Banking - Bank NPLs softened in March 2024

Banking - Bank NPLs softened in March 2024 The position of the bank's non-performing loan (NPL) ratio decreased in Mar24. This increase in bank asset quality even occurred at the same time as the credit restructuring relaxation policy due to COVID-19 ended. This is in line with the recent forecast of the Financial Services Authority (OJK), which states that the impact of the end of the credit restructuring policy, which ends in March 2024, will only have a minimal impact. NPLs and risky credit (loan at risk/LAR) probably won't increase much, considering that banks have quite massive reserves. "Credit quality (as of March 2024) remains maintained with the net NPL and gross NPL ratios of banks recorded at 0.77% and 2.25%, respectively," said Chairman of the OJK Board of Commissioners Mahendra Siregar. Previously, in February 2024, banking net NPL was 0.82% and gross NPL was 2.35%. (Source: Investor Daily) Comment : In line with our expectations, the banking industry and banks under our coverage NPL’s continue to soften. With the expectation that asset quality improvement will remain well managed, gross NPL should continue to stay low, which will ultimately benefit banks risk metrics. Maintain our OW stance for the banking sector, with BBRI and BBNI as our top picks.