Banks cut provisions as credit cycle turns

A survey of bank profits by KPMG noted that the five largest banks in aggregate reported a slight increase in the incidence of impaired loans to gross assets. This ratio increased to 0.22 per cent in 2006 from 0.21 per cent in 2005. Banks, however, have reduced provisions. The ratio of specific provisions to gross impaired loans fell to 31.0 per cent in 2006 from 38.3 per cent in 2005. Banks also reduced collective provisions by a quarter, to 0.6 per cent of loans from 0.8 per cent under the old general provision.