S&P: Asia-Pacific Banks Likely to Remain Resilient in 2011

Asia–Pacific banks are likely to remain resilient in 2011 following a year of strong regional economic recovery, Standard & Poor`s Ratings services said in a report recently published. As most of the Asia-Pacific banking systems have benefited from improved earnings, S&P expects the overall rating trend of the region`s banks to remain stable, even if the region`s economic growth should slow in 2011.

“With few exceptions, we expect GDP (gross domestic product) growth in the Asia-Pacific region to exceed growth in most other regions in 2011,” said Standard & Poor`s credit analyst Naoko Nemoto. “As a result, the credit standings of the region`s banks should find support from relatively high loan growth and moderate credit costs–we do not expect credit costs to surge significantly in the next two years,” she added

Although higher inflation and tightening monetary policies could put more pressure on borrowers, the negative impact could be mitigated by overall sound credit profiles within the corporate and household sectors. Most of the rated Asia-Pacific banks have maintained sound asset quality, thanks to the region`s robust economic growth.

Among the rated Asia-Pacific banks, 88% of the outlooks on the ratings are stable, 5% are positive, while 7% are negative. Compared with U.S. banks, of which 57% are stable and 37% are negative, the high percentage of stable outlooks in the region supports S&P`s view of a resilient Asia-Pacific banking system.

Inflationary pressure remains the single biggest risk that could lead to the revision of the outlook on Asia-Pacific banking system to negative. The impact is likely to come from policy responses to high inflation that could cause steep property price corrections and pressure banks` profitability.

(by Ben Shen)



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