NST Business

Asia Pacific investment banks face increased pressure from global challenges

KUALA LUMPUR: Global macroeconomic challenges are likely to increase pressure on the short-term earnings prospects of investment-grade banks in Asia Pacific, Fitch Ratings said in a report today.

The report addressed the main questions asked by the US and Canada-based investors during a recent tour by Fitch analysts to discuss mainly investment-grade rated banking systems, with particular focus on Australia, New Zealand, mainland China and Hong Kong, Japan, Korea and Singapore.

Fitch said banks in most markets faced several challenges in their operating performance.

This included increased costs related to regulation, slower trade and economic growth, subdued loan growth, low interest rates and acute competition.

"The factors are squeezing net interest margins and overall profitability. However, while many banks are likely to report weaker financial results (or less improvement) in 2020 than in 2019, we do not expect significant deterioration.

There is unlikely to be any immediate impact on ratings. Consequently, the majority of bank ratings remain on stable outlook, Fitch added.

Nevertheless, some banks in Australia (in particular, the major banks and their New Zealand subsidiaries) and in Japan are more exposed to negative rating pressure.

"Where this is the case, ratings are on Negative Outlook," it added.