S&P: Asian banks to retain credit standing

Standard & Poor’s expects banks from the Asia Pacific region, including those from the Philippines, to keep their credit standing this year.

In one of its latest reports, S&P said that its baseline projection for 2012 points to global economic challenges, led by a mild recession in the euro zone, which is seen to post an average growth of only 0.4 percent.

Despite this, the international credit rating firm said Asia-Pacific banks would remain relatively healthy, thereby maintaining their creditworthiness.

Apart from a mild recession in the euro zone, S&P’s baseline projection points to a slowdown in China’s economy to 7.7 percent from nearly 10 percent last year. It also expects the US economy, which remains fragile, to escape recession.

But S&P said that should the euro zone take a turn for the worse, Asia-Pacific banks would experience downside pressures on their credit ratings.

Nevertheless, S&P said that under the most likely scenario for 2012, the euro zone would still post growth, albeit a very minimal one, and that Asia-Pacific banks would stay relatively healthy.

The projections by S&P is consistent with that of the Bangko Sentral ng Pilipinas, which earlier expressed confidence that the Philippine banking sector would remain profitable, adequately capitalized, and generally sound this year even amid lingering problems abroad.

The central bank said that investments of Philippine banks in euro-denominated assets made up a very small fraction (just below 2 percent) of their total portfolio investments.

Potential defaults by European debt issuers, therefore, should not significantly harm the financial standing of Philippine banks, the regulator said.