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ASSET QUALITY RATIO

1. NPL Ratio

NPL Ratio

0.4292%
0.05% 0.03111%
0.04%
0.03% 0.01136%
0.02%
0.01%
0.00%
2018 2017 2016

NPLs have been under the surveillance of the government and bank management,
since they are considered to be associated with bank failures and crisis whereby the loans that
overdue more than 90 days because the customer are in default due to the fact that they has not

made any scheduled payment of prinicipal and interest within specified period of time depending
on the types of their loan. Factors such as bank’s interest rate and economy of the country is the

another main reason must be weighted down. Loan is the asset of the bank. Hence, the
uncertainty that debtors will pay their loan in future, will increase the non-performing loan ratio,
which cause to the decline in bank’s asset quality and performances. Financial institution,

especially banks, use non-performing 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. The chart above
show that there is uptrend in Public Bank’s NPL ratio from the year of 2018, 2017 and 2016

whereas the percentage soar from 0.01136% in 2016, 0.03111% in 2017 and go up to
0.04292% in 2018 respectively. Therefore, overall for these respective years, it can be concluded
that Public Bank Berhad has a poor performance in managing its loan thus lowering its asset

quality. This can be an indicator that the decrease in NPLs is proven to have adverse impact on
the banking sector so that understanding the determinant of NPLs is immensely crucial to ensure

the efficiency and soundness of the overall banking operation and economy.

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