Asia-Pacific banking’s nonperforming assets and consequent credit losses could rise by US$600 billion and US$300 billion, respectively, in 2020 because of COVID-19, the oil price shock, and market volatility.
Events will hit the banking systems of China, India, and Indonesia the hardest.
While many Asia-Pacific banks will exhibit resilience, negative rating momentum is inevitable.
The economic storm created by COVID-19 will test the ratings resilience of the region’s 20 banking sectors. S&P Global Ratings recently cut our GDP assumptions for the region. We estimate an additional US$300 billion spike in lenders’ credit costs and a US$600 billion increase in nonperforming assets (NPAs) in 2020. We therefore believe negative rating momentum is likely for some Asia-Pacific banks during 2020 (see chart 1).
Source: S&P Global