Banking Sector Development for July 2019

Credit growth rebounds to a new high level


  Jul 19 Jun 19
May 19
Apr 19

Deposit rate (%) *
1.939 1.939 1.956 1.954
Lending rate (%) *
8.029 8.029 8.044 8.111

Total Deposits (T$m)
611.0 611.0 605.1 611.0
Total Lending (T$m)
486.2 486.2 487.3 484.3
New Commitments (T$m) 10.3 10.3 13.3 8.6
Broad Money (T$m) 600.1 600.1 584.8 585.9

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

Lending

Following last month’s decline, the banks’ total lending picked up to a new high level of $491.1 million. This was an increase of $4.9 million (1.0%) and $38.2 million (8.4%), respectively, over the month and year to July 2019. Majority of this growth was for business lending, followed by household loans.

The non-bank financial institutions loans also increased over the month and year by 0.7% ($1.2 million) and 17.2% ($28.0 million), respectively, reflecting the accessibility of these loans to individuals in the informal sector and small medium enterprises. Government on-lent loans continued to decline by 1.0% over the month and 3.6% over the year, due to loan settlements.

Business Lending

The banks’ total loans to businesses increased over the month and year to July 2019, by 2.1% ($4.8 million) and 14.3% ($29.0 million) respectively to $231.7 million. The monthly rise was a result of higher lending to state-owned enterprises, professional & other services, agriculture, and manufacturing sectors, whereas increased loans offered to the professional & other services, transport, state-owned enterprises, wholesale & retail, tourism, and manufacturing sectors led to the annual increase.

Household Lending

Over the month and year to July 2019, the banks’ total lending to households increased by 0.1% ($0.3 million) and 3.9% ($9.8 million) respectively to $259.2 million. This increase in household loans was mainly driven by the continuous increase in housing loans, and supported by higher other personal loans, over the year.

Other lending

Banks’ other lending fell over the month and year to July 2019 by 46.2% ($0.2 million) and 73.4% ($0.6 million), due to lower loans offered to non-profit institutions serving households.

Non-performing loans

The lower non-performing loan balances from the fisheries, vehicles/transport, agricultural, and manufacturing sectors improved the overall non-performing loans further in July 2019. As a result, the share of non-performing loans to total loans also improved from 3.2% last month and 3.9% last year to 3.1% in July 2019.

Deposits

In July 2019, the banks’ total deposits rose further to $613.2 million by $2.2 million (0.4%). Both saving and time deposits increased, reflecting more deposits made by individuals and private businesses. This offset the decline in demand deposits as a result of lower deposits from private businesses, government, and state-owned enterprises.

Over the year, the banks’ total deposits fell by $11.5 million (1.8%) due mainly to lower time and demand deposits. The decrease in time deposits was driven mainly by lower deposits from individuals, state-owned enterprises, insurance companies, and microfinance institutions, whereas the decline in demand deposits was mainly due to the lower deposits from state-owned enterprises and government. Saving deposits, however, rose over the year due to an increase in deposits made by individuals, churches, schools, as well as state-owned enterprises.

Interest Rate Spread

The weighted average interest rate spread widened over the month by 1.73 basis points to 6.11%. This was solely driven by the decline in weighted average deposits rates as both demand and time deposits rates declined and offset the rise in saving deposit rates. The weighted average lending rates however slightly rose due to higher lending rates to businesses which was almost offset by the decrease in household lending rates.

Over the year, the weighted average interest rate spread widened by 6.5 basis points. This was due to the decrease in the weighted average deposit rates outweighing the decline in weighted average lending rates. Both demand and time deposit rates fell and exceeded the increase in saving deposit rates, whereas reduced lending rates offered to businesses within the entertainment & catering, tourism, construction, and agricultural sectors contributed to the decline in weighted average lending rates. Household lending rates however increased due mostly to higher interest rates on vehicle loans but were fully offset by the decreased business loans.

Broad money

Broad money fell over July 2019 and the year to $593.9 million, by 1.0% ($6.2 million) and 1.9% ($11.7 million), respectively. This resulted from the lower net domestic assets, which was mainly driven by lower government deposits from the payout of matured government bonds over the month and higher credit to private sectors over the year. On the other hand, the net foreign assets increased over the month and year, mainly on higher foreign reserves from the receipt of budgetary support, grants, and remittances.

Liquidity

Liquidity (reserve money)1 in the banking system rose over the month of July 2019, by 2.2% ($6.7 million) to $309.0 million. The higher deposits from the commercial banks to the Reserve Bank vault led the monthly rise, supported by the slight increase in the bank's statutory required deposits. These outweighed the decline in currency in circulation. The banks’ total loans to deposit ratio increased from 77.8% to 78.4% over the month, reflecting loans rising at a faster pace than the increase in deposits.

Over the year, liquidity (reserve money) in the banking system fell by 7.0% ($23.4 million) due mainly to a decrease in the commercial banks’ exchange settlement accounts. This resulted from higher withdrawals from the Reserve Bank vault, to cater for the festivities during the year such as church conferences, family & school reunions, and the Christmas & New Year celebrations. The currency in circulation decreased also and supported this annual decline. Statutory required deposits, on the other hand rose, reflecting the increase of the statutory required deposit requirement ratio from 5% to 10%.

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.

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.


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 May
Released on 22 October 2019 | 269 KB
pdfIcon June
Released on 22 October 2019 | 253 KB

pdfIcon March
Released on 20 June 2019 | 285 KB
pdfIcon April
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pdfIcon January
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pdfIcon February
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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
Released on 26 April 2019 | 212 KB

pdfIcon July
Released on 27 December 2018 | 248 KB
pdfIcon August
Released on 2 January 2019 | 246 KB

pdfIcon May
Released on 20 August 2018 | 268 KB
pdfIcon June
Released on 7 September 2018 | 268 KB

pdfIcon March
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pdfIcon April
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pdfIcon January
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pdfIcon February
Released on 29 May 2018 | 274 KB

2017


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
Released on 4 September 2017 | 271 KB
pdfIcon May
Released on 15 August 2017 | 471 KB

pdfIcon April
Released on 7 July 2017 | 285 KB
pdfIcon March
Released on 28 June 2017 | 276 KB

pdfIcon February
Released on 21 June 2017 | 274 KB
pdfIcon January
Released on 21 June 2017 | 274 KB

2016


pdfIcon December
Released on 21 June 2017 | 461 KB
pdfIcon November
Released on 24 March 2017 | 275 KB

pdfIcon October
Released on 24 March 2017 | 270 KB
pdfIcon September
Released on 24 March 2017 | 272 KB

pdfIcon August
Released on 8 February 2017 | 278 KB
pdfIcon July
Released on 31 October 2016 | 463 KB

pdfIcon June
Released on 5 September 2016 | 522 KB
pdfIcon May
Released on 25 July 2016 | 288 KB

pdfIcon April
Released on 11 July 2016 | 610 KB
pdfIcon March
Released on 3 June 2016 | 631 KB

pdfIcon February
Released on 3 June 2016 | 251 KB
pdfIcon January
Released on 26 April 2016 | 510 KB

2015


pdfIcon December
Released on 8 April 2016 | 245 KB
pdfIcon November
Released on 29 January 2016 | 398 KB

pdfIcon October
Released on 29 January 2016 | 280 KB
pdfIcon September
Released on 11 January 2016 | 329 KB

pdfIcon August
Released on 11 January 2016 | 338 KB
pdfIcon July
Released on 11 January 2016 | 297 KB

pdfIcon June
Released on 12 June 2015 | 469 KB
pdfIcon May
Released on 14 December 2015 | 466 KB

pdfIcon April
Released on 26 May 2015 | 480 KB
pdfIcon March
Released on 9 June 2015 | 471 KB

pdfIcon February
Released on 19 May 2015 | 282 KB
pdfIcon January
Released on 30 March 2015 | 477 KB

2014


pdfIcon December
Released on 30 March 2015 | 460 KB
pdfIcon November
Released on 30 March | 472 KB

pdfIcon October
Released on 21 January 2015 | 410 KB
pdfIcon September
Released on 9 December 2014 | 402 KB

pdfIcon August
Released on 9 December 2014 | 406 KB
pdfIcon July
Released on 24 September 2014 | 484 KB

pdfIcon June
Release on 14 August 2014 | 416 KB
pdfIcon May
Release on 3 July 2014 | 589 KB

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