Public Bank and Hong Leong Bank are top-scoring banks for defensiveness against credit risks, CGS-CIMB Equities Research’s new scoring methodology has found. The research house’s report on Thursday showed that Public Bank and Hong Leong Bank scored the highest at 37-38 points versus the 10-24 points garnered by peers.
The ranking made Public Bank and Hong Leong potentially the most defensive banks against any increase in the company’s gross impaired loan (GIL) in 2021F arising from the Covid-19 outbreak.
The eight Malaysian banks were ranked in the report against five indicators to assess their defensiveness against credit risks. The indicators were:
- the peak GIL ratio in the past 20 years
- collateral coverage
- loan loss coverage
- total buffer coverage
- percentage loan exposure to residential mortgages.
CGS-CIMB Research also ran stress tests on the banks’ forecasted net profits for the upcoming financial year. The results from the stress test show that the impact would be smallest for three banks: Public Bank, Hong Leong Bank, and BIMB, given that the total provision buffer of these banks can cover the additional provisioning from the doubling of their GIL ratios.
(Source: The Star)