(The following statement was released by the rating agency)
Dec 13 - Fitch Ratings says the Stable Outlook for 2013 for Asia Pacific (APAC) banks
reflects broadly their ability to handle the risks of a less favourable external environment.
Prospects for upgrade, however, are held back by rising leverage across Asia Pacific and the
risk of a sharper slowdown in China.
"Banks generally have strong absorption capacity given their sound profit and
capitalisation levels," says Mark Young, Managing Director in Fitch's Financial
Institutions team. "This will position them well in the face of pressures from
a softer but still solid, by global standards, economic growth environment.
"Funding structures are also generally well placed, and risks are coming down
where there had been sensitivities in the past, such as in Australia and Korea,"
Mr Young said.
In a special report published today, Fitch says China and India remain the weak
spots where the Viability Ratings (VRs) of banks in these markets are under
pressure. Fitch's concerns over the effect of China's rampant credit growth on
bank credit quality and solvency are now becoming evident. In addition activity
in wealth management products has the potential to hurt China banks.
India's more protracted slowdown means that the credit fundamentals of
state-owned banks are also under pressure after a build-up of risk
concentrations and rising non-performing loans.
Risks that could also impact ratings negatively include a China hard landing.
While not Fitch's base case, a hypothetical 300bp hit to China's GDP in 2013
shows economies with large trade links hardest hit. Taiwan, Korea and Thailand
would be affected most, while Japan is most exposed among major advanced
economies, as are the open economies of Hong Kong and Singapore. This would add
pressure on banks' VRs.
Another trend to monitor is the rising levels of leverage across the region
which is constraining upward momentum of ratings. Beyond China, high and rapidly
rising leverage has led to a build-up of risk in Hong Kong and Indonesia as well
as in the lower-rated countries of Mongolia, Sri Lanka and Vietnam which are
more sensitive to an economic slowdown.
The report, '2013 Outlook: Asia-Pacific Banks', is available on
www.fitchratings.com or by clicking on the link above.
Link to Fitch Ratings' Report: 2013 Outlook: Asia-Pacific Banks