ETBFSI DeskFitch Ratings has revised the outlook for a further 10 APAC banking systems to negative. With that, all 17 banking systems in the region now have a negative sector outlook. “This highlights our expectation that the global coronavirus pandemic will have wide-ranging effects on the region that will adversely affect bank performance in 2020 and into 2021,” Fitch added. Impact on profitability The ratings agency believes that the pandemic will affect Asian banks through multiple channels. “The existing challenges to profitability in many markets will be aggravated by recent cuts to interest rates. Weaker economic growth outlooks will dampen demand for credit, and will also contribute to higher credit loss provisions (even if the exposure is not yet impaired) — especially for those banks reporting under IFRS 9,” it added. The credit rating agency also believes that the capital market volatility could deter issuance and listing activity that may end up damaging additional revenue streams. “Some banks can also lose securities portfolio.”Worsening asset quality Coronavirus pandemic has already halted business activities of many companies. These companies have huge exposure to banks and while there is no or low cash generation, it would be difficult for these companies to repay… Read full this story
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