Asian banks' bad debt pile highest since global financial crisis
Asian banks' bad debt pile highest since global financial crisis
Daily Voice News -
Economic Collapse
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Bad debts at Asian banks have climbed to their highest since the global financial crisis and the trend will likely worsen as regional economies battle against
China's slowdown and volatile oil and commodities prices, a Reuters data analysis shows.
The bad loans pile at 74 major listed
Asian banks, excluding Indian and Japanese banks, reached $171 billion at the end of
2015, the survey of banks showed, the highest since at least 2008.
Non-performing loans (NPLs) jumped 28 percent from a year earlier, nearly twice the growth in
2013.
Indian and Japanese banks were not included as their fiscal year ends in March.
With economic growth in the region slowing, analysts expect the asset quality of Asian lenders will continue to deteriorate as banks start publishing quarterly earnings, forcing them to make writedowns that will hurt profit and depress valuations.
Asian central banks have cut interest rates to ensure abundant liquidity, but uncertain economic growth and weak export demand will likely lead to more loan defaults in the near term, analysts and bankers said.
"We expect asset quality to weaken and bad loans to increase
... the key factor we see is
Asia entering into more challenging phase of the credit cycle," said
Gene Fang,
Moody's associate managing director for financial institutions group
.
"In the recent past, we saw relatively strong growth and low interest rates, which encouraged loan growth and higher leverage. But growth has now weakened, most significantly in
China, which is impacting the rest of the region."
The average ratio of bad loans to gross credit for 29 Asian banks for which this data is available stood at 1.9 percent last year - the highest since 2009, the survey showed. In 2008, the ratio stood at 2.
5 percent.
In China, where the economy grew 6.9 percent in 2015 - the weakest pace in a quarter of a century - bad loans surged to a decade-high at the end of December, with Moody's expecting continued asset quality pressure over the next 12-18 months.
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Chinese lenders including
Industrial and Commercial Bank of China (601398.SS),
Agricultural Bank of China (601288.SS) and
Bank of Communications (601328.SS), will report March quarter results next week.
Last year, the total bad debt pile for all listed and unlisted
Chinese banks stood at $297 billion.