Bangkok--Aug 9--Moody's
Moody's Investors Service -- in a major new report -- sees a strengthening outlook for the banking industry in Asia as the macro-economic environment continues to improve.
"Although economic growth is expected to be slower than last year, it
nevertheless continues and, for the banking industry, activity unseen - since the Asian financial crisis in the late 1990s -- has become apparent," the report says.
The report, as evidence of its conclusion, says that in Moody's rated
universe of Asian banks, upgrades outpaced downgrades in 2004, and this trend has persisted into 2005 and is expected to continue.
"This is a very comprehensive report and illustrative of the in-depth and broad nature of Moody's coverage of the region," says Wei Yen, Managing Director for the rating agency's Financial Institutions Group in Asia.
"The study looks at 13 banking systems. We cover every established system, including Japan, Australia and China, but also look at Cambodia, a lesser known system, and where the sector's infrastructure is in the early stages of reconstruction. The range of the study is indicative of the unrivalled capabilities of Moody's analysts," Yen says.
Despite the positive outlook for most banks in Asia, the new report
observes that economic revival has not translated directly into loan growth.
"Plentiful liquidity and improved risk awareness mean loan growth remains anemic and margins are constantly under pressure," it says, but notes
that consumers have been more active borrowers relative to corporate players.
Other major themes explored include improvements in capital and risk
management, the outlook for an increase in cross-border acquisitions,more consolidations, as well as entry into new markets and the launch of new products.
Furthermore, the report looks in detail into the implications of the
adoption of new IFRS accounting rules and Basel II.
IFRS means bank earnings may appear more volatile, but Moody's does not
expect any rating changes. Similarly, the implementation of Basel II is unlikely to have any immediate impact on ratings.
Another key theme of the report is the expansion throughout the region of Islamic banking, which is still small.
The report says that the risks of Islamic banking are largely identical
to usual banking risks, but adds that "if ratings are to remain unaffected, it will be important that the depth and liquidity of Islamic banking sources grow in line with the market."
Hong Kong
Wei S. Yen
Managing Director
Financial Institutions Group
Moody's Asia Pacific Ltd.
Telephone: 852-2509-0200
Facsimile: 852-2509-0165
Singapore
Deborah Schuler
Senior Vice President
Financial Institutions Group
Moody's Singapore Pte Ltd.
Telephone: 65-6398-8300
Facsimile: 65-6398-8301 End.