COVID-19 loan moratoria declines for fourth consecutive time

Large declines in loan moratoria among household, retail and real estate sectors suggest that income flows are on a steady recovery

Loans subject to a moratorium have declined for a fourth consecutive time since March 2020, suggesting that more businesses and households are recommencing their regular loan repayments.

According to a Central Bank update, there were 2,373 loans subject to a moratorium on repayments in December 2020, standing at €748.7 million or 6.4% of all outstanding loans to Maltese residents. Compared to November, this number declined by around €185 million.

The largest declines were observed in household, wholesale and retail, and real estate sectors. A large portion of loans covered by moratoria were held by households, with €137.6 million held by Maltese households.

However a majority of outstanding loans are held in the accommodation and food service activities, with €213.1 million loans in the sector subject to a moratorium. In fact, 42.1% of total outstanding loans in the sector are currently subject to a moratorium.

A legal notice published in January saw the bank loan moratorium scheme extended by a further nine months. Interest parties have until 31 March to apply for the extension, which is available to all individuals, businesses and households who can show that they have been negatively affected by the pandemic.

New applicants who have never been subject to a moratorium are entitled to a full nine-month moratorium, while borrowers who have benefitted, or are benefitting, from a moratorium shorter than the stipulated nine months can apply for an extension so that their moratoria period will cover no more than nine months total.

Credit extended to Maltese residents grew at an annual rate of 11.1% in December, up by 0.3pp from 10.8% in November. According to the Bank, the acceleration in credit throughout December was powered by fast credit growth from outside general government, which reached 5.6% in December from 5% in the previous month.

Simultaneously, growth in credit extended to general government, in the form of bonds or other debt instruments, rose by 32.3% in December, down from 33.5% in November.

A look at the long-term changes in credit show a significant spike in credit extended to general government, driven largely by liquidity support measures imposed during the COVID-19 pandemic. On the other hand, percentage changes in credit to residents remained stable between 2016 and 2020, albeit seeing accelerated increases last year.

Loans to non-financial corporations grew at an annual rate of 8.4%, up from 8% registered in November. The Bank said that this acceleration is largely due to significantly smaller contractions in loans to wholesale and retail sectors, and to a lesser extent, an increase in credit to the ICT sector.

The Bank further commented that these developments were partly offset by a slower increase in loans to the transportation and storage sector, followed then by a smaller expansion in loans to the energy sector.

For household loans, the annual rate of change edged down to 5.4% in December from 5.6% in the previous month. This reflects a larger contraction in consumer credit and other lending, which the Bank said fell by 6.2% following an initial decline of 4.9% in November.

At the same time, mortgage lending expanded b 6.7% in December, unchanged throughout the whole fourth quarter.