Singapore, July 04, 2017 -- Moody's Investors Service has revised to stable from negative its
outlook for banks in Asia Pacific as banking risks in the region are stabilizing
due to stable or improved operating conditions.
"Asset quality is stabilizing in most banking systems, as
the negative credit cycle in many of these systems has proven to be shallow
with a moderate economic upturn now evident in APAC, while commodities
prices are relatively stable," says Stephen Long, Moody's
Managing Director for Financial Institutions in the region.
Moody's conclusions are contained in its mid-year update
of its annual outlook on banks in APAC, "Banks -- Asia
Pacific, Stabilizing credit cycle", published on 3 July
2017.
The industry outlook indicates the rating agency's forward-looking
assessment of fundamental credit conditions that will affect the creditworthiness
of the banking industry over the next 12-18 months.
"A total of 77% of bank rating outlooks in APAC are now stable,
up from 64% at end-2016, while banks in China,
Hong Kong, Singapore, Australia, New Zealand and Mongolia
are mostly behind the increase in stable outlooks, following rating
downgrades in some cases," adds Long.
Moody's further believes that commodity-related problem loans
have mostly peaked and the rating agency's expectation of relatively
stable energy and other commodity prices in 2017 should support bank asset
quality in this segment.
Moreover, capitalization and profitability show good levels against
risk, while capital buffers are generally higher due to moderating
growth in risk weighted assets and more stringent regulatory requirements.
Profitability will recover in many markets because of lower credit costs
and stable to higher net interest margins.
Funding and liquidity will also remain a credit strength, and most
APAC banks are mostly deposit funded with a moderate reliance on wholesale
sources -- with the exception of Australia, New Zealand and
Mongolia -- and liquid balance sheets.
Foreign capital flows are also returning to emerging Asia, although
the risk of reversal remains due to market uncertainty around US interest
rates and US dollar strengthening, China's re-balancing,
potential policy changes in key economies, and global/regional political
issues.
In terms of long-term risks, corporate and household leverage
remain elevated in parts of APAC, but the build-up has slowed,
supporting the banks' asset quality. Furthermore, property
prices are rising in many economies, amplifying bank credit risks
in the case of a major market correction.
Latent property-related risks are more pronounced in Australia,
China, Hong Kong, New Zealand, Malaysia and India,
based on property price appreciation, the banks' exposure
level, or both.
Moody's expects that the trend for government support will be stable
for the majority of APAC banking systems. This is because regulators
are not keen to embrace wider bail-in measures and early public
support remains the preferred way to prevent banking stress in most systems.
The exception rather than the rule is Hong Kong, which is moving
closer to an operational resolution regime and will likely implement one
in 2017, and this situation could lead to a lower level of government
support uplift for some banks.
The banking systems where Moody's has coverage in Asia Pacific include,
with the advanced economies, Australia, Hong Kong, Singapore,
Japan, New Zealand, Korea and Taiwan. In the case of
the emerging and developing economies, they include China,
Bangladesh, India, Indonesia, Malaysia, Mongolia,
Thailand, the Philippines, Sri Lanka and Vietnam.
Subscribers can read the full report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1080890
NOTE TO JOURNALISTS ONLY: For more information, please call
one of our global press information hotlines: New York +1-212-553-0376,
London +44-20-7772-5456, Tokyo +813-5408-4110,
Hong Kong +852-3758-1350, Sydney +61-2-9270-8141,
Mexico City 001-888-779-5833, São Paulo
0800-891-2518, or Buenos Aires 0800-666-3506.
You can also email us at mediarelations@moodys.com or visit our
web site at www.moodys.com.
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Eugene Tarzimanov
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077