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Research Report

16/01/2020 17:52

APAC banks contend with tougher 2020 - S&P

[ET Net News Agency, 16 January 2020] Despite expectations for slower growth in 2020 in
the Asia-Pacific region, financial institution rating trends will remain relatively
stable, according to "Asia-Pacific Financial Institutions Monitor 1Q 2020: Bank Ratings
Should Withstand A More Demanding 2020," a report published today by S&P Global Ratings.
In December 2019, the credit rating agency revised its growth forecasts for the
Asia-Pacific region slightly lower to 4.7% for 2020. There was some marked variability in
country growth outlooks, however, with the downward revision much more pronounced for Hong
Kong and India.
"The slowing regional outlook may weigh on asset quality metrics at some banks, in our
view, but the effects will vary by jurisdiction," said Gavin Gunning, a credit analyst at
"The majority of our rating outlooks on Asia-Pacific financial institutions are stable,
and we expect this to remain the case in 2020," he added.
Globally, most banks should be able to contend with challenging credit conditions in
2020 at current rating levels. At the same time, the economic outlook is delicately
poised. Key risks for banks include the potential spillover effects on asset quality from
slower economic growth and a weaker outlook for corporate earnings, as well as the
low-interest rates that are gradually pulling down banks' profitability.
A key assumption underpinning our outlook for Asia-Pacific in 2020 is that there is no
significant increase in geopolitical stresses across the region. This includes Hong Kong,
where protests have remained contained, to date, with limited spillover to other
Further, S&P assumed that most governments across the region will remain supportive to
systemically important private sector commercial banks in the unlikely event that support
was required. This is in contrast with Western Europe and the U.S. where S&P believes
systemically important banks will most likely benefit from additional loss-absorbing
capacity rather than government support. (KL)

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