AsPac banks well poised to handle risks

MANILA, Philippines - Asia-Pacific banks are seen in good position to handle risks emanating from the still fragile weak environment, but possible flow of excessive credit need to be monitored closely, a debt watcher said.

“Fitch Ratings’ outlook for Asia-Pacific banks is a broad reflection of their ability to handle risks of a less favorable external environment,” the credit rater said in a Compendium of Banks report released on Wednesday.

A “stable outlook” has been given on lenders in Australia, China, Hong Kong, Indonesia, Japan, Malaysia, Mongolia, New Zealand, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.

The sole “negative” forecast was assigned for Indian banks due to rising unpaid loans and slowing economic growth that could put credit on state-owned lenders “under pressure.”

In general however, the region’s banks would continue to enjoy “sound capitalization” and “strong profit,” contrary to their counterparts in developed markets in Europe.

“Funding structures are generally sound, and risks are coming down where there have been sensitivities in the past — such as in Australia and Korea,” Fitch said.

Risks however persist, it added, noting increased leverage to developed nations and to China, which could result in a credit crunch as debt problems remained unresolved.

With regard to the bank industry’s growth, “protectionist tendencies” on some territories could limit cross-border deals, Fitch said.

This comes at a time of regional expansion in the Southeast Asian region and as banks look for more investors to boost capitalization to meet Basel III reforms.

“Asian growth and regional integration will see internationalization as an ongoing strategic theme, but protectionist tendencies will limit large cross-border bank deals,” it said.