Unserviced loans dip, but still higher than before the pandemic

Consumers and businesses, mainly in the tourism and construction sector, rushed to pay down past-due bank loans that were headed towards recent highs, according to the latest data from the the central bank.

It caused this particular pool of unserviced loans to dip from $50.1 billion in April to $41 billion in May.

“The market is working,” Deputy Governor of the Bank of Jamaica, Dr Jide Lewis, said at a recent BOJ briefing.

“People are acquiring properties, banks are facilitating that by offering mortgages and managing the risk associated with their exposure to that segment,” he said.

Loans become past-due when not serviced for a month. Borrowers have up to three months to service their loans to avoid default, otherwise, it becomes a non-performing loan or NPL.

Since mid-2022 past-due loans have climbed in successive quarters. It reached recent highs of $50 billion or two-thirds greater than the pandemic low of $29.3 billion.

Past-due loans that soured beyond 90 days into NPLs totalled $35 billion up to May. That reflected less than three per cent of the total loan pool of $1.35 trillion. The sector generally aims to keep NPLs under 10 per cent to avoid systemic issues.

“So our NPL ratio is extremely low. We have other jurisdictions in the Caribbean with NPLs in the teens,” said Lewis. “So it is not something we are particularly worried about at this particular point.”

The central banker added that there are over 11,000 outstanding mortgage borrowers and that banks are managing their risk.

Historically, past-due loans hit a record of $80 billion in April 2020, in the month after the COVID-19 pandemic reached Jamaica. The debt quickly dipped as borrowers paid down their loans after the initial shock of the health crisis. Eventually, past-due loans declined to pandemic lows of $29.3 billion in December 2021.

steven.jackson@gleanerjm.com

Past-due loans (J$b):

2024

May $41.0

April $50.1

March $43.0

February $42.6

January $50.3

2023

December $44.5

November $41.6

October $43.7

September $38.1

August $37.0

July $46.4

June $46.8

May $47.2