Banking - NPL has been increasing in the first two months

Banking - NPL has been increasing in the first two months The shadow of the risk of bad credit in banking is increasingly visible. This is reflected in the industry's net non-performing loan (NPL) ratio, which has been recorded as continuing to increase since the end of 2023. The Financial Services Authority (OJK), in its latest report as of February 2024, recorded net NPL at the level of 0.82%, up from the previous month at 0.79%. Meanwhile, gross NPL recorded no change from the previous month, namely, stable at 2.35%. Yet, banking NPLs are currently showing solid improvement after the COVID-19 pandemic and are now in line with the national economic recovery, according to OJK. (Source: Kontan) Comment : We think a slight increase is acceptable due to the monthly banking operations. The key to countering this negative sentiment is good enough coverage. We also believe that banks under our coverage are likely to continue showing consistent asset quality improvement and thus will make NPL in the following months of this year manageable. Maintain our OW stance for the banking sector, with BBRI and BBNI as the top picks.