Phl banks’ outlook positive – Moody’s

MANILA, Philippines - Philippine-based financial institutions are expected to remain strong in 2014, according to international credit rating agency Moody’s Investors Service.  

“In terms of individual banking systems, the outlook for banks in India, Vietnam and Singapore is negative, while that for Philippine banks is positive. All the other banking systems in South and Southeast Asia have stable outlooks,” said Stephen Long, Moody’s managing director for the Financial Institutions Group in Asia Pacific.

“Most banking systems in Asia are well capitalized and exhibit strong profitability buffers. Moreover, their assets are largely funded by domestic deposits, a situation which adds resilience to their liquidity profile.”

Long said for the banking industry, the credit profiles and ratings of banks in Asia continue to fare well against banks in other regions.

Moody’s assessment, however, warned that credit quality in Asia has generally peaked, and that some systems will face increasing asset quality challenges. The downside risks primarily stem from recent rapid credit creation and elevated asset prices.

“The negative outlook for the Indian banking system pertains mainly to public sector banks, as such banks represent more than 70 percent of total system assets. These banks will remain dependent on government injections to maintain their capitalization levels,” said Long.

As for Vietnam’s banking system, Moody’s negative outlook reflects the difficult operating environment – characterized by domestic macroeconomic imbalances – which poses risks to the banks’ asset quality.

On Singapore, Moody’s says the negative outlook for the banking system is owing to rapid loan growth and rising real estate prices. Both

factorshave increased the probability of deterioration in credit quality.Long said the overall credit quality of non-financial corporates and financial institutions in South and Southeast Asia will be stable over the next 12 months.

“We expect these strengths to persist in 2014, allowing most systems to remain resilient in our base case scenario, which is characterized by the gradual recovery in global growth. This view is reflected in our average deposit ratings in the region, which, despite a slight decline in recent years, is positioned above banking systems in Europe and also those in other emerging market regions,” Long said.