In the rating agency’s Banking Quarterly Roundup 4Q 2020 issued on Thursday, it expected an improvement in earnings with an upward bias in the net interest margins trajectory.
On the 4Q results, Wong Yin Ching, RAM’s co-head of financial institution ratings said with an estimated 13% of banks’ loans under targeted repayment assistance or subject to restructuring and rescheduling, their true underlying asset quality has yet to surface. “The average credit cost ratio of eight selected local banks had almost tripled from 30 bps to 84 bps y-o-y. Roughly half of the charges comprised management overlays and macroeconomic adjustments.
She also pointed out banks’ NIMs had been severely constricted by the aggregate 125 bp cut in the Overnight Policy Rate last year, further compounded by modification charges in 2Q 2020.