 "Indian banks' profit to rise; China economy a worry: Moody's report")
Indian banks' profits will rise next year due to lower provisioning expenses and robust growth in retail segments, said a report by Moody’s Investors Service on Wednesday.
In Asia Pacific, banks' profitability is expected to stabilise as they recover from the impact of the coronavirus and their net interest margin remains steady, said the report. Stability is supported by central banks pausing rate hikes and maintaining stable provisioning expenses.
Chinese banks, however, may face challenges as they grapple with further contraction due to loan repricing following recent policy easing. The broader economic landscape in Asia Pacific is marked by concerns over China's economy slowing down due to muted domestic demand, weak exports, and corrections in the property market. China’s slowdown could have widespread consequences for the entire region.
China’s economic recovery is losing steam with growth expected to slow down to 5 per cent in 2023 and 4 per cent in 2024. This deceleration poses risks for the broader Asia-Pacific region, with implications for banking, loan quality and overall economic stability.
While economic growth is expected to hold up well for most economies in Asia Pacific, there are potential risks for those with high household leverage and exposure to real estate markets, leading to increased problem loan ratios. Chinese banks, in particular, face heightened risks due to the economic slowdown and stress among property developers.
The report said that despite economic challenges, capital in the region is expected to remain unchanged. Capital generation, coupled with prudent dividend policies, is expected to keep pace with asset growth.
Authorities are actively implementing Basel III rules to fortify bank capital, with impacts varying across different countries. Funding and liquidity are projected to remain stable, with banks well-funded by deposits and in adherence to prudential regulations, said the report.