Advanced Search

The story appears on

Page A10

July 31, 2020

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home » Supplement » Banking

COVID-19 to hit APAC banks hard

By Tracy Li | 00:17 UTC+8 July 31, 2020 | Print Edition

Asia-Pacific banks’ profits will fall over the next few years as the coronavirus outbreak accelerates structural changes, says Moody’s Investors Service.

“Lower-for-longer interest rates, rising credit costs and operating expenses, and in some countries aging populations, will weigh on the profitability of APAC banks in coming years, with many of these trends exacerbated by the coronavirus outbreak,” said Rebaca Tan, a Moody’s assistant vice president and analyst.

“While the region’s banks are all facing a growing need to change their business models to overcome these challenges, laggard institutions are at a greater disadvantage.”

Banks’ returns on assets declined in 12 of 17 APAC banking systems between 2014 and 2019, and are likely to remain weak at least through 2021.

Deflationary pressure from a reduction in demand and low oil prices will keep interest rates low for a prolonged period, leading to a narrowing of the gap between the interests banks receive and the interests they pay out.

Another drag on lenders’ profitability is likely to be increases in credit costs as asset quality weakens, while the accelerating shift to digital banking will push up operating costs.

To reduce their dependence on net interest income from domestic markets, banks will increasingly pursue other revenue or expand overseas while continuing digitization.

But these options have their own challenges, especially for banks that lack the vision or resources to overhaul their business models.

The gap between some banks in their ability to tackle profitability challenges means the agile of them will widen their competitive edge.

Banking


 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend