Banks warned vs risks of North Asia exposure, NPLs: Maybank

North Asia non performing loans went up 8% to 191% quarter-on-quarter.

Banks in the Lion City are cautioned against the risks in Chinese properties and contagion issues, Maybank said.

“North Asia non performing loans increased 8% - 191% quarter-on-quarter (QoQ) in the second quarter of 2022. While some of this were one offs, continuing stress in the Chinese property sector and potential contagion impacts landing on balance sheets cannot be ignored,” read the report.

Continued lockdowns also pose risk of stress for banks, Maybank added.

“Potentially renewed guidance for higher credit charges need to be watched,” said Maybank.

At the same time, continued weakness in markets may still cause downside to trading and investment income.

NIM to accelerate

Maybank said the net interest margin (NIM) is seen to speed up amidst the two 75 basis point (bps) Fed hikes within the third quarter.

In the second quarter of 2022, NIM expansion went up to 12 bps QoQ from 2bps.

With this, Maybank said higher interest rates will possibly tighten spreads as cost of funding increases.

“Nevertheless, we expect asset yields to have significantly outpaced funding cost increases,” said Maybank.

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