South Asian banks register highest NPLs

The top 10 banks with the highest gross non-performing loan (NPL) ratio among the 500 largest banks in Asia Pacific comprise of five Indian banks, two Bangladeshi banks and one each from China, Japan, and Pakistan. This is according to The Asian Banker 500 (AB500) 2021, an evaluation of the 500 banks in Asia Pacific for the financial year 2020, with a March 2021 cutoff. The average gross NPL ratio of these 500 banks rose only moderately, as the COVID-19 relief measures have resulted in the deferred recognition of problem loans.

The asset quality of the Indian banking sector improved slightly, with average gross NPL ratio of Indian banks on the AB500 list, down to 7.5% at the end of March 2021, from 7.9% a year ago. Private sector banks had lower gross NPL ratio, averaging 5%, compared with 9% for public sector banks. Despite the improved asset quality, Indian banks still had higher average gross NPL ratio than most banks in Asia Pacific markets, and their average loan loss reserves to gross NPLs ratio was lower. IDBI Bank recorded the highest gross NPL ratio among Indian banks, at 22.4%, followed by Central Bank of India (16.6%), Yes Bank (15.4%) and Punjab National Bank (14.3%).

Janata Bank from Bangladesh topped the list, although its gross NPL ratio fell to 22.6% in 2020 from 26.5% in the year earlier. This is much higher than average gross NPL ratio of the 500 largest banks in Asia Pacific, at only 1.62%. The average gross NPL ratio of Bangladeshi banks remained the highest in the region, at 13.6%, albeit improving primarily due to the relaxation of loan classification rules, compared with 16% in 2019. Islami Bank Bangladesh registered the lowest gross NPL ratio among its peers in Bangladesh, at 3.42%.

Bank of Huludao had the weakest asset quality among Chinese banks and its gross NPL ratio stood at 13.9%, far above the average in China of 1.5%. The bank reported a considerable deterioration in gross NPL ratio, rising to 13.9% in 2020 from 3.7% in 2019 and 1.8% in 2018. Meanwhile, its loan loss reserves to gross NPLs ratio dropped to 32% from 105% in the previous year.