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Bank Islam Brunei Darussalam maintains a strong liquidity position
- Bank Islam Brunei Darussalam tops the Strongest Banks by Balance Sheet ranking in Brunei
- The bank is highly liquid due to robust risk management initiatives
- Profitability and asset quality weigh on Asia Pacific banks’ balance sheet strength
26 February 2021, Singapore – Bank Islam Brunei Darussalam (BIBD) topped the ranking of Strongest Banks by Balance Sheet in Brunei in 2020. BIBD and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.
This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in Asia Pacific (APAC), Middle East, and Africa regions.
The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity.
BIBD tops ranking of strongest banks by balance sheet in Brunei
With the strength score of 3.26 out of 5, BIBD is in 73rd place out of 500 in the Strongest Bank by Balance Sheet ranking in APAC. The bank retained its position as the largest bank by total assets and the strongest bank in Brunei.
Its capital adequacy ratio (CAR) reached 18.3%, higher than 17.2% in the previous year. The healthy balance sheet growth and lower gross non-performing loan (NPL) ratio also contributed to its balance sheet strength.
The following were especially considered in the evaluation of the banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.
The bank is highly liquid due to robust risk management initiative
The bank maintained stronger liquidity buffers than most banks across the region. Its liquid assets to total deposits and borrowings ratio reached 64%, making it one of the top 20 banks with the highest liquid assets to total deposits and borrowings ratio in APAC.
The loan to deposit ratio of the bank stood at 47%, while the weighted average loan to deposit ratio of the 500 largest banks in the region was 75%.
Profitability and asset quality weigh on Asia Pacific banks’ balance sheet strength
While most Asia Pacific banking sectors maintained adequate capital and liquidity buffers, profitability has weakened amid the COVID-19 crisis. On average, the return on assets (ROA) of banks on the list was down from 0.82% in 1H 2019 to 0.66% in 1H 2020 and the cost to income ratio edged up from 40.2% to 40.9%. The weakened profitability was largely triggered by compressed net interest margins and the rise in loan loss provisioning.
Hong Kong, Pakistan, and the Philippines achieved the highest average score in profitability while Japan, Australia, and Sri Lanka had the lowest except for the markets with only three banks or less on the list. Banks in Indonesia, Thailand, Singapore, and the Philippines saw the average ROA drop the most. Indonesian banks’ average ROA was down from 2% to 1.4% in 1H 2020. On the contrary, the average ROA of Indian banks was higher at 0.62% from 0.35% partially due to easing of credit costs.
On average, banks in Australia, South Korea, and Hong Kong achieved the highest score in asset quality at 4.82, 4.72 and 4.65 out of 5, respectively. Some banking sectors in the region have already seen some deterioration in average gross NPL ratio in 1H 2020 such as Indonesia, Pakistan, and Thailand. The average gross NPL ratio of Indonesian banks on the list was up from 3% in 1H 2019 to 3.8% in 1H 2020. Pakistani banks posted an increase in the average gross NPL ratio from 7.5% to 8.4%. Meanwhile, banks boosted loan loss reserves (LLR) in response to expected losses from the economic slowdown resulting in a higher average LLR to gross non-performing loans ratio in most economies.
For the evaluation criteria and full ranking list of Strongest Banks click here
About the programme
The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.
The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.
The winners are determined using a scorecard approach based on six crucial performance indicators rated on a scale of 0-5: scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity.
About The Asian Banker
The Asian Banker is the region’s most authoritative provider of strategic business intelligence to the financial services community. The Singapore-based company has offices in Singapore, Malaysia, Manila, Hong Kong, Beijing, and Dubai, as well as representatives in London, New York, and San Francisco. It has a business model that revolves around three core business lines: publications, research services and forums. The company’s website is www.theasianbanker.com
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