Banks growth steady despite crisis

Bank loans rose 9.6 percent to $304.71 million in the last quarter of 1998 compared to the same period the previous year, according to statistics from the Department of Commerce.

But officials did not say whether the increase could be attributed to growing demand for cash in light of worsening economic condition or cutback in interest rates that has encouraged people to borrow money.

Real estate loans soared 66 percent to $54.7 million during the same period from $32.9 million logged in 1997, indicating a massive refinancing of loans by property owners, hardest hit by a plunge in the tourism economy. A big number of commercial and residential spaces have been abandoned by occupants as a result of the business slowdown.

Consumer loans climbed to $83.6 million from $80 million, or a 4.5 percent increase, largely fueled by rise in spending for automobiles, vacation or home improvement.

Money borrowed for commercial purposes inched upward .18 percent to $165.7 million from $166 million, but officials declined to say if this would indicate that economic activities are slowly picking up.

The financial fallout in Asia has deeply hurt the island economy, which relies heavily on the region for tourists and investments. The Northern Marianas has seen an exodus of tourism-related business since last year, when the commonwealth started to feel the pinch of the Asian-wide currency crisis.

Banks operating in the CNMI have been cautious in lending money because of decreasing confidence on the borrowers’ ability to pay. This attitude is expected to continue until financial institutions see some signs of economic improvement.

The half-a-billion-dollar banking industry continued to grow despite the worst economic crisis to grip the Commonwealth, with banks assets posting a modest increase of 5.3 percent to $531 million during the first half of last year, and officials predict that end-1998 figures could surpass year-ago’s record.

For the fourth straight year since 1994, bank assets have been climbing steadily, with the biggest growth in 1996 at $507.7 million, or 16.2 percent, compared to year-ago figures. It was the first time the banking industry hit the half-a-billion mark to make it one of the most robust sectors after tourism and garment when the commonwealth was still prosperous.

The currency crunch in Asia has crippled the tourism industry — the backbone of the island economy — leaving the garment and the banking sectors the key sources of revenues for the financially-troubled government.