Slight decline on COVID-19 loan moratoria

As at end October, there were 5,435 loans subject to a moratorium on repayments.

The total value of loans subject to a moratorium in October edged down further when compared with September. These declined by around €370 million and stood at €1.4 billion, or 11.7% of total outstanding loans to Maltese residents.

In response to the outbreak of COVID-19 and the subsequent containment measures, a number of businesses and households were faced with liquidity challenges, requesting banks for a moratorium on loan repayments.

Loans subject to a moratorium declined for the second consecutive time since March 2020, which suggests that some businesses and households have recommenced regular loan repayments, signalling a recovery in income flows.

The largest declines were in household, manufacturing, real estate, wholesale and retail, and accommodation and food services activities sectors.

The largest number of loans covered by moratoria was held by households, with the sector accounting for around 68.7% of the total volume of loans subject to a moratorium. Maltese households held €336.8 million, or 24.8%, of the total value of loans subject to a moratorium, equivalent to 5.4% of outstanding household loans.

Meanwhile, the accommodation and food services activities sector held €248.7 million in loans subject to a moratorium. This was the sector most affected by the containment measures and, indeed more than half – 51.6% – of the loans held by this sector were subject to a moratorium by the end of October.

This was followed by the real estate sector, which held €246.8 million in loans subject to a moratorium, or around 18.2% of such loans – equivalent to around a fourth of the sector’s outstanding loans.

Moreover, as at end October, the wholesale and retail trade sector held €132 million in loans subject to a moratorium, making up 9.7% of loans subject to a moratorium, or 20.3% of loans held by the sector.

The manufacturing sector as well as the real estate sector experienced the strongest drops in the sector’s share of loans subject to a moratorium.

In order to further alleviate liquidity challenges, the government launched the Malta Development Bank (MDB) COVID-19 Guarantee Scheme (CGS) for the purpose of guaranteeing new loans granted by commercial banks for working capital purposes to businesses facing liquidity shortfalls as a result of the pandemic.

The scheme enables credit institutions to leverage government guarantees up to a total portfolio volume of €777.8 million.

By end October, 478 facilities were approved under the CGS, covering total sanctioned lending of €351.1 million. As the scheme provides loans for working capital, only €204.6 million were disbursed by the end of October, up from the €165.6 million disbursed by the end of September.

The wholesale and retail activities applied for the largest number of facilities and had the largest value of sanctioned loans at €85.6 million. This was followed by accommodation and food services activities, with 111 facilities making up a total of €70 million sanctioned loans, and the sector comprising transportation and ICT, which had a total of €49.5 million.