4.
1 ASSET QUALITY RATIO
Table 4.1.1: Asset Quality Ratios of Hong Leong Bank in year 2017 to year 2018.
Asset Quality Ratios of Hong Leong Bank(%)
Details/Year 2017 2018
Non-Performing Loan(NPL) 6.1 5.4
Loan to Deposit 80.6 82.0
Deposit to shareholder fund 684.3 658.9
Graph 4.1.1 Trend Analysis of Asset Quality Ratios of Hong Leong Bank from year 2017 to
year 2018
Asset Quality Ratio
90.00%
80.00%
80.60% 82.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
6.10% 5.40%
0.00%
2017 2018
Non-Performing Loan Loan to Deposit
Firstly, we will be using asset quality ratios to analyzing the level of non-performing
loans, recoveries, and adequacy of provisions for Hong Leong Bank Berhad. Asset quality
ratios consists of few type of ratios which are non-performing loan(NPL), loan to deposit, and
deposit to shareholder fund. Non-performing loan is used to measure the loan that is in
default or close to being in default. The lower non-performing loan the better ability bank to
identify problem loan and later provides measures to recover the default loan to minimize
losses efficiently and effectively.
As we can see from the Table 1.1 and Graph 1.1 above for Hong Leong Bank Berhad,
the non-performing loan in the year 2017 to year 2018 is decrease 0.7%. Therefore, Hong
Leong Bank Berhad is more efficient in managing their problem loan because they still have
more than 90% of profit after deducting the default loan.
Next is loan to deposit of Hong Leong Bank Berhad where its used to assess a bank’s
liquidity by comparing a bank,s total loans to its total deposits for the same period. The
higher the ratio loan to deposit, therefore the bank may not have enough liquidity to cover
unfourseen fund requirements. Conversely, if the ratio is too low, the bank may not be
earning as much as it could be. In year 2017, Hong Leong Bank Berhad recorded loan to
deposit of 80.6% and its increasing to 82.0% for year 2018. Typically, the ideal loan to
deposit ratio is between 80% to 90%. Thus, the loan to deposit ratio of Hong Leong Bank
Berhad is in ideal condition.
Table 4.1.2: Asset Quality Ratios of Hong Leong Bank in year 2017 to year 2018.
Asset Quality Ratios of Hong Leong Bank
Details/Year 2017 2018
Deposit to Shareholder Fund 6.84 6.59
Graph 4.1.1 Trend Analysis of Asset Quality Ratios of Hong Leong Bank from year 2017 to
year 2018
Deposit to Shareholder Fund
6.9
6.85
6.8
6.75
6.7
6.65
6.6
6.55
6.5
6.45
2017 2018
Deposit to Shareholder Fund
Lastly, asset quality ratios for Hong Leong Bank Berhad are deposit to shareholder
fund where its measure efficiency of the bank’s to generate profit with all its deposit compare
to equity. Higher ratio shows a higher depending of the bank to obtain profit from deposit
compare to its equity. The of Hong Leong Bank Berhad of the year 2017 recorded deposit to
shareholder fund of 684.3% and its decreasing to 658.9% for year 2018. Its shows the amount
of shareholder fund is increasing in year 2018. To be concluded, Hong Leong Bank Berhad
shows a good performance in managing their quality asset efficiently in year 2018 because
generally the bank’s shows about maintaining strong asset quality and better ability to
optimize their profit for asset quality ratios.
Objectives
To understand how risks are categorized, quantified, monitored and managed within
within banks and the regulation.
To identify the key banking risks groups and their relative importance
To learn about the qualitative and quantitative tools for measuring and managing
financial risks in banks.
To understand the regulation aimed at controlling risks in banks and how it has
evolved.
