Banking Sector Development for November 2019

Strong growth in lending


  Nov 19 Oct 19 Sep 19
Aug 19

Deposit rate (%) *
1.950 1.933 1.944 1.924
Lending rate (%) *
8.015 7.970 7.999 8.035

Total Deposits (T$m)
607.6 614.5 615.3 615.5
Total Lending (T$m)
504.3 496.9 493.9 496.5
New Commitments (T$m) 18.9 10.7 9.5 13.6
Broad Money (T$m) 605.6 592.5 594.5 602.3

* Weighted Average calculated as a function of interest rate and volume of deposits and loans.

Lending

In November 2019, the banks’ total lending reached a new high level of $504.3 million, corresponding to higher business and household loans. Over the month and year, lending increased by $7.4 million (1.5%) and $34.5 million (7.3%), respectively.

Loans extended to the non-bank financial institutions continued to rise over the month and year by $3.1 million (1.6%) and $32.2 million (19.2%), respectively. This increase reflects the accessibility of these loans to individuals in the informal sector and small medium enterprises. Government on-lent loans declined further by 0.5% over the month and 5.0% over the year due to loan settlements.

Business Lending

Lending to businesses also reached a new high level of $243.4 million, an increase of $4.8 million (2.0%), and $32.2 million (15.3% ), respectively, over the month and year. More loans issued to the state-owned enterprises, professional & other services, tourism, and utilities sectors contributed to the monthly rise. Over the year, higher business lending was mainly for the state-owned enterprises, professional & other services, transport, and tourism sectors.

Household Lending

Lending to households rose over the month and year to November 2019, by $2.5 million (1.0%) and $2.7 million (1.0%), respectively, to $260.8 million. An increase in other personal loans mostly drove the monthly rise. However, higher housing loans continued to drive annual growth in household lending.

Other lending

Banks’ other lending increased over the month but decreased over the year to November 2019, due to movements in lending to non-profit institutions serving households.

Non-performing loans

The non-performing loan balances improved over the month of November 2019 mainly on lower non-performing loans from the professional & other services, wholesale & retail, and fisheries sectors. This led to a decrease in the share of non-performing loans to total loans from 3.2% last month and 3.6% last year to 2.8% in November 2019.

Deposits

The banks’ total deposits decreased over the month and year to November 2019, by $6.9 million (1.1%) and $6.1 million (1.0%) respectively to $607.6 million, due mainly to lower demand deposits. Lower government deposits mostly drove both the monthly and annual movements in demand deposits.

Saving deposits also decreased over the month yet increased over the year. The monthly decline was due mainly to lower deposits from individuals, churches, and schools. However, over the year, the deposits from individuals, churches, and schools increased, which resulted in the annual rise.

Time deposits increased over the month but fell annually. Churches, schools, and state-owned enterprises made more deposits over the month. Meanwhile, lower deposits from individuals led the annual decline, followed by state-owned enterprises, churches, and schools.

Interest Rate Spread

The weighted average interest rate spread widened over the month however narrowed over the year to November 2019, by 2.7 basis points and 5.0 basis points respectively to 6.06%. Over the month, the weighted average lending rates rose more than the increase in deposit rates. The higher lending rates over the month were driven mainly by higher lending rates offered to businesses such as agriculture, professional & other services, and utility sectors as well as household housing loans. Similarly, the increase in deposit rates over the month was underpinned mainly by the rise in the volume of time deposits as all deposit rates decreased. Annually, both rates fell with the weighted average lending rates declining the most and offsetting the lower weighted average deposit rates. The declining weighted average lending rates resulted mostly from lower household lending rates, mainly for other personal loans followed by lower vehicle and housing lending rates. This offsets the slight increase in business lending rates, which were mostly for the utilities, agricultural, and distribution sectors. The decrease in deposit rates over the year was led by lower time and demand deposit rates outweighing the increase in saving deposit rates.

Broad money

The higher net credit to government offset the decline in net foreign assets, leading to an increase in the net domestic assets as well as broad money over the month, by $13.1 million (2.2%) to $605.6 million. Similarly, over the year, broad money increased by $13.3 million (2.2%) as a result of higher net foreign assets from the receipts of budgetary support, grants and project funds from donor partners. This was also supported by the minimal rise in net domestic assets, mainly on higher credit to private sectors.

Liquidity

Liquidity (reserve money)1 in the banking system declined over the month and year to November 2019 by $8.2 million (2.7%) and $16.1 million (5.1%), respectively, to $301.2 million. The decline in Exchange Settlement Account (ESA) balances was the main driver of the fall in liquidity. Higher government payments led to the monthly decline in ESA. In contrast, the annual ESA decrease was mostly due to loan repayments, oil, and other import payments. Both currency in circulation and Statutory Required Deposits fell and supported the monthly decline. However, over the year, the Statutory Required Deposits fell again and supported the annual reduction while currency in circulation increased. The banks’ total loans to deposit ratio increased over the month from 79.1% to 81.2%, which is above the Reserve Bank minimum ratio of 80%, reflecting higher loans whilst deposits decreased.

Outlook 

Credit growth is expected to continue in the near term but at a slower pace. The level of competition between banks in terms of housing loans, coupled with the accommodative monetary policy, is expected to utilize the excess liquidity in the banking system for further lending to support economic activity.

The Reserve Bank will continue to closely monitor the growth across all monetary indicators, particularly credit growth and broad money movements, for any signs of overheating and to ensure financial and macroeconomic stability is maintained.


1 - Liquidity in the banking system (reserve money) is a sum of currency in circulation, exchange settlement account balances, and required reserve deposits.


Banking Sector Developments Releases

Banking Sector Developments Releases for 2019


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pdfIcon April
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2018


pdfIcon November
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pdfIcon December
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pdfIcon September
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pdfIcon October
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pdfIcon July
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pdfIcon August
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pdfIcon June
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pdfIcon February
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2017


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pdfIcon November
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pdfIcon October
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pdfIcon September
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pdfIcon August
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pdfIcon July
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pdfIcon June
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pdfIcon May
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pdfIcon April
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pdfIcon March
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pdfIcon February
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pdfIcon January
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2016


pdfIcon December
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pdfIcon November
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pdfIcon October
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pdfIcon September
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pdfIcon August
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pdfIcon July
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pdfIcon June
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pdfIcon May
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pdfIcon April
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pdfIcon March
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pdfIcon February
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pdfIcon January
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2015


pdfIcon December
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pdfIcon November
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pdfIcon October
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pdfIcon September
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pdfIcon August
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pdfIcon July
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pdfIcon June
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pdfIcon May
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pdfIcon April
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pdfIcon March
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pdfIcon February
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pdfIcon January
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2014


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pdfIcon November
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pdfIcon October
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pdfIcon September
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pdfIcon June
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pdfIcon May
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