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Rising private sector debt may hurt Asia-Pacific banks in 2014: S&P
Financial institutions in Asia Pacific may face more hurdles in 2014 as pressure on the economic front was likely to bear down on their asset quality, said Standard & Poorâs (S&P) Ratings Services in a recently published report
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inancial institutions in Asia Pacific may face morehurdles in 2014 as pressure on the economic front was likely to bear down ontheir asset quality, said Standard & Poor's (S&P) Ratings Services in arecently published report.
S&P said in its official release on Wednesday that although gross domestic product (GDP) growth in the Asia-Pacific region had moderately improved to 5.4 percent from 5.3 percent in 2013, growth prospects in emerging countries such as China and India had weakened.
Going against past trends, Asia-Pacific financial institutions were now more exposed to local and regional risks than external risks, according to S&P.
'We hold the view that China's slower growth could have spillover effects on other countries such as Australia, Indonesia, Taiwan, Korea, and Hong Kong,' S&P credit analyst Naoko Nemoto said.
'Sluggish economic conditions, combined with a high level of corporate and household debt in some major economies will stress banks' asset quality. In our view, the credit profiles of banks in Malaysia and Thailand are vulnerable to deterioration in the health of their respective household segments due to the rapid growth of household debt.'
Generally, S&P expects credit costs to rise.
Nevertheless, Nemoto said that S&P was unlikely to see a sharp increase hurting banks' capitalization by assuming the region would benefit from a gradual global economic recovery under S&P's base-case scenario.
