Thursday 28 Mar 2024
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SINGAPORE (Dec 13): Moody’s Investors Services on Tuesday said it is negative on the outlook for banks in Asia Pacific for 2017.

The credit rating agency says the banks' asset quality and profitability will be dragged down by challenging operating conditions in the region in the year ahead.

"Problem assets will rise from a generally low level, due to previous rapid credit expansion, elevated corporate and household leverage in some economies, the ongoing recognition of credit problems, and challenges in commodities and cyclical industries," says Moody's Managing Director Stephen Long.

"Foreign private capital flows will remain volatile in emerging Asia, pressuring domestic currencies and weakening operating conditions for the banks," adds Long. "And, property price increases in parts of Asia Pacific will further amplify credit risk for the banks."

In addition, Moody’s says the banks' generally strong profitability will continue to be pressured by higher credit costs.

Of the 16 banking systems in Asia Pacific that Moody's analysed in its outlook report, Banks — Asia Pacific: 2017 Outlook — Negative Amid Asset Quality and Profitability Challenges, six carried negative outlooks.

Only three banking systems carried negative outlooks at the start of 2016.

The six banking systems with negative outlooks are: Australia, China, Hong Kong, Korea, Mongolia, and Singapore.

However, Moody’s says the stable outlooks for the remaining 10 systems reflect the banks' greater resilience against higher solvency risks.

The 10 banking systems with stable outlooks are: India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Sri Lanka, Taiwan, Thailand and Vietnam.

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