Martin says CCMB non-performing debt not as bad as it seems
Published:Friday | April 29, 2011 | 12:00 AM
Capital and Credit's bosses defended the position of the merchant banking subsidiary's underperforming loan portfolio on Wednesday, pointing out that a large portion of the debt has been restructured.
"Of the J$2.86 billion classified as non-performing under the GOJ regulations, J$2.3 billion of those facilities were performing as per the rescheduled arrangement," said Curtis Martin, deputy group president, banking and investment services, and chief executive officer of Capital and Credit Merchant Bank (CCMB).
But even though, said Martin, the majority of the loans have been restructured, the debt must remain classified as non-performing for 12 months, under the Bank of Jamaica regulations.
Martin said the bank is to work along with clients to restructure and continue servicing their debt, rather than liquidate their assets.
"We must realise that this has been a very unique period. Customers are not servicing loans because they don't have a willingness to pay, but there are external issues that are impacting on their businesses," said the bank president.
"So we have a responsibility to work with customers to have an orderly resolution," he said.
It has a J$6.2 billion loan portfolio, net of provisions, of which J$3.08 billion was past due but not impaired at December 2010. Another J$903 million was reported as impaired, or unrecoverable.
But since January, Martin said that the bank has been working with customers to bring accounts up to date.
"Since January, we have a number of sales agreement undertaken from public bodies; we have land bonds issued; we have situations where clients are using resources from other businesses to service the facilities," he said.
"So a significant part of the facility is actually being serviced and the expectation is that the liquidation process will be orderly."
Martin said some 12-16 accounts were delinquent but that the amount of arrears were manageable and collateralised at up to two or three times the value of the loans.
"Our expectations are that these accounts will be liquidated on an orderly basis," he said.
To dispel questions about the bank's strength, Martin pointed to the company's risk management mechanisms, which he said, were recently boosted.
"There is a corporate governance structure in place, and one of the pluses, despite these loans not performing, is that clients have the capacity to pay or they have other resources to service these facilities," he said.
CCMB has a business unit, which deals with loans origination, a risk unit that analyses the borrowing company as well as its local and international operating environment and industry.
The transaction then goes to the credit and investment committee for final sign off, followed by another review of documents on the loan terms, and to ensure collateral is provided to back the debt.