4 APAC markets face 'declining' outlook as loan yields retreat: Fitch

Any resulting drag on the operating profit and RWA should be manageable.

Most banks in the Asia-Pacific region are expected to maintain “broadly steady profitability” in 2026, although net interest margins (NIMs) are still likely to decline.

Credit costs uncertainty and macroeconomic challenges persist in several markets, notably Taiwan, Hong Kong, China, and Thailand, Fitch Ratings said in a report published in January 2026.

Loan yields will fall faster than funding costs across most markets, compressing NIMs modestly.

Margins are set to decline “only marginally”, and any drag on operating profit and risk-weighted assets (RWA) in the near term should be manageable, the ratings agency added.

Strong loan growth is expected in India, Vietnam, the Philippines, and Indonesia. In these markets, loan growth remains a critical lever for sustaining profitability.

Banks in APAC are in stronger capital positions than banks in the Americas and Western Europe, according to a separate report by Moody’s Ratings.

Six markets— Taiwan, New Zealand, Australia, South Korea, Singapore, and Hong Kong— are expected to see margins fall in 2026, according to earlier estimates by Fitch.

“Intensifying competition, regulatory and conduct risks, and normalisation in fee and trading income in some markets could add further earnings variability within individual banking systems and across APAC,” Fitch Ratings said.