Exclusive: Slump fuels loans crisis

Nearly one in ten loans — including mortgages — are in arrears as Bermuda continues to struggle with the recession.

And banks warned the upward trend in defaulting customers seen over the last two years is likely to continue.

It’s not just the banks that are feeling the pinch either as people struggle to pay their mortgages. BF&M Limited said yesterday it took a $5 million hit in 2012, citing potential mortgage defaults.

A total of one in 10.2 loans of all types were classed as “non-performing” in the third quarter of 2012, the latest figures available from the Bermuda -Monetary Authority (BMA) show.

At the Bank of -Butterfield alone, a total of nearly $97 million in loans were in arrears in 2012 — up more than $8 million on the previous year.

The bank’s 2012 report said: “The increase was due to an $11.1 million rise in non-performing residential 

mortgages, totalling $45.9 million as at year end.”

A spokeswoman for the Bank of Bermuda declined to comment on specific figures. But she said: “HSBC Bermuda continued to see a difficult mortgage landscape in the last three quarters of 2012.

“The financial challenges faced by some customers continues and we expect this trend in the mortgage environment to potentially continue well into 2013.”

She added that the bank was prepared to help and urged customers struggling to make ends meet to contact the bank as soon as possible. The spokeswoman said: “We have specialists available who are willing to work with customers, to look at their financial budgeting and help them to understand the options that are available to them. Circumstances are assessed and alternatives that will help the customers are considered.”

Capital G bank did not respond to questions from the Bermuda Sun by press time.

But the bank’s annual report listed more than $200 million in loans either overdue by between 7 days to more than 12 months or as “individually impaired”. The 2012 report added: “A substantial proportion of the loans and mortgages receivable is due from residents of Bermuda and is secured by residential property in Bermuda.

“The Bermuda economy is largely dependent on tourism and international business services and the health of these sectors depends to a large extent upon the strength of the United States and European economies.

“Therefore, an adverse change in these sectors in future periods may have a material adverse impact on the carrying value of the bank’s loans and mortgages receivable.”

In addition, the bank reported that nearly $50 million in loans “which would otherwise be past due or considered impaired” had been renegotiated.

A spokesman for the BMA said figures for the final quarter of 2012 are due to be released next month — but declined to speculate on whether the personal debt situation would be worse.

John Wight, BF&M CEO and president, wrote in the company’s earnings statement released yesterday: “We were disappointed however that the prolonged and severe economic climate and depressed real estate market in Bermuda resulted in certain mortgagees potentially unable to fulfill their contractual obligations to the company. 

“This resulted in the requirement to record an impairment provision of approximately $5 million in the consolidated statement of income for 2012. This compared with an impairment provision for mortgages of approximately $500,000 in 2011.” n

Additional reporting by Don Burgess