BANGKOK – The credit rating agency Moody’s Investors Service predicted on Thursday a stable outlook for banks across Asia-Pacific over the next 12 months, but warned that operating conditions could become increasingly demanding.
“The banks’ creditworthiness will stay broadly stable in 2019 because of the still-healthy economic fundamentals and good credit buffers,” Moody’s Vice President Eugene Tarzimanov said in a statement.
The agency said the capital, provisions and profits of Asia-Pacific banks guarantee them a sufficient margin to absorb losses, while funding and liquidity will remain stable.
He also highlighted his conviction that government support to these banks will remain strong and that their senior creditors will not be required to pay bailouts, with the exception of Hong Kong.
At the same time, Moody’s indicated that GDP growth in the region “has peaked and will moderate,” and that “credit expansion will continue to slow,” with the US-China trade conflict posing a risk for banks.
The agency also warned of the high private sector leverage in many of the regional economies, “exposing banks to the risk of asset quality impairment” as interest rates rise.
It also warned about the exposure of banks to real-estate sector risks despite the fall or moderation of prices, and highlighted loans for sector investment purposes as the greatest risk for banks of Australia, New Zealand, South Korea and Malaysia.
“Overall, the banks will have sufficient buffers against growing risks,” said Moody’s in the statement where it added that digitization will help “banks scale down their branch networks and lower costs.”