NPL increase in most banking systems not too much of a concern: Fitch

NPLs compare favourably relative with other regions.

Fitch Ratings says NPLs are likely to rise in most banking systems in 2016 (Figures 4 and 5), adding to profit pressures as lending growth slows. But this will not be enough relative to current bank rating levels to merit any major negative rating actions.

Fitch adds that in a large number of cases, NPLs are coming off cyclical lows and compare favourably relative with other regions. The same is true for currency risks in emerging Asia, where countries compare relatively well against other emerging regions.

"However, a source of risk is corporate (or non-bank private sector) external debt that has been on the rise – particularly a combination of weaker currencies and lower commodity prices will expose commodity producers which borrowed in hard currency. A knockon asset-quality impact for the domestic banking system would be likely in that scenario, as sectors in the supply chain would be affected."