Analyst Pin-board Banking sector – Bad debt in 2021
In the context that the economy reached the lowest growth rate in a decade and the number of closed businesses skyrocketed, the banking sector still recorded good earnings. On the bright side, some banks still managed well with robust net interest income, driven by less impacted segments, others’ income was supported by upfront fees from exclusive bancassurance deals, opportunities from the volatile gold market, widened exchange rate spread, and low interest rates. This is quite better than expected compared to the concern of surging provision expenses and weak lending demand affecting profits. This was also due to the restructuring, maintenance of debt group which helped lower the pressure from provision of restructured loans. In 2021, these worries will be back as Circular 01 expires. High provision expenses and lag in bad debt formation are widely anticipated to hamper profit growth.
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