The Asia Pacific Banking Industry Outlook 2019- Bracing for a bumpy year
Slower growth, trade disruptions, financial asset repricing and high private sector leverage emerge as top industry risks for 2019. Although strong government support for APAC banks is likely to keep the funding and liquidity stable, asset quality in some markets pose concerns as monetary conditions tighten.
The Asia Pacific Banking Industry Outlook 2019
Macroeconomic conditions in the region appear to be more challenged as Asia-Pacific Banks prepare to exit the extraordinarily long credit cycle. Potential deterioration in credit conditions exacerbated by higher interest rates in the US and volatile domestic currencies pave way for more difficult financing conditions in 2019. High debt and high asset prices fuelled by the past excesses of cheap lending pose additional risks, should there be a sharp correction in asset prices and withdrawal of market liquidity.
Although most banks are well capitalised and pose strong balance sheets to weather any economic shocks, the region reflects an array of banking risks. Strong growth of debt, particularly household debt in Australia, Korea, Malaysia, New Zealand, Singapore and Thailand and property market-downturn related risks in jurisdictions of China and Hong Kong are of particular concern. Resolution of Non-performing loans (NPL) and recapitalisation of systemically important public sector banks (PSBs) in India whereas the ongoing trade skirmish between US and China could erode corporate profitability and asset quality of Chinese banks. For Japanese banks, the Negative Interest Rate Policy (NIRP) is yet to translate into higher lending and increased profitability.
The session discussed the build-up of economic imbalances which may take a toll on bank credit quality and assessed the forthcoming challenges from a financial markets perspective for banks in 2019. Further areas discussed include:
- Key macro themes, risks/challenges to watch out for in 2019
- Impact of the turning credit cycle and strategies going forward
- Slower credit growth in China? Is stable deleveraging around the corner
- Impact of the ongoing trade tariff escalation and spillover to finance
- Asset quality concerns in Indian banks
- The case of increasing household and corporate sector leverage
- A ‘no-deal’ BREXIT and implications for offshore centres in Asia
- Risks and opportunities from fintech development in China
Alicia Garcia-Herrero is Chief Economist for Asia Pacific at NATIXIS. She also serves as Senior Research Fellow at the European think-tank BRUEGEL, and Senior Research Fellow at El Cano Royal Institute for International Relations. She is currently adjunct professor at University of Science and Technology (HKUST) as well as HKUST Business School. Alicia serves at the Board of the Hong Kong Forum and she is also a member of the Council of Advisors of the Hong Kong Monetary Authority Institute for Monetary Research (HKMA). Alicia has a PhD in Economics at George Washington University and is author of numerous journal articles and books. She is also a regular contributor in Bloomberg and CNBC as well as a columnist for Nikkei Asia Review and Brink.
Eugene Tarzimanov is the Vice President, Moody’s Investors Service. He is a senior credit analyst at Moody’s Financial Institution Group. Based in Singapore, he is the lead analyst for banks in Southeast Asia, including Singapore, Malaysia and Vietnam. He was previously with Moody’s Moscow office, where he covered the largest banks in Russia, as well as financial institutions in Europe and the Middle East.
Foo Boon Ping manages The Asian Banker publication business and engages practitioners, customers, partners and the media on critical issues that impact the industry. He has more than 19 years of experience in the banking and financial services industry, specializing in strategic branding, marketing communications and consumer insight. Prior to The Asian Banker, he was at United Overseas Bank (UOB), covering Singapore and key markets in the region, such as China, Indonesia, Malaysia and Thailand.
Keywords: Credit Cycle, Currencies, Non-performing Loans, Asset Quality, Fintech
Institution: Moody’, Natixis
Country: Australia, China, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, Singapore, Thailand
Region: Asia Pacific
People : Eugene Tarzimanov, Alicia Garcia-Herrero