BANKING, INVESTMENT AND
FINANCIAL SERVICES INTERVIEW
BANKERS ASSOCIATION
RICHARD DOWNIE KELLY BUTE-SEATON President
Executive Director
T
he Bankers Association of Trinidad & Tobago (BATT) sees a resilient banking sector continuing to meet and overcome the challenges posed by the COVID-19 health crisis while advancing digital transformation and managing issues of asset quality deterioration, loan delinquency and slowdown in credit. “Overall, the sector remained well-capitalised, highly liquid and is well supported in no small measure by the Central Bank’s monetary policy measures,” BATT said.
Outlook and challenges for banking sector in 2021/2022
While noting that the rollout of vaccinations provides a crucial anchor for positive medium-term expectations, in light of the ongoing impact of the COVID-19 pandemic, BATT said the near-term outlook may reflect: Asset Quality Deterioration. Payment deferral and forbearance programmes helped borrowers in the near term, but the lockdowns of 2020 and 2021 impaired companies’ finances, while rising unemployment ate into household incomes and weighed on borrowers’ ability to service their loans. This, combined with the phasing out of support measures, means that banks remain vulnerable to adverse credit risk movements, particularly in sectors hit hardest by the pandemic, such as tourism, hospitality and entertainment. Arising from this, asset quality risk could increase due to pandemic-induced repayment challenges. . Non-Performing Loans. In December 2020, nonperforming loans (NPLs) at 3.4% of total loans, up from 3.1% one year earlier, remained within reasonable proportions but were likely to be one of the most serious consequences of the pandemic for banks.
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OF TRINIDAD & TOBAGO (BATT)
Improving the ease of conducting banking business remotely and safely via various digital platforms.
by Kay Baldeosingh-Arjune
CHALLENGING TIMES AHEAD IN THIS UNCERTAIN ENVIRONMENT
The third wave of COVID-19 infections and the reimposition of restrictions in 2021 triggered a considerable slowdown in economic activity, weakening the ability of debtors to pay their obligations and placing strain on banks that serviced the sectors most affected. NPLs can be expected to creep upward, demonstrative of the financial impact of the pandemic, particularly as relief measures such as loan moratoria are eventually withdrawn. Muted credit growth. An environment of weak economic activity will weigh on bank loan demand as businesses struggle to survive, investment projects are put on hold and unemployment inevitably rises. Despite low interest rates, lending to businesses has been weak, falling by 4.6% year-over-year in September 2020. Loan growth is very likely to be muted in 2021 and 2022 as businesses may be less inclined, in this uncertain environment, to seek new financing.
Support of SMEs during and post-COVID
During this crisis, BATT noted that banks responded collectively and expeditiously to support those struggling to meet financial obligations by instituting various forms of relief, including reducing interest rates on all loan types, loan instalment deferrals of up to six months, and waivers of penalty charges and late payment fees on credit facilities.
