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Bad Debt Grows in Top Southeast Asian Countries as Economies Slump With China

Bad debt is becoming a growing pain for banks in major Southeast Asian nations, mirroring a trend in China, as their economies weaken together.

In Indonesia, the largest ASEAN country by nominal GDP, the mean nonperforming loan ratio of the top three lenders rose for two straight years to 1.84% at the end of 2015, while the figure in the bloc's No. 2, Thailand, jumped to 3.32% from 2.62% in the 12 months through Dec. 31, 2015, according to SNL Financial data based on company disclosures.

The Indonesian economy expanded at the weakest pace in six years in 2015, while growth in Malaysia slowed by the most since 2010.
 The average in Malaysia, the next-biggest Southeast Asian economy, crept up to 1.80% from 1.74% over the year.

 The mean ratio of loan loss provisions to average customer loans also rose in each of the three nations in 2015.

Asset Quality Metrics at Top Banks in Select Economies in Asia-Pacific

The Indonesian economy expanded at the weakest pace in six years in 2015, while growth in Malaysia slowed by the most since 2010. Thailand recovered from the aftermath of political unrest in 2014, but its 2015 growth rate was still less than half where it was as recently as 2012.

One common challenge for the countries is a slumping China, the largest trading partner for ASEAN as a whole. The world's second-largest economy ended 2015 with the lowest growth rate in 25 years, sending ripples across countries around the world. Particularly, China's waning demand for everything from rubber to fuels is exacerbating a commodities slump that has hurt export revenue for resource-rich Indonesia and Malaysia.

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 Troubles for banks in China-dependent economies are becoming clearer as they report more problem assets.

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