Moody's sees more stability in Asia Pacific banking systems

Global Credit Research - 26 Jan 2010

Singapore, January 26, 2010 -- Moody's Investors Service has changed to stable from the negative the industry outlooks for 12 of the banking systems in Asia Pacific, while -- at the same time -- maintaining negative outlooks for four.
The systems with stable outlooks are Australia, China, Hong Kong, Indonesia, India, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, and Thailand; and those with negative outlooks include Cambodia, Japan, Mongolia, and Vietnam.
"Three factors underpin the generally better outlooks across most of Asia's banking systems, and they are improving local economic prospects and stabilizing global conditions; and improving access to international debt and money markets," says Deborah Schuler, a Moody's Senior Vice President.
"The third factor is a continued adequate level of reslience to cope with remaining macro- and micro-economic risks, with the banking systems having suffered only limited damage during the past 30 months of the financial crisis," says Schuler.
"Those Asian banking systems which continue to carry negative industry outlooks are also exhibiting some signs of stability, but remain more vulnerable to shocks," says Schuler. "Typically, these systems were weaker going into the crisis, may have suffered more during the crisis, and/or operate in economies experiencing slower recoveries."
Schuler was speaking on the release of Moody's latest update on the outlooks for Asia Pacific's banking systems.
Such outlooks represent Moody's view on the likely direction of credit conditions in those industries, and are not represent projections of rating upgrades versus downgrades.
"Moreover, underlying our revised improve outlooks is Moody's expectation that the most likely scenario is for a sluggish global recovery and with growth returning to trend rates. Nevertheless, we expect that non-performing loans (NPL) will remain above normal throughout much of the region for at least the next 12-18 months," says Schuler.
Of the region's advanced economies, only Japan still has a negative outlook, where -- despite continuing improvements in fundamentals over 2009 -- the operating environment remains characterized the onset of deflation; very weak credit growth and employment figures; still volatile equities market; and limited growth opportunities inside its domestic markets.
By contrast, in Australia, the banking system outlook has returned to stable as industry conditions are stabilizing on the back of an economic outlook far more favorable than predicted only six months ago.
And with the emerging economies, the outlook for the Chinese banking system is stable as the country's economy is back to high growth -- due to active government support -- and which is factored into Moody's 12-18 month rating horizon.
The report is entitled, Asian Banking System Industry Outlooks: 12 Systems Move to Stable from Negative. It can be found at www.moodys.com

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