UP to late 2021, consumers were still benefiting from moratoria on loans extended by members of the deposit-taking community. The Bank of Jamaica (BOJ) shows that companies, not individuals, were the biggest beneficiaries.

The BOJ, in its just-released annual report for 2021, indicates that up to month end November 2021, the stock of loans remaining under moratorium facilities related to COVID-19 stood at $15.4 billion and was spread across five licensees (commercial banks and building societies). There are 11 deposit-taking institutions (DTIs) supervised by the central bank.

The November data compare with a stock of $70.2 billion in loans under moratoria reported by nine institutions for the similar period in 2020. The loans were largely domestic currency facilities, representing 58.9 per cent of all moratoria.

By customer group, corporate clients and individuals were the main beneficiaries of payment holidays at end November 2021. Overall, the BOJ indicates the outstanding stock of loans that have benefitted from moratorium arrangements since the onset of the pandemic totalled $176.1 billion at end 2021, representing 15.9 per cent of total DTIs loans.

Overall, this represented a decline of 18.5 per cent ($39.9 billion) relative to the stock reported at end 2020, the BOJ noted, as customers who formerly received payment holidays made principal repayments on the outstanding loan stock.

Debt written off

Additionally, some licensees engaged in debt write-offs for some impaired credits. The BOJ notes as well that as income levels continued to be adversely affected by the economic fallout from the pandemic, the stock of non-performing loans (NPLs) (past due three months and over) increased by 12.6 per cent ($3.7 billion) to $33.0 billion at end 2021.

The central bank stated that, although the growth in NPLs was lower than the previous year’s out-turn of 41.9 per cent ($8.6 billion), asset quality, measured by the ratio of total NPLs-to-total loans, deteriorated to 2.9 per cent, which was the highest ratio since end 2016.

Overseas delinquency

The BOJ said that the increase in delinquencies was primarily reported in loans to overseas residents ($1.8 billion), followed by corporates ($1.3 billion) and individuals ($0.6 billion).

On the other hand, past due loans (PDLs) (past due one month to three months) continued to decline. Specifically, PDLs fell by 5.4 per cent ($1.7 billion), following the reduction of 16.0 per cent ($5.9 billion) in the previous year.

As a result, the lead indicator of asset quality, measured by the ratio of total PDLs-to-total loans, improved to 2.6 per cent at end 2021 from 3.0 per cent at end 2020.

Within the portfolio of loans granted moratorium, the stock of loans that transitioned to non-performing status following the expiration of their deferral arrangements stood at $7.5 billion at end November 2021, above the previous year’s total of $2.7 billion.

This represented 22.5 per cent of the overall stock of NPLs held by DTIs (compared to 9.2 per cent at end 2020) and was largely recorded among local individuals ($6.4 billion).

The stock of past due moratorium facilities, however, declined to $8.8 billion at end November 2021 ($12.7 billion at end-2020) following the regularisation of large valued business facilities.

Loan loss provisions

While there was an uptick in loan loss provisions in 2021, they were less than those made the year before.

The central bank noted that, as the quality of the lending environment deteriorated, DTIs increased loan loss provisions (primarily general provisions for performing loans) by 2.3 per cent ($0.8 billion) during the year, though lower than the previous year’s 34.3 per cent ($8.8 billion).

The BOJ said that a slowdown in the growth of provisioning occurred as some institutions were optimistic about the recovery of the macroeconomic environment, leading to a decline in provisions made in accordance with IFRS 9 requirements.

As a result, due to the faster rate of growth of NPLs, DTIs’ coverage of NPLs via provisions declined to 106.9 per cent of NPLs in 2021 from 117.7 per cent in 2020. Notwithstanding this decline, provisions were deemed sufficient to meet potential future deterioration in loan quality.

Loan growth

On a more positive note, the bank reported growth in total loans predominantly reflecting an expansion in domestic currency loans of 10.7 per cent ($86.8 billion), relative to the previous year’s increase of 11.4 per cent ($83.4 billion).

At the same time, foreign currency loans expanded by 5.7 per cent ($12.5 billion), relative to growth of 8.7 per cent ($17.7 billion) in 2020, primarily reflecting the impact of revaluation gains on the stock of foreign currency facilities, the central bank outlined.

It was noted that the reason for some DTIs continuation of payment holidays was to mitigate the impact of the pandemic on asset quality.

However, when the BOJ suspended its special regulatory treatment of COVID-19-related payment accommodations, effective May 3, 2021, some licensees commenced a gradual phase-out of deferral arrangements and transitioned to strategically supporting working capital needs and debt restructuring.

However, some DTIs continued to hold these moratorium arrangements throughout 2021 in support of customers who were adversely impacted by the pandemic.