Malaysia Banks' Non-performing Loans Trends

Affin Bank's NPL has been accelerating despite all the other banks are having a healthier loan portfolio.

A Non-performing loan (NPL) occurs when the debtor has not made the scheduled payment for a specific period. It is an important metric to look at in the banking industry because they reflect the credit quality of the loan portfolio of banks.

Public Bank had delivered the best ROE over the past 5 years while Affin Bank is the worse performer in terms of ROE. This chart today shows that NPL is one of the utmost important factors that affect ROE as we are seeing a strong inverse relation between ROE and NPL. Affin Bank is still the worst performer in terms of NPL, which depicts that its asset quality is not as sturdy as Public Bank's one.

However, when we delve further and compare their loan portfolio, we see that most of the Public Bank's loan is disbursed to the property sector. The recent AGM has shown the direction the Malaysian banks are going to focus in the upcoming years. Maybank and CIMB will be focusing on SME loans, Hong Leong Bank will be focusing on digitalization while Public Bank is still focusing on asset quality.

Emphasis on asset quality means they are not going to lend so much to those without collateral and will continue to lend to the safest sector they deem, property. With the sluggish economy and soaring high house prices, isn't that providing liquidity to the SME is the right thing to do?

Public Bank has been rewarding its shareholders handsomely over the past 50 years and has created many millionaires. But we think a bank should also balance the interests between the national economy and its shareholders' pocket.

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