China, Philippine banks most impacted with rate cuts: Fitch

Their net interest margins are likely to decline until fiscal year 2026.

The earnings and profitability of banks in China and the Philippines will be the most affected by the lowering of interest rates in the Asia Pacific, according to Fitch Ratings.

The ratings agency foresees “some deterioration” in APAC banks’ operating profit and risk-weighted asset ratios from the peaks seen over the past two years, it said in a non-rating action commentary published in December 2024.

Net interest margin (NIM) improvements from recent interest rate hikes are unlikely to reverse fully by the fiscal year of 2026.

“NIMs could decline in 10 of the 14 large APAC jurisdictions over FY23 to FY26, with the largest fall in the Philippines, Hong Kong, Singapore, China and India,” Fitch warned.

On the other hand, NIMs and profitability are expected to improve in Japan, Malaysia, and Vietnam.