Some of the numbers related to the banking sector are truly worrying. Outstanding loans as a proportion of GDP stood at 152% in December. With Bank Negara projecting 2% to 3% GDP growth in 1998 and 15% credit growth, the ratio will rise to 165% by December 1998.
Nor is the lending particularly good lending. As at December 1997, M$39 billion was extended for the purchase of shares - an alarming 45% of which was given to individuals, for which read tycoons. This would suggest that Sime Bank's numbers were not particularly rogueish. The whole banking sector has been giving Malaysian tycoons money - to prop up their own stock, to launch takeovers or just to punt the market.
If, for example, 50% of these loans prove to be irrecoverable, the system could be be hit with a loss of M$8.8 billion, more than the M$7.9 billion pretax profit recorded by the entire banking system in 1997.
Total lending for share financing (M$39 billion), consumption credit such as hire purchase (M$54 billion) and broad property (M$140 billion) together amounts to 58% of total outstanding credit. While not all property loans are non-productive, there is a clear overhang in this sector.