Malaysian banks' absolute NPLs rose 2.1% in November 2015

The credit cycle may have turned.

Maybank Kim Eng reports that absolute NPLs rose a marginal 1% MoM and 2.1% YoY end-Nov 2015. The industry’s gross NPL ratio was marginally higher at 1.61% end-Nov 2015 vs 1.59% end-Oct 2015. On a segmental basis, NPL ratios were higher MoM for auto, personal loans and working capital loans. The loan loss coverage ratio, however, slipped to 97.2% from 98.1% end-Oct 2015.

"NPL levels are still very benign at this stage but as the chart in the preceeding page and those below would indicate, absolute NPLs are no longer contracting YoY, which would suggest that the credit cycle may have turned. As it stands, we have already imputed higher NPL ratios and higher credit costs into 2016, but we do still expect the overall credit environment to remain fairly benign, unless economic growth slows much more than anticipated and the unemployment rate picks up sharply," adds Maybank Kim Eng.