Over half-a-billion dollars was recovered from Jamaicans with bad debts between July and September, cutting the tally to $19.8 billion and indicating that non-performing loans (NPLs) have fallen from record levels.

Its the largest reduction in NPLs (unserviced loans over 90 days) following the global downturn and represents a 4.5 per cent reduction from the $20.4 billion record levels reached at June 2010, according to Bank of Jamaica data released this month.

Exactly $650 million was slashed from the stock of NPLs throughout the financial sector over three months to September, allowing NPLs to drop for the first time in six-quarters:

*$19.75 billion at September 2010;

*$20.4 billion at June;

*$19.4 billion at March;

*$16.4 billion at December;

*$14.2 billion at September 2009; and

*$14.6 billion at June 2009.

Its only the second time that financial institutions have seen an ease on bad debt since NPL growth started to accelerate in the June quarter of 2008. It therefore isn’t surprising that the three-month record NPL decline isn’t reflected over 12 months — still up 39 per cent to $19.75 billion year on year.

But over the three-month review period, Commercial banks’ NPLs fell by $900 million to $13 billion followed by near banks or FIAs, down $10 million to $816 million. Building Society NPLs however climbed by $250 million to $5.8 billion.

All building societies opted over the three-month review period to increase the provision for loan losses (which covers both regulatory and company requirements) including:

*FirstCaribbean International Building Society up 22 per cent to $328.6 million;

*Victoria Mutual Building Society up 15 per cent to $1.25 billion;

*Jamaica National up 9.4 per cent to $1 billion; and

*Scotia Jamaica Building Society up 3.0 per cent to $228 million.

Data on individual company NPLs was not disaggregated. NPLs across the financial sector still equals investments in failed FX trading firm Olint, which was partially blamed for the rise. The level of bad debt is not however affecting the stability of the financial sector as it accounts for 5.7 per cent of total loans up from 4.1 per cent a year prior.

The financial sector has been affected by the ongoing recession in Jamaica which was triggered by global economic fallout two years ago. Part of that downturn is reflected in the 1.0 per cent decline in gross loans across the aggregate financial sector to $346.9 billion at September 2010 compared with the similar period in 2009.