Reuters logo
Fitch: ASEAN Banks' Challenges Persist, Weighing on 2017 Outlook
December 13, 2016 / 1:11 AM / a year ago

Fitch: ASEAN Banks' Challenges Persist, Weighing on 2017 Outlook

(The following statement was released by the rating agency) SINGAPORE, December 12 (Fitch) Most of ASEAN's banking sectors are likely to face weak loan demand and further pressure on asset quality in 2017. Fitch Ratings has maintained its negative banking sector outlook for Indonesia, Malaysia and Thailand, and has moved Singapore's to negative from stable to reflect continued asset-quality risks from oil & gas exposures and broader pressures from a slowing economy. Only the Philippines and Vietnam - where economic prospects are brighter - have stable sector outlooks. Weak global trade, low commodity prices and the slowdown in China's economy have all contributed to a weakening of GDP growth over the last few years across many members of the Association of Southeast Asian Nations. We expect only a slight pick-up in 2017, while the continued build-up in Chinese corporate debt and the possibility of a rise in US protectionism, renewed dollar strength and higher US interest rates have added to downside economic risks. Loan demand is likely to remain soft in these subdued economic conditions, limiting opportunities for earnings growth. We also expect NPL ratios to rise in most ASEAN banking sectors. Asset-quality issues are likely to continue to broaden in Thailand and Indonesia, with loans to the SME sector, in particular, vulnerable to the muted economic environment. Meanwhile, banks in Singapore and Malaysia are more exposed to stress in the oil & gas sector. We expect operating conditions for the oil & gas sector to remain tough, despite a modest recovery in energy prices, which will place continued pressure on more vulnerable sub-segments such as oil service operators. Singapore banks were hit by debt restructuring and defaults in the oil & gas sector in 2015-2016, which pushed up the average NPL ratio of the three local banks to 1.4% at end-September 2016 from 1.1% at end-2015. That said, ASEAN banks are generally well-placed to cope with the difficult credit environment. Underwriting standards have mostly been stable and we generally expect a manageable cyclical deterioration even in the more challenged banking markets. Risks to banks in these markets are also mitigated by healthy loss-absorption buffers, sound funding and liquidity positions and - in the case of Singapore, Thailand and Malaysia - macroprudential regulations that have helped to stave off credit excesses over the past few years. Our internal stress tests show that most ASEAN banks' capital buffers would be able to weather a significant deterioration in asset quality. In all of these countries, solid credit profiles support our mostly stable rating outlooks. Banks in the Philippines and Vietnam face a much more supportive economic environment that should translate into robust loan demand and steady asset quality next year. However, Vietnam's banking sector has structural systemic weaknesses - thin capital buffers, a large NPL stock and low profitability - that can only be addressed over the long term. The ratings of Vietnamese banks are among the lowest in the region as a result of these issues. For more details see our report "2017 Outlook: Asia Pacific Banks", available at www.fitchratings.com. Contact: Elaine Koh Director Financial Institutions +65 6796 7239 Fitch Ratings Singapore Pte Ltd. One Raffles Quay South Tower #22-11 Singapore 048583 Wee Siang Ng Senior Director Financial Institutions +65 6796 7230 Dan Martin Senior Director Fitch Wire +65 6796 7232 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below