Home' Trinidad and Tobago Guardian : March 8th 2015 Contents In last Thursday s BG View, it was
observed that as at the end of Sep-
tember 2014, the total debt held by
T&T consumers amounted to $25.7
billion, while deposits outstanding
for consumers totalled $47.7 billion
for the same period.An interesting
insight into the extent of financial stress that
households may be experiencing in T&T
comes from the observation that at the end
of 2010, the debt held by consumers totalled
$20 billion, while the outstanding deposits
held by consumers amounted to $36.7 billion
for the same period.
This means that between the end of 2010,
and September 2014, consumer debt increased
by 28.5 per cent from $20 billion to $25.7 bil-
lion, while deposits held by consumers
increased by 30 per cent, from $36.7 billion
at the end of 2010 to $47.7 billion at the end
of September 2014.
One conclusion that can be drawn from
the Central Bank data is that overall household
wealth has increased in the period of four
years and nine months.
Another conclusion is that while consumer
debt has increased in the period under review,
consumer deposits have kept pace with and
marginally outstripped consumer debt.
That may mean that while consumers are
taking on debt to acquire homes/property,
buy vehicles, refinance and consolidate their
debts, engage in home improvement and pur-
chase goods and services with their credit
cards, a certain percentage of those consumers
are also building up their bank deposits, which
may allow them to substantially reduce their
debts at short notice.
In order to gain a more complete insight
into the current state of the balance sheets
of households in this country, it would obvi-
ously be necessary for someone or some insti-
tution to undertake the research to determine
what percentage of households hold liquid
deposits that can be used to reduce their
The answer would determine the households
in T&T that would be able to ride out this
period of economic difficulty relatively
unscathed and the households that would be
scathed by an increase in taxes and a sub-
stantial reduction in Government expenditure
on transfers and subsidies---which is likely to
be the first area that any serious administration
Hopefully, this is an exercise that the coun-
try s commercial banks and other lenders have
undertaken or will undertake as a result of
the ventilation of this household balance sheet
issue in this space.
And if the lenders do not undertake such
an exercise, it may be incumbent on house-
holds themselves to conduct the exercise of
tallying their debts and their liquid assets so
that they have an idea of their current financial
Conducting a personal balance sheet may
also help households determine their debt
strategy if lenders start to increase the interest
rates on mortgages.
While bank deposits obviously represent a
significant percentage of the liquid assets
available to T&T households, they are not the
only assets that can be used to defray debts.
Another option would be the balances that
households hold at the country s main mutual
In the February 2015 Economic Bulletin,
the Central Bank observed that aggregate
funds under management by four of the coun-
try s mutual fund providers increased in 2014,
after experiencing a decline in 2013.
At the end of December 2014, according
to the Central Bank, funds under management
stood at $41.8 billion, an improvement of 6.3
per cent from 2013.
This means that at the end of December
2013, aggregate mutual funds under manage-
ment---which includes funds managed by the
Unit Trust Corporation, Roytrin, Republic
Bank and First Citizens Bank---amounted to
During 2014, these four mutual funds
attracted sales of approximately $15.2 billion
and repurchases of roughly $12.8 billion, result-
ing in net sales of $2.4 billion.
During 2013, the mutual fund industry
attracted sales of approximately $15.8 billion
and repurchases of about $15.7 billion, resulting
in net sales of roughly $98 million.
In 2014, income funds under management
(which account for more than 80 per cent
of the mutual funds industry) grew by 4.9
per cent to $34.8 billion, following a decline
of 4.2 per cent in 2013, according to the Cen-
tral Bank. Last year, income funds realised
net sales of $598.2 million.
Equity funds under management increased
by nine per cent to $5.8 billion at the end of
2014, accruing net sales of some $1.39 billion
during that 12-month period.
According to the February 2015 Economic
Bulletin: "Regarding the industry currency
profile, both foreign currency and TT-dollar
denominated funds expanded during 2014.
"US dollar mutual funds grew by 4.2 per
cent in 2014 following a contraction of 9.4
per cent in 2013. After a marginal increase
of 1.3 per cent in 2013, TT-dollar funds
improved by 6.8 per cent in 2014."
In 2013, foreign currency-denominated
funds declined while TT dollar denominated
funds maintained some momentum. US dollar
funds contracted by 9.4 per cent in 2013 fol-
lowing a 12.0 per cent expansion in 2012. TT
dollar funds increased by a modest 1.3 per
cent after advancing 6.9 per cent in 2012.
In addition, funds under management
jumped by 18 per cent from $35.51 billion at
the end of 2009 to $41.88 billion at the end
What does this information say about the
balance sheets of households?
1) The August 2014 Economic Bulletin---
the comparable table was not presented in
the February 2015 bulletin---that up to the
end of 2013, 84 per cent of the funds under
management by the four mutual funds were
held in income funds.
Income funds are liquid and operate on the
premise that if a subscriber needs the money
in such a fund, they would be able to get a
cheque within one day.
It is noteworthy that households in T&T
have preferred the liquidity of income funds
in a period in which those funds generate
A good example of this is the Roytrin TT
dollar Income Fund, which had a fund size
of $4.59 billion at the end of December 2014.
That fund generated a return of 1.82 per cent
in 2014 and 1.66 per cent in 2013. But the
fund s management expense ratio---which
reflects the fund s management fee and oper-
ating expenses as a percentage of the fund
size---is 2.09 per cent, which is greater than
the return for the last two calendar years.
Whether that means that RBC collected nearly
$92 million in fees and management expenses
from this fund in 2014 would be for Natalie
Mansoor, the head of RBC Trinidad s asset
management unit to answer.
2) The data indicate that more money
flowed into the four mutual funds in 2014
than flowed out. In my view, this indicates
that T&T households had more surplus funds
last year than in the previous two years when
funds under management were mostly flat.
It may also indicate that some households in
T&T are practising a degree of financial pru-
dence. But, again, the issue is which house-
holds and why did they have surplus funds
to invest, mainly in income funds, last year;
3) The funds under management of T&T s
mutual funds are not increasing as quickly as
either commercial bank and non-bank finan-
cial institution deposits or commercial bank
debt. This is an interesting observation given
the fact that the return on a commercial bank
deposit at this time is even less than the return
on an income fund. It could be that more
households prefer to keep their funds in com-
mercial banks, given the fact that their deposits
are easily accessible, one assumes, and that
there is deposit insurance of $125,000 per
4) Given the predisposition of households
towards income funds, one would assume
that those funds would count in totalling the
liquid assets that are available to T&T house-
Central Bank of T&T
MARCH 08 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COMMENTARY | SBG3
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