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03328 BANKCOMM
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09/12/2019 17:43

Moody's 2020 outlook for APAC banks negative

[ET Net News Agency, 9 December 2019] Moody's Investors Service's outlook for the
banking industry in the Asia Pacific is negative over the next 12 months because Moody's
said that the US-China trade dispute will weaken economic and trade activity in the
region, and erode investor confidence.
"Weaker economic and trade conditions will lead to moderate increases in problem loans
for APAC banks," said Eugene Tarzimanov, a Moody's Vice President and Senior Credit
Officer.
"Meanwhile, the banks' profitability will fall, because they are raising credit
provisions while central banks are cutting interest rates to support economic growth,"
added Tarzimanov.
Nevertheless, Moody's says that APAC banks have generally maintained good capital and
liquidity buffers and the probability of government support for these banks will stay
high, except for the banks in Hong Kong, because the territory is the only jurisdiction in
APAC with an operational resolution regime.
Moody's conclusions are contained in its just-published 2020 outlook for the 17 banking
systems in the Asia Pacific, namely, Australia, Bangladesh, China, Hong Kong, India,
Indonesia, Japan, Korea, Malaysia, Mongolia, New Zealand, the Philippines, Singapore, Sri
Lanka, Taiwan, Thailand, and Vietnam.
Moody's points out that while high private-sector leverage poses a risk to many APAC
economies, the buildup in leverage is generally moderating.
Most APAC banking systems have passed Moody's stress test on capital, except for the
banks in India, Mongolia, Sri Lanka, and Vietnam, because banks in these jurisdictions
have lower starting capital ratios and higher starting problem loan ratios.
Moody's report also said that environmental, social and governance risks will
increasingly affect the creditworthiness of APAC banks. (KL)

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