Although asset quality remains weak as evidenced by a higher than sector average NPL ratio, impaired credits
started to decline in the final quarter of FY 2012, due to write-offs.
This is in view of the challenges associated with restoring net profitability to a solid footing following sustained net losses and the increase in impaired credits
Moody's understands that the impaired credits
include some of the bank's largest customers and relate to both domestic and regional high-profile corporate defaults," he said, adding that a decline in asset quality would continue in 2010.
Although the vast majority of the insured portfolio is sound, like their competitors, XLCA and XLFA have exposure to some impaired credits
Like its competitors, XLCA and XLFA have exposure to some impaired credits
but Fitch believes these are manageable at the present time.
The private sector banks, which have generally been aggressive in maintaining or increasing reserve levels and in attacking their stock of impaired loans with heavy chargeoffs, appear to be much better positioned to absorb substantial increases in impaired credits
in the private sector, although a haircut to government exposure combined with a substantial increase in impaired loans could also lead to significant hits to equity