KUALA LUMPUR, April 11 — Moody's Investors Service has maintained its stable outlook on 13 Asia-Pacific (Apac) banking systems, including Malaysia.
Others are Australia, China, Hong Kong, India, Indonesia, South Korea, New Zealand, Pakistan, the Philippines, Singapore, Taiwan and Thailand.
The credit rating agency also revised upwards the banking systems outlook of Japan and Bangladesh to stable from negative.
“The stable outlook is supported by recovering macroeconomic and operating conditions in Apac economies, banks' largely stable asset quality, capital and liquidity, and rising profitability,” it said in a statement today.
Meanwhile, Moody’s retains its positive outlook on Vietnam’s banking system.
It said the outlook on many Apac banking systems could have been positive if not for the military conflict in Eastern Europe, which is the key risk for the outlook.
“A potential further escalation of the military conflict and/or additional sanctions or embargoes on Russia's exports would fuel commodity prices and inflation, a credit-negative for real economic growth, financial markets, business and consumer confidence,” it said.
Moving forward, Moody's expects Apac banks' profitability to generally rise this year because of wider net interest margins against the backdrop of higher policy rates.
It said loan loss provisions as a share of gross loans, will likely decrease modestly in parts of Apac.
“However, banks will be reluctant to release significant amounts of general reserves amid macroeconomic uncertainties,” it said.
On non-performing loans (NPL), it said Apac banks' NPL ratio would increase but only modestly in some markets amid the macroeconomic recovery, which is consistent with a stable credit view on asset risk, particularly when considering the credit benefits of banks' large loan-loss reserves.
Moody’s expects Apac banks would maintain strong and stable funding and liquidity, following improvements over the past two years in funding conditions that benefited from easier monetary policy and slow credit growth.
“Their core capital will remain stable, although a mild decrease will occur in some systems as banks will post higher credit growth and pursue capital optimisation strategies.
“Furthermore, government support for banks will remain strong in most Apac banking systems, supporting the credit ratings of the banks,” it said.
— Bernama
