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ASSET QUALITY RATIO

1. NPL Ratio
Non-performing loan is classified for the loans that overdue more than 90 days due to the
customer failure in meeting obligation that they have not made any scheduled payment of

principal and interest within specified period depending on the types of their loan. Based on the
table above, in the year of 2018, it shows that Public Bank NPL ratio is 4.29%, which is it is higher

when compared to RHB, that recorded 1.93% of its NPL ratio. Based on the differences, it
indicates that Public Bank has poor performance in managing non-performing loan than RHB
bank. Financial instituions, especially banks use non-performing loan ratio to measure the bank’s

asset quality as the higher the ratio, the poorer the bank’s asset quality, the poorer the bank’s
performance. Therefore, we can conclude that RHB Bank has higher asset quality than Public

Bank and has better performance in managing non-performing loan.

2. Loan to Deposit Ratio (LDR)

Loan to deposit ratio is used to access the bank’s liquidity by dividing bank’s total loan and to its
total deposit within the same time of period. Laon to deposit ratio can be the benchmark that
banks may not have much liquidity to cover unforeseen fund requirement such as bank’s abilities

to cover loan losses and withdrawals by the customers. Based on the ratio calculation above, the
comparison between both bank in the year of 2018, Public Bank’s LDR is 91.28% while RHB
Bank’s ratio is 85.66%. Based on the comparison, it displayed that Public Bank has better obtain

more profits than RHB Bank and it faces higher risk. In conclusion, the higher ratio indicates that
better profit, but banks will face higher risk which is known as risk of non-performing loan.

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