APAC developed market banks to see limited loan growth, NIM pressures

Hong Kong is expected to see even slower loan growth than other DM markets.

The top developed market (DM) banks in Asia Pacific are expected to see modestly positive growth momentum, but headwinds will limit its loan growth.

Hong Kong’s banks are expected to see an even slower loan growth than the projected 3% to 5% average of other APAC top DM banks, according to Fitch Ratings in a 7 April 2025 report.

Nonperforming loans (NPL) risk minor deterioration, Fitch warned— with Hong Kong banks facing the greater pressure on this— as headwinds build around higher rates, economic growth, and property sector malaise.

Net interest margins (NIMs) of DM banks are expected to “face greater pressure unless interest rates are higher than expected.”

Meanwhile, return on equity (ROE) should be broadly stable on banks’ strong focus on ROE.

Regulatory ratios are expected to remain steady, with pressure greatest in Australia and Japan. Japanese banks are especially hit most over time by Basel III, according to Fitch.

Things to watch out for include the interest rate trajectory and their implications for NIMs, competition, asset quality, and risk appetite of DM banks.

Property sector pressures remain, especially in the Greater China region.

There is also the escalating geopolitical and trade tensions, which is resulting in weaker economic outcomes, prolonged inflation, and more limited monetary easing, according to Fitch.