Fitch Ratings expects generally stable profitability for Asia-Pacific banks as regional monetary authorities gradually close their easing efforts, according to a recent release.
The rating agency believes in a marginal drop in net interest margins (NIMs) across the region, which should improve banks' operating profit to risk-weighted asset ratios.
Most markets will see loan yields dropping quicker than funding costs, resulting in a modest decline in NIMs, although Japan will observe higher NIMs due to gradual monetary normalization, Fitch said.
However, credit cost volatility and macroeconomic hurdles linger in markets such as Taiwan, Hong Kong, China, and Thailand, where Fitch holds a deteriorating sector outlook.
Meanwhile, solid loan expansion mainly supports retained profitability in markets such as India, Vietnam, the Philippines, and Indonesia, Fitch said.
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