ASEAN banking sector resilient: S&P
(12 May 2016 – Asia) Standard & Poor's Global Ratings has this week said that the banking sector in the Southeast Asia region will remain resilient amid difficult operating conditions this year on the back of adequate capital cushions against asset quality risk.
"The fair to satisfactory profitability and generally sound capitalisation of Asean banks should mitigate an erosion in assets quality in 2016," Ivan Tan, S&P Global Ratings credit analyst, said on Wednesday.
Tan continued “We believe nonperforming loans (NPLs) of ASEAN banks will continue to rise in 2016. However, our base case assumes a gradual deterioration, rather than a sharp spike in delinquencies.”
The report found that the asset quality of Singaporean banks will be vulnerable to further deterioration in external conditions. Also, the quality of overseas loans of these banks, particularly to emerging markets such as Indonesia and India, has continued to weaken.
According to S&P, Indonesia's banking sector will continue to face difficult operating conditions in 2016, marked by slower growth and higher credit stress. The ratings agency expects Indonesian banks' reported NPLs to increase to 3-4 percent of total system loans in 2016, from 2.9 percent in February 2016.
“We expect loan growth to reduce in most ASEAN economies due to a slowdown in the regional economies,” Tan said in the statement.
"Loan growth in Malaysian could moderate to 6%-8% in 2016, from a five-year average of 10%, amid unfolding external uncertainties about the pace of U.S. Fed rate normalization and the economic rebalancing in China," he concluded.
Subscribe