Macau’s banking sector has been hit hard by a dramatic rise in non-performing loans over the past year.
According to data from the Monetary Authority of Macau (AMCM), non-performing loans surged to 45.4 billion patacas (around $5.25 billion) by the end of March 2024.
This reflects a staggering 111.3% increase compared to the previous year.
The trend has persisted for 13 consecutive months, causing non-performing loans to reach record highs.
Bad loans now account for 4.2% of all lending within Macau, a figure that rises to 5.6% when including loans made to individuals and entities outside of Macau.
The European Banking Authority defines banks with over 5% of loans classified as non-performing as facing significant risk.
This surge requires a comprehensive strategy to mitigate potential long-term impacts on the financial health of Macau‘s banking sector.
The profitability of the region’s banks also declined significantly.
In the first quarter of 2024, profits fell to 2.48 billion patacas ($286.9 million), down 38.5% from the same period in 2023, marking the lowest quarterly profit in over a decade.
Macau’s Banking Sector Faces Challenges
A major contributor to this decline was a 23.7% drop in net interest margin, which fell to 3.86 billion patacas ($446.4 million).
This decline reflects the shrinking difference between revenues from loans and the costs of deposits.
Loan revenue, a primary income stream for banks globally, also decreased by 13.8% compared to the previous year, amounting to 1.07 trillion patacas ($124.1 billion).
However, deposits managed to increase slightly, rising 0.2% annually to 1.23 trillion patacas ($142.5 billion) by the end of March.
These financial changes underline the challenges facing Macau’s banking industry.
It is affected by internal management difficulties and external economic pressures, such as fluctuating interest rates following U.S. Federal Reserve policy adjustments.
The AMCM must carefully navigate these issues to prevent further financial deterioration and stabilize the sector.