In Focus
RETAIL BANKING | Staff Reporter, Singapore

Asia Pacific banks' credit conditions seen to be stable

But high corporate leverage still presents latent risk.

Moody's Investors Service says that its poll of market participants in Hong Kong and Singapore showed most respondents believe that broad credit conditions are stable for banks in Asia-Pacific (APAC), with a positive bias.

"Moody's itself is also of the same opinion and we had revised our outlook for APAC banks to stable from negative in early July to reflect easing risks to banks' asset quality as macroeconomic conditions turn mildly positive in the region and commodity prices broadly stabilize," says Eugene Tarzimanov, a Moody's Vice President and Senior Credit Officer.

"We further note that high corporate leverage is unambiguously a top concern among the respondents to our poll, and we also consider this a critical latent risk, especially in light of gradually tightening monetary policy in the US," adds Tarzimanov.

Here's more from Moody's:

When asked about the broad credit outlook for Asia Pacific banks, 59% of the respondents in Hong Kong think it is stable, followed by 31% who have positive views. Sentiment is even more optimistic in Singapore, where 76% of the respondents think the outlook is stable and 21% positive.

Apart from the latent risk presented by high corporate leverage, Hong Kong respondents cited high housing prices as another risk, an issue Moody's also sees in some systems. In particular, high housing prices, coupled with a high level of household debt, were the main driver of our recent downgrades on Australian banks.

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