Gross NPLs may hit 9%, says RAM

From The Edge:

RAM Rating Services Bhd expects the banking sector’s gross non-performing loans (NPLs) ratio to reach 9% this year at the worst-case scenario amid the global financial turmoil, said its head of financial institution ratings Promod Dass.

Currently, the sector’s gross NPL ratio stands at 4.1%, and net NPL ratio is at 2.2%, complemented by the financial institutions’ strong capitalisation and the industry’s risk-weighted capital-adequacy ratio (RWCAR) and Tier-1 capital-adequacy ratio at a respective 12.6% and 10.5%.

“Net NPL involves a lot of other calculations. Perhaps net NPL would be half of the gross NPL, but we will stick to gross NPL as it is the key indicator,” Dass said at the release of RAM Rating’s Banking Bulletin here yesterday.

RAM Rating said there had been a gradual shift from corporate to retail lending, as banks had been focusing mainly on residential property loans and lending to small and medium-sized enterprises (SMEs).

The major concern here is, will retail lending hold up? Will the consumer buckle under these conditions? Looking at the way jobs have been disappearing in Malaysia, I think not.