Commonwealth Bank has reported a 2008 net income up more than $500k from the previous year despite growth in delinquencies – one of its most impressive results.
*”We are able to report solid results for 2008, notwithstanding the global economic crisis and recession in the United States,*” said Chairman TB Donaldson. *”Net income for 2008 exceeded $49m, up marginally from $48.5m in 2007.*”
Commercial banks are expecting to see the number of bad accounts climb as the Bahamian economy suffers direct fallout from the U.S. and global recessions. The Central Bank has been pointing to deteriorating asset quality. According to its report for November, 2008: *”The value of private sector Bahamian dollar loan balances encountering payments arrears of 31 days and over rose further by $93.0 million (14.2%) to $749.0 million. Past due payments of at least 90 days, on which banks stopped accruing interest, advanced by $49.9 million (14.8%) to $387.0 million.”*
Consequently, banks have been forced to increase their provisioning for bad debt, which has impacted profits. Chairman Donaldson says the effect on Commonwealth has been relatively mild compared to that for some of the sector’s other players. *”While our non-performing loans increased to 1.7 percent of the loan portfolio from 1.5 percent in 2007, they were more than fully covered by loan loss reserves and the ratio compares extremely favourably with an industry average of 6.3 percent as reported by the Central Bank at November 2008,*” he says.