Recovery in 2021 can counter gloom in banking

This was a key concern raised during CGS-CIMB Research’s roadshow from Oct 7-9 involving 46 participants from 13 asset management companies.

“We sensed that the main reason why investors have not increased their holdings in banks is their concern over a possible rise in gross impaired loan (GIL) ratio in the first half of 2021 following the end of the targeted loan moratorium.

“However, we think an economic recovery in 2021 – our economist projects gross domestic product growth of 7.5% – would help to limit any increase in the GIL ratio, as this could lower the unemployment rate and improve business revenue, ” the research house stated in a note.

CGS-CIMB Research forecasts the banking industry’s GIL ratio to increase from 1.4% as at end-Aug 2020 to 1.7% by end-2020 and 2% by end-2021.