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Southeast Asian bank stocks shine in Q1 as others in Asia-Pacific slump


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Southeast Asian bank stocks shine in Q1 as others in Asia-Pacific slump

SoutheastAsian bank stocks fared better than their peers in other parts of Asia-Pacificin the first quarter, a trying period for lenders around the region amid arange of headwinds.

SNL Financial-coveredlisted banks in seven Southeast Asian countries, including , and , delivered a total return of8.75% in the three months through March 31, according to a marketvalue-weighted SNL index. By contrast, banks in China, Japan, and Australia andNew Zealand all cost investors money during the period, dragging down returnson Asia-Pacific bank stocks as a whole into the red.

Banksin the region are coping with fallout from economic slowdowns, from growing baddebt to interest rate cuts that undermine lending margins, while facing risksfrom their exposure to globally struggling sectors, such as energy, in somecases. For those in emerging markets, possible rate hikes in the U.S. haveraised concerns that their economies could become more vulnerable, with capitaloutflows accelerating.

Amongthe top 20 Asia-Pacific banks by market capitalization, all but one saw theirstock prices declinein the three months to March.

Someof those woes may have eased for Southeast Asian banks, helping them performbetter in the market, said Kevin Kwek, a Singapore-based analyst at Sanford C.Bernstein.

"SoutheastAsia's gains are likely due to a combination of U.S. rate hike fears moderatingin the near term, giving countries like Indonesia a reprieve," Kwek said.

A recovery in oil prices have also cooled worries aboutenergy-related troubled loans at banks in Malaysiaand Singapore, he said. All told, "there was a general sense that theregional economies were not quite as 'broken' as feared, especially and Indonesia."

For all the downbeat talk, Southeast Asian nations continueto offer plenty of growth potential for banks, said Franco Lam, an analyst at Deutsche Bank.

"Liquidityis ample, and opportunities in lending and services can continue to growearnings in almost every country," he said.

SNLindexes show Japanese banks were the worst performers in Asia-Pacific in thefirst quarter. The central bank of the countryin late January decided to adopt negative interest rates, a move to furtherhurt interest margins at Japanese banks, which for years have been strugglingwith ultralow rates in a sluggish economy.

InChina, home to thefour largest banks by market cap in Asia, the local stock market has beenfeeble since a meltdown in mid 2015. For lenders in the country, risks toprofitability are becoming more notable, with nonperforming loan ratios at thetop four at multiyear highs at the end of 2015, as the nation's economy losessteam.

SNL Financial is a part ofS&P Global Market Intelligence.

Click here to screen and monitor banks by region and compare them for a variety of pricing and financial ratios.

Click here to view historical values for SNL-covered indexes in Asia-Pacific.

Click here for more stories on Asia-Pacific banks and here to set real-time alerts for such data-driven articles. In Step 2, select Banking under the "Data Dispatch Asia-Pacific" section.