, the "quality of the private sector loan portfolio improved marginally over the review quarter".

"The ratio of past due loans to total private sector loans improved to 6.0 per cent at end-September 2010 from 6.4 per cent at end-June 2010," said the quarterly monetary policy report for the September 2010 quarter. "The ratio of past due loans to total loans was 5.2 per cent at the end of the review quarter compared to 5.6 per cent at end-June 2010."

The total stock of non-performing loans stood at $14 billion at the end of June 2010, while private sector credit then totalled $216.4 billion. Private sector credit totalled $220.1 billion at the end of September, which means that bad debt portfolios across commercial banks collectively totalled $13.2 billion, or $800 million less.

Key sectors which accounted for the marginal improvement in loan quality for the review quarter include manufacturing, tourism, transport, storage and communication and personal.


Source:
Jamaica Observer
Wednesday November 17, 2010

http://www.jamaicaobserver.com/business/Loans-grow-again--bad-debt-falls_8159623