HAVING eased in September, the size of bad debt across the financial sector jumped again in the last quarter of 2009.

Trend data provided by the Bank of Jamaica (BOJ) showed that Non-performing loans (NPLs) jumped to $16.4 billion at the end of 2009 after easing to $14.2 billion at the end of September 2009 — the first time that financial institutions saw an reduction in its combined bad debt portfolio since NPL growth started to accelerate in the June quarter of 2008.

NPLs started 2009 at $10.6 billion in March, increased to $14.6 billion in June, then eased to $14.2 billion in September.

For the year, NPLs increased by 68 per cent but provisions made to cover these loans, which are unserviced over three months, have fallen, according to the latest prudential indicators released by the BOJ.

Commercial banks accounted for the bulk of NPLs at $10.8 billion with building societies at $4.8 billion and FIA institutions or near banks at $808 million.

NPLs grew fastest over the 12-month period under review at building societies — up 75 per cent — whilst commercial banks and near banks increased by 68 per cent and 38.4 per cent, respectively. The growth does not affect the stability of the financial sector as NPLs account for 4.7 per cent of total loans up from 2.9 per cent a year prior.

Up to December 2009, the aggregate financial sector provided 75.4 per cent coverage or loan loss provision for these NPLs compared to 87.2 per cent at December 2008 and 103.4 per cent at December 2007.

Building societies have only 42.6 per cent coverage, commercial banks currently have 88 per cent coverage and FIAs have 85.5 per cent up to December 2009.

The financial sector has been affected by the ongoing recession in Jamaica which was triggered by global economic fallout two years ago.

The aggregate financial sector increased gross loans by 5.3 per cent to $350.6 billion at December 2009 compared with the end of 2008. Commercial banks total gross loans increased 4.1 per cent to $256.4 billion over the review period with two commercial banks shrinking their loans including: FirstCaribbean International Bank Jamaica (FCIBJ) and RBTT Bank by 8.1 per cent to $26.9 billion and 5.3 per cent to $34.55 billion, respectively.

Other banks increased their loans over the review period including National Commercial Bank (NCB), up five per cent to $87.1 billion, Scotia Group Jamaica at $83.6 billion, up 5.6 per cent, Citibank, up 122 per cent from $450.7 to $1 billion, First Global Bank (FGB) up 23 per cent to $10.5 billion, and Pan Caribbean Bank up 6.7 per cent to $6.5 billion. BOJ’s data did not show individual bank NPL performance.

All building societies saw increases in their respective mortgage portfolios over the review period ending December 2009 including Jamaican National (JN) up 15.7 per cent to $38.3 billion, Victoria Mutual Building Society (VMBS) up 6.9 per cent to $30.8 billion, Scotia Jamaica Building Society (SJBS) up 11.4 per cent to $6.8 billion and First Caribbean International Building Society (FCIBS) up 2.7 per cent to $7.7 billion.