For the banking system as a whole, what used to be high-double-digit growth until 2013 has wallowed at below 5 percent year-on-year for 29 straight months.
MELBOURNE: Potentially higher interest rates, as well as volatile domestic currencies, bond markets, and property prices, would make financing conditions more difficult for Asia-Pacific financial institutions in 2019, according to S&P Global Ratings.
“High debt levels and lofty asset prices have evolved during what has been an extraordinarily long economic and credit cycle across much of Asia-Pacific,” S&P Global Ratings’ credit analyst Gavin Gunning said in a statement Monday.
“These elevated risks set the scene for a potential deterioration in Asia-Pacific bank credit quality, over the short to medium term,” he said.
S&P Global Ratings published a report titled “Asia-Pacific Financial Institutions Monitor 1Q 2019: A More Difficult Year Ahead”.
The agency said bank ratings in the region remained relatively stable over the course of 2018 and its base case was that this trend would likely continue in 2019 despite credit conditions becoming more difficult.
“Last year, only 7% of our pool of rated banks in Asia-Pacific were either upgraded or downgraded. As of Dec. 31, 2018, the median rating across the portfolio of over 200 rated banks remained unchanged from a year ago at ‘A-’, with about 87% of our bank ratings at ‘BBB-’ or higher,” S&P Global Ratings said.
Gunning said a significant and abrupt credit cycle downturn would likely result in negative ratings momentum for some Asia-Pacific banks.
“This is despite our expectation that most banks can contend with a moderate and gradual negative turn in the credit cycle at current rating levels,” he said.
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
