LENDING & CREDIT | Staff Reporter, Malaysia

How badly can RHB’s oil and gas exposure hurt its profitability?

It would slip into the red if 40% of its O&G book turned non-performing.

According to Maybank Kim Eng, loan exposure to the O&G sector for banks in their coverage ranges from 0% to 5% of their total loan books. “Based on our stress test, Public Bank, AFG and HL Bank would be the most resilient, in that they would still be profitable even in the extreme case whereby 100% of their O&G book turned non-performing.”

"The banks in our coverage generally have an O&G exposure level ranging from less than 1% of their total loan portfolio for the likes of Public Bank, AFG and HL Bank, to 5% for RHB. Effectively, the first three banks would remain profitable, even if there was a 100% default on their entire O&G loan book. RHB would slip into the red only if 40% of its O&G book turned non-performing, while the other banks such as AMMB, CIMB and Maybank would be loss-making if 60% of their O&G book turned nonperforming. These are fairly high tolerance levels, in our view, given that we have also assumed full provisioning against such O&G NPLs," added Maybank Kim Eng.

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