Banking - The risky credit ratio is getting better, even though the Covid-19 credit restructuring ends

Banking - The risky credit ratio is getting better, even though the Covid-19 credit restructuring ends A number of banks have succeeded in reducing the risky credit ratio after the end of credit restructuring relaxation due to COVID-19 since March 2024. Bank loans at risk (LAR) have also fallen, and the quality of credit disbursed has also been maintained. The Financial Services Authority (OJK) noted a decreasing trend in LaR to 10.51% in June 2024 from May 2024, which was at the level of 10.75%. The LaR ratio is also getting closer to the pre-pandemic level, namely 9.93% in December 2019. A number of large banks recorded an annual decline in LaR in the first semester of 2024, including BBRI down from 14.94% to 12.11%, BMRI down from 10.3% to 7.76%, BBCA down from 8.7% to 6.4%, BNGA fell from 13.3% to 10.2%, and BBTN fell from 23.13% to 21.20%. Bank BTN Risk Management Director, Setiyo Wibowo, revealed that the largest contributor to LaR came from the subsidized and non-subsidized KPR segments. On the other hand, BTN has also prepared sufficient reserves so that it is optimistic that this year's LAR will be able to fall below 18% and NPL coverage will be in the range of 160%. "Every quarter we carry out an assessment of the credit account, and the projection is that it will downgrade to a consistent NPL in the range of 7%, which we have anticipated in the Bank Business Plan (RBB)," he said. (Source : Kontan) Comment : Loans at risk and Covid-19 restructured loans have never been our concerns since our ‘24F outlook for BMRI was released in November 23. Indeed, even since the relaxation is fully lifted, we are confident that both the Covid-19-related restructured loan and BaU figure, as well as the total amount, will continue to decline as recovery momentum has brought banking business normalized. Our eyes continue on banks cost of credit, which will play a crucial role in the remaining quarters of this year. Maintain our overweight stance for the banking sector with BBRI and BBNI as the picks.