SINGAPORE, Jan 18 (AFP): The prospects for bank ratings in the Asia Pacific region are stable as credit profiles improve due to stronger economies and continuing structural reforms, US credit risk evaluator Standard and Poor's said Wednesday.
"Most banking systems in the Asia Pacific region have improved their credit profiles, thanks to stable economic conditions and continuing structural improvements," Ping Chew, a credit analyst with the agency, said.
"In the next few years, banks should continue with these improvements, although the pace of such improvements may be moderated by risks on the horizon."
The risks include higher oil prices and rising interest rates, which could affect the broader economy, he said.
Banks in India, Indonesia and China are benefiting from favourable economic conditions, said Ryan Tsang, another credit analyst from the agency.
"Japanese banks are reporting some meaningful profit figures, Korean banks are improving their risk management techniques and in Taiwan, the regulatory regime appears to be changing for the better, although politics... may prove a stumbling block," Tsang said.
Bank rating upgrades rose significantly in 2005, with the average grade of Asia Pacific lenders climbing half a notch from "BBB" at the start of the year.
A "BBB" rating means a borrower has adequate capacity to meet its financial commitments but a deterioration of the economy or other circumstances is more likely to weaken its ability to repay borrowings.
For 2006, credit rating improvements are likely to be "slower and more incremental," Standard and Poors said, as many banks have already implemented improvements including cutting their non-performing loans.
"Structural improvements in banks' income profiles mean that profitability of Asian banking systems will be largely sustained at current levels and the strengthening of risk management practices will continue at a quicker pace," said Ritesh Maheshwari, another credit analyst for the company.