It has declined to 74.4% from 4Q14's peak of 91.1%.
Loans loss coverage ratio has been on a persistent decline from a peak of 91.1% in 4Q14 to 74.4% in 1Q17 as provisions continue to lag gross impaired loans formations, says UOB Kay Hian.
"Overall loans loss provision declined 25% qoq and 16% yoy in 1Q17 despite a 2% qoq and 25% yoy increase in gross impaired loans balance. Banks have always justified the declining LLC trends with the sufficient level of collateral cover inherent."
Here's more from UOB Kay Hian:
However, with the implementation of MFRS9 on 1 Jan 18, such justification can no longer hold as the impact of life time provisioning will inherently raise provisions significantly regardless of collateral cover.
Banks with LLC significantly below 100% would have to ramp up provisions (eg RHBBank, Affin bank, AMMB). These banks’ overall LLC (inclusive of regulatory reserves) are currently hovering at an average of 75% vs overall peer average of 120%.
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