Highlights of 2023: Best of Asia-Pacific banking coverage

High interest rates led to bumper profits for banks in India, Australia and Singapore in 2023. Interest rates are most likely at their peak, and many analysts expect global central banks to start easing monetary policy in 2024. Lenders across several geographies will likely lose the interest rate tailwinds, and their net interest margins are likely to come under pressure in 2024, setting them up for a challenge to sustain income growth.

Meanwhile, banks in mainland China faced falling interest rates as the authorities focused on supporting the economy. Troubles in the real estate sector, which makes nearly a quarter of mainland China's gross domestic product, have remained a drag on bank earnings.

Finally, Japanese lenders are looking at 2024 for the possible end to negative interest rates, as the Bank of Japan started de-facto tightening of its monetary policy by increasing its tolerance for yields on Japanese government bonds to go higher.

Asian banks' efficiency gains may start to erode when interest rates fall

Increasing interest rates improved net interest margins and boosted incomes for most Asia-Pacific banks, helping some lenders to lower their cost-to-income ratios in 2023.

Indian banks' dividends to rise further on strong metrics, credit growth

Indian banks are forecast to take their share in aggregate payout across all sectors to 13% for the year ending March 31, 2024, according to S&P Global Market Intelligence estimates. This is up from 12% for the fiscal year ended March 31, 2023, and 9% in the year ended March 31, 2022.

Big Indian bank profits to level off as net interest margins plateau

India's largest banks have seen increased profits in the second quarter, but banks' net interest margins compressed over the quarter due to the rising cost of deposits.

Indian banks set to attract foreign investment on solid metrics, growth market

The total market value of foreign institutional investors' holdings in Indian banks rose to 8.363 trillion rupees as of June 30, from 7.713 trillion rupees a year ago, according to data compiled by S&P Global Market Intelligence.

Indian banks improve across key financial metrics despite global challenges

Major private and public sector lenders in India bettered their performance in measures including provision coverage ratio, nonperforming loans ratio, and return on equity assets, data compiled by S&P Global Market Intelligence showed.

Singapore banks face uphill task to repeat 2023 profit growth

Singapore banks aim to replicate profit growth in 2024, but lenders have several challenges to overcome in the following year with tepid loan growth and a high interest rate environment that could dampen wealth management fees.

China's green bond sales decline amid push for international alignment

China's issuance of green bonds that aligned with global standards fell 18.1% year over year to a 10-quarter low of $9.36 billion in the July-to-September period, according to data from the Climate Bonds Initiative. Issuance of so-called nonaligned green bonds slumped 25.4% to $12.93 billion, bringing total sales in the world's second-largest economy to $22.29 billion in the third quarter — a drop of 22.5% year over year.

China could cement IPO lead with new listing rules, upcoming mega deals

The Shanghai and Shenzhen bourses, which ranked first and second in the first-half global IPO league table, could reinforce their positions given the full implementation of China's new listing rules and mega deals in the pipeline. Shanghai Stock Exchange and Shenzhen Stock Exchange together hosted 136 IPOs in the first half of 2023, through which companies raised $29.67 billion, nearly half of the global aggregate, according to S&P Global Market Intelligence data.

Chinese banks grapple with problem loans amid economic difficulties

Aggregate stage 2 loans, which measure loans that carry a higher credit risk under International Financial Reporting Standards accounting standards, increased year over year in the January-to-June period at large Chinese banks, S&P Global Market Intelligence data show. The aggregate stage 2 loans as a percentage of gross customer loans at big banks climbed to 2.41% as of June 30, up from 2.24% a year ago and from 2.20% in the same period in 2021.

Taiwan financial companies watching how new rules could impact dividends

Dividend payout at each of the four largest listed Taiwanese financial holding companies is likely to rise in 2024, but the firms will be assessing how proposed regulations will play out.

Chinese banks' capital buffers may erode further on weak market sentiment

Chinese banks were some of the least cushioned in the Asia-Pacific region in terms of capital buffers, as measured by common equity Tier 1 ratio in excess of minimum regulatory requirements, according to S&P Global Market Intelligence.

Analysts expect Japan megabank shares to ride on monetary policy tailwinds

A possible end to negative interest rates in Japan after seven years will boost bank margins of megabanks. Indications of tighter monetary policy have helped boost share prices, improving total returns for shareholders in Japanese megabanks.

Japan M&A set for growth in 2024 due to financial, regulatory support

M&A deals from January to November 2023 rose to 1,425 in Japan, from 1,413 for the same 11 months of 2022, S&P Global Market Intelligence data shows. The number of deals has risen since 2019 amid ultralow interest rates.

Major Japanese banks may issue loss-absorbing capacity bonds as demand returns

Sumitomo Mitsui Financial Group Inc.'s $4.3 billion total loss-absorbing capacity note issuance drove total debt capital raised by Asia-Pacific banks in July to $11.50 billion, according to data compiled by S&P Global Market Intelligence. The July aggregate was lower than the $15.03 billion raised in June 2023 and $21 billion in July 2022.

Japanese regional banks may raise loan loss provisions as bankruptcies grow

Japanese regional lenders that cater to smaller borrowers are worried about loan repayments as customers face "harsh conditions" and as loans extended under a zero-interest program subsidized by the government become due.

Australia's buy-now, pay-later players face battles after pandemic highs

Several buy-now, pay-later companies that thrived in Australia during the record-low interest rates of the pandemic have failed, and investors have dumped shares, reducing the combined market capitalization of the three biggest buy-now, pay-later companies by 90%.

Competition to squeeze Australian bank profits in 2024 as COVID-era subsidy ends

Australia's big four banks face a tougher year of declining margins as competition intensifies for deposits and as an era of cheap funding comes to a close.

Australian banks may tap debt markets as COVID-era loans become due

National Australia Bank Ltd., Westpac Banking Corp., ANZ Group Holdings Ltd. and Commonwealth Bank of Australia are expected to raise more than A$120 billion in 2023 as they need to repay their share of about A$200 billion of three-year loans extended to lenders by the Australian central bank via the pandemic-related Term Funding Facility.