Portfolio Lead Advisory Services Weekly Digest - Edition 13

Singapore, one of the regional bellwethers of the South East Asian Economies could see its full year GDP fall by 6 percent in a survey conducted by the Monetary Authority of Singapore. As the economic woes continue, the inadvertent rise in NPLs are slowly but surely starting to surface, especially as forbearance policies come to an end. Over the coming months the likes of Australia, Thailand, Philippines, Malaysia will see the potential expiration of some of these policies which have served to mask the true level of distress, as have China and India.

All five Chinese banks have been raising provisions and the Bank of China Ltd President, Wang Jiang was cited in the NY Times saying that the external challenges in the second half are unprecedented. This is not dissimilar to what most banks in Asia have been doing, but unlike previous crisis, it would appear banks are much better capitalised, and a liquidity crunch does not seem to be a major risk.

As part of an APAC focused webinar we recently organised with The South East Asian Central Banks (SEACEN) Research and Training Centre and Perbadanan Insurans Deposit Malaysia (PIDM) entitled ‘Navigating COVID-19: Fortifying resilience in the banking sector’, we carried out a survey among the 700 participants comprising of regulators, bankers and advisors. The results were no surprise that circa 80% expected a rise in NPLs and more than 35% expecting a significant increase from current levels. More than 80% of respondents felt that this crisis was more severe than previous ones, with more than 90% seeing the greatest level of stress to be in the SME and Retail banking space.

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