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Industry Report Card: Top 60 Asia-Pacific Banks: COVID-19 Drives Downside Risks As Credit Losses Jump And Earnings Fall

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Industry Report Card: Top 60 Asia-Pacific Banks: COVID-19 Drives Downside Risks As Credit Losses Jump And Earnings Fall

We expect that US$2.7 trillion of economic output will be lost in Asia-Pacific over 2020 and 2021, hitting the performance of banks in the region. S&P Global Ratings believes that the risks for Asia-Pacific banks are firmly on the downside--we took 50 negative rating actions on lenders in the second quarter of 2020, and we may yet downgrade more institutions. Our ratings on lenders are clearly linked to the region's economic health, and we only see Asia-Pacific GDP trends normalizing by 2023, at the earliest.

The main risks are that the pandemic lasts longer and is more severe than we now estimate, and that no vaccine or treatment will be available before the second half of 2021. The extent of defaults from borrowers, and banks' credit losses, will become clearer when governments unwind fiscal support, and banks end their loan repayment moratoriums. We expect most institutions in the region will show a multifold rise in credit losses and a sharp drop in earnings in the next two to three years due to the COVID-19 induced economic downturn.

In our base case, we expect that most banks in Asia-Pacific will absorb the hits from COVID-19, and start to recover by the end of 2021. Nevertheless, a more severe or prolonged hit to the economies than our current baseline would almost certainly push banks' credit losses higher, drive their earnings lower, and amplify other risks. High private sector indebtedness and still high asset prices in many countries may have also set up some countries for a disorderly correction.

We consider that many large banks in Asia-Pacific demonstrated strong metrics at the onset of COVID-19. Nevertheless, we forecast that banks in the region will account for about 60% of credit losses globally during 2020 and 2021 (see "The $2 Trillion Question: What’s On The Horizon For Bank Credit Losses" and "Global Banking Country-By-Country Outlook Midyear 2020: More Or Less Resilient To COVID-19 Shocks," both published on July 9, 2020). In this report we examine the implications of the pandemic and attendant economic downturns for Asia-Pacific's top 60 banks, breaking out a short comment for each institution.

The Road To Economic Recovery Stretches To 2023

We expect the Asia-Pacific economy will contract 1.3% in 2020, and then rebound to 6.9% growth in 2021 (see chart 1). This contrasts sharply with our prior assumption (set before the outbreak) of 4.7% growth in 2020, and 4.8% growth in 2021. While we expect GDP trends to revert to pre-COVID levels by the end of 2023, we believe the outbreak will have permanently reduced the region's economy by 2%-3%. In our view, risks to banks are more balanced as COVID infection curves flatten, but that the risks will remain prominent at least for the next one year as consumers spend less.

Chart 1

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We expect that India's economy will shrink 5% this year as lockdowns compound underlying vulnerabilities, followed by a rebound next year. We anticipate China and Korea will be among the early exiters from the effects of COVID-19, that Japan will be a middle exiter, and India and Indonesia will be among the late exiters. The top risks during recovery include a buildup of leverage, economic disruptions brought by COVID-19 measures, economic spillover from the U.S.-China strategic confrontation, and uneven access to U.S. dollar funding. The economies in the region also face risks from a COVID-19-induced slump in demand on corporates, households, and governments (for a detailed definition of "early exiter," "middle exiter," and "late exiter," see Appendix 1 in "Sector Roundup Asia-Pacific: Net Negative Bias Spikes To One In Six Issuer," June 30, 2020.)

More Downgrades May Be In Store For Banks In Asia-Pacific

Risks faced by banks in Asia-Pacific have increased significantly since the outbreak of COVID-19, in our opinion. We have taken 50 negative rating actions on banks and finance companies in Asia-Pacific in the second quarter of 2020 (see chart 2). We define negative rating actions to include the lowering of a rating, the revision of an outlook to stable from positive, or to negative from stable, and the placement of ratings on CreditWatch with negative implications. Twenty-three of the top-60 banks in the region have been affected by these rating actions. Countries where we have taken negative rating actions include Australia, India, Indonesia, Japan, Malaysia, New Zealand, and Thailand.

Chart 2

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Rising economic risks faced by banks and weakening sovereign creditworthiness due to the spillover of COVID-19 are among the key drivers of these rating actions. We forecast that most banks will show increased credit losses and weaker earnings in the next one to two years. Systemwide risks are rising in many Asia-Pacific countries amid recessions, elevated unemployment, weak business and consumer sentiment, and uncertainty about the control and treatment of COVID-19.

Our outlooks on most banks in Asia-Pacific remain stable. Governments' monetary, fiscal, and prudential actions, and loan repayment moratoriums are providing some buffer to banking systems in the region. Nevertheless, the balance of risks is clearly on the downside, as reflected in our negative outlooks on 17% of financial institutions (including 17 of the top-60 banks) as of June 30, 2020. Credit losses incurred by the banks in the next three years may substantially exceed our current forecasts if the economic downturn is significantly more severe and prolonged than our current expectations.

Asset Quality Metrics Are Set To Materially Weaken, Even If Temporarily

We forecast that contracting economies, rising unemployment, and depressed consumer and business sentiment in the wake of the coronavirus outbreak will drive a multifold increase in credit losses in most countries in Asia-Pacific (see chart 3 and "Asia-Pacific Losses Near $3 Trillion As Balance Sheet Recession Looms," June 26, 2020). In Australia, Hong Kong, Japan, Korea, Malaysia, New Zealand, Singapore, and Taiwan this increase comes off historically low credit losses in 2019. We expect that in many countries credit losses will peak by the end of next year, and normalize by 2023 on the back of economic recovery.

Risks to banks' asset quality could heighten. A more severe or prolonged hit to the economies than our current baseline would almost certainly push banks' nonperforming loans (NPLs) and credit losses higher. The extent of defaults from the borrowers, and banks' credit losses, will become clearer when the fiscal support from the governments unwinds and the banks end their loan repayment moratoriums. We expect that many businesses and households will struggle to meet their loan repayment obligations at that time.

Chart 3

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Credit Costs Should Begin To Cool Off In 2021

We expect that NPLs will remain elevated in several countries beyond the next two years. It will take some banks years to resolve problematic loans even as economies start to recover (see chart 4). At the same time, we expect nonperforming assets to recover quickly in many countries including Hong Kong, Japan, Korea, Singapore, and Taiwan.

COVID-19 has hit India particularly hard, as the lenders were already grappling with high NPLs coming into the crisis. We expect that the pandemic will push back by years a state-led rehabilitation of Indian lenders (see "COVID And Indian Banks: One Step Forward, Two Steps Back," June 30, 2020.)

For the Chinese banks, the rate at which forborne loans turn into nonperforming assets will largely be driven by the strength of the economic recovery, in our view (see "The $2 Trillion Question: What’s On The Horizon For Bank Credit Losses," July 9, 2020.)

Chart 4

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Bank Earnings Will Take A Big Hit In Several Countries

For most banks, a steep rise in credit losses, and a sizable drop in interest margins and fee income, will likely suppress earnings at least for the next year (see chart 5). India's banking system--with already weak earnings due to subdued economic growth and high credit losses stemming from pre-existing problem loans--will likely show an overall loss in the next year.

Economic strain stemming from COVID-19 and the prospect of lower interest rates globally will likely exacerbate the regional Japanese banks' low profitability. We expect banks in Australia, China, Hong Kong, Korea, Taiwan, Thailand, and Vietnam will also see a substantial fall in earnings.

Chart 5

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We believe banks in many countries in the region will struggle to return to pre-COVID earning levels amid persistently low interest rates, weak household and business spending, and heightened competition, including from nontraditional players.

That said, most profit drops are off a high base. Banks in Australia, Hong Kong, New Zealand, and Singapore continue to benefit from strong earnings metrics compared with many of their European peers. The healthy loan loss reserves of China's major banks should also cushion any profit hit.

High Private-Sector Debt, Asset Prices May Presage Disorderly Correction

We forecast significant property price drops in Australia, China, Hong Kong, and New Zealand. Consumer and business sentiment is weak in these markets, which are grappling with untypically high unemployment and economic contraction (see chart 6). In our base case, we expect these price declines will not trigger banking system crises as any correction should broadly match the strong price growth seen over the past one to two years. Furthermore, we expect the countries' property markets to trend upward again by late 2021 as their economies recover.

Chart 6

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A number of countries in the region have high private sector debt, which could exacerbate the risks to the banking sector if the economic downturn and fall in asset prices turn out to be more severe than our forecasts (see chart 7). We expect a materially elevated level of defaults from highly leveraged households and businesses in such a scenario.

Chart 7

image

COVID May Accelerate Move Toward Digital Banking

Social distancing in response to the COVID-19 pandemic is accelerating digitalization of banking in Asia-Pacific banking systems. Contactless payments and cashless transactions have surged in the recent few months due to COVID-19. For example, more than 100,000 DBS Bank Ltd. customers used digital transactions for the first time over January-March 2020. Consumers who had resisted digital channels adopted them to avoid handling cash, which involves risk of virus transmission. We expect this shift in behavior will prompt bank managements to review business strategies. Krung Thai Bank Public Co. Ltd., which witnessed a 70%-80% growth in transactions on its mobile banking platform during the pandemic, announced plans to downsize its physical branch footprint this year.

Bank-By-Bank Report Card: Top-60 Asia-Pacific Banks

As part of this discussion, we review Asia-Pacific's top 60 banks, to get an understanding of how they are positioned during this health crisis, and beyond.

Australia

Australia and New Zealand Banking Group Ltd. (ANZ)

ANZ's earnings, despite a substantial fall in interest and fee income, should remain sufficient to contend with higher credit losses that we expect to eventuate due to the COVID-19 outbreak. ANZ's impairment charges have increased significantly by about A$1.7 billion reflecting the uncertain economic outlook. As a result of the higher provisions, the bank's half-year net profit after tax fell to A$1.5 billion in the six months ended March 31, 2020, down 51% from A$3.2 billion on the prior comparable period. We expect that ANZ will maintain its sound capitalization by reducing dividend payments or issuing new capital, if needed.

We forecast a rebound in the Australian economy by about mid 2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect that credit losses will ease to about 50 basis points (bps) of gross loans--a level broadly in line with our long-term expected average--after peaking at about 85 bps in the next year or so.

The negative outlook on ANZ mirrors that on the Australian sovereign. We expect to lower our long-term issuer credit rating on ANZ to 'A+' if we were to lower our long-term local currency issuer credit rating on Australia to 'AA+'.

(Contact: DeLange, Nico; nico.delange@spglobal.com)

Commonwealth Bank of Australia (CBA)

We expect that CBA's earnings in the next two years will remain sufficient to absorb our forecast substantial increase in credit losses, despite a significant fall in interest and fee income. Furthermore, we expect that CBA would maintain its strong capitalization through a combination of retaining capital following business sales currently underway, reduced dividend payout, increased dividend reinvestment, or new capital issues, if needed. CBA's third-quarter net profit after tax was A$1.3 billion, down from an average of A$2.2 billion across the previous two quarters, and materially affected by a A$1.5 billion additional credit provision for the potential longer term effects of COVID-19.

We forecast a rebound in the Australian economy by about mid 2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect that annual credit losses will ease to about 50 bps of gross loans--a level broadly in line with our long-term expected average--after peaking at about 85 bps in the next year or so.

The negative outlook on CBA mirrors that on the Australian sovereign. We expect to lower our long-term issuer credit rating on CBA to 'A+' if we were to lower our long-term local currency issuer credit rating on Australia to 'AA+'.

(Contact: Barrett, Lisa; lisa.barrett@spglobal.com)

National Australia Bank. (NAB)

NAB is positioned well to contend with higher credit losses and weaker operating income that we expect to eventuate due to the COVID-19 outbreak. Furthermore, we expect that NAB would maintain its strong capitalization by cutting dividend payments and issuing new capital, if needed. NAB's cash earnings were down significantly to A$1.4 billion in the six months ended March 31, 2020, compared with A$3 billion in the same period a year earlier. Excluding large one-off items, the lower cash earnings reflect higher credit impairment charges and mark-to-market losses on NAB's high-quality liquid asset portfolio.

We forecast a rebound in the Australian economy by about mid 2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect that credit losses will ease to about 50 bps of gross loans--a level broadly in line with our long-term expected average--after peaking at about 85 bps in the next year or so.

The negative outlook on NAB mirrors that on the Australian sovereign. We expect to lower our long-term issuer credit rating on NAB to 'A+' if we were to lower our long-term local currency issuer credit rating on Australia to 'AA+'.

(Contact: DeLange, Nico; nico.delange@spglobal.com)

Westpac Banking Corp. (Westpac)

We expect that Westpac's earnings in the next two years will remain sufficient to absorb our forecast substantial increase in credit losses, despite a significant fall in interest and fee income. Furthermore, we expect that Westpac would maintain its strong capitalization by cutting dividend payments and issuing new capital, if needed. Westpac's half-year profit to March 2020 was A$1.2 billion--67% below the previous half-year period, materially affected by net A$1.3 billion in one-off items, and a A$1.8 billion (predominantly COVID-19 related) increase in bad-debt provisions.

We forecast a rebound in the Australian economy by about mid 2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect that annual credit losses will ease to about 50 bps of gross loans--a level broadly in line with our long-term expected average--after peaking at about 85 bps in the next year or so.

The negative outlook on Westpac mirrors that on the Australian sovereign. We expect to lower our long-term issuer credit rating on Westpac to 'A+' if we were to lower our long-term local currency issuer credit rating on Australia to 'AA+'.

(Contact: Jain, Sharad; sharad.jain@spglobal.com)

Macquarie Bank Ltd. (MBL)

MBL is well positioned to absorb a drop in business volumes and increase in credit and market risk impairments that could emerge due to the COVID-19 outbreak. We expect that MBL will remain strongly capitalized, supported by Macquarie Group Ltd.'s decision to not distribute any dividends out of the bank for the year ended March 31, 2020. In our base case, we expect that despite the significant headwinds MBL faces due to the COVID-19 outbreak, the bank's earnings in the next two years will remain sufficient to absorb the increase in credit losses.

We forecast a rebound in the Australian economy by about mid 2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect that systemwide credit losses will ease to about 50 bps of gross loans--a level broadly in line with our long-term expected average--after peaking at about 85 bps in the next year or so.

The negative outlook on MBL mirrors that on the Australian sovereign. We expect to lower our long-term issuer credit rating on MBL to 'A' if we were to lower our long-term local currency issuer credit rating on Australia to 'AA+'.

(Contact: DeLange, Nico; nico.delange@spglobal.com)

China

Agricultural Bank of China Ltd. (ABC)

We expect the fallout from the COVID-19 outbreak will remain manageable for ABC. The bank's revenue growth is likely to decelerate in 2020, given sectorwide interest margin contraction, exacerbated by an increase in its lower-yielding inclusive finance loans to support China's economic recovery. Decelerating revenue growth will put some pressure on ABC's capitalization. However, the bank issued Chinese renminbi (RMB) 120 billion in perpetual bonds in late 2019. ABC's focus on better-quality large corporations and strong provision coverage of nonperforming assets (which include special mention and forborne loans) should limit the rise in credit losses. In addition, the bank has reduced its exposure to high-risk sectors and improved collateral levels in recent years.

We expect a recovery in China's economy in 2021, which should help ABC's earnings growth to resume on the back of its extensive branch network, vast customer base, and good franchise in rural and county markets.

(Contact: Xu, Robert; Robert.Xu@spglobal.com )

Bank of Communications Ltd. (BoCom)

We expect BoCom to remain profitable over the next 12 months, but its profit may face significant downward pressure owing to the COVID-19 outbreak. The fall in BoCom's net profit is likely to be more prominent compared with peers, given its weaker profitability and lower provision coverage ratio. Even though BoCom's reported NPLs may only rise mildly due to the regulator's forbearance policy, we foresee a considerable increase in the bank's nonperforming assets and a meaningful rise in its credit costs in 2020. We also expect BoCom's net interest margin to fall in line with other banks in China, given the regulator's guidance to lower lending rates in a bid to boost the economy.

We anticipate BoCom will face some capitalization pressure because of a deterioration in asset quality due to the pandemic. The bank's planned issuance of RMB90 billion of hybrid capital instruments would help increase its capital buffer. At the same time, fast loan growth could add further pressure on the bank`s capitalization if the growth rate exceeds the rate of capital retention from internal and external sources.

(Contact: Cheng, Xi; xi.cheng@spglobal.com)

Bank of China Ltd. (BOC)

We expect BOC's superior business resilience as one of China's largest banks and its adequate capital buffer to help it withstand the impact of COVID-19. BOC's profitability in 2020 is likely to be hit by weaker global growth, lower interest rates, and asset quality impairments. The decline in profitability could weaken BOC's capital ratios, but the bank's issuance of US$2.8 billion in preference shares in March this year and RMB40 billion in perpetual bonds in April augmented its capital by about 20 bps. This should help the bank absorb increased credit losses due to the COVID-19 outbreak. We expect BOC's provision coverage of nonperforming assets (which include special mention and forborne loans) to remain reasonable during the pandemic.

We anticipate China's economy will recover in 2021, helping put BOC's profit growth back on track. The bank's very strong business position, above-average funding, and strong liquidity underpin our view.

(Contact: Tan, Ming; ming.tan@spglobal.com)

China Construction Bank Corp. (CCB)

We expect CCB to withstand asset quality pressure from COVID-19 and a sharp decline in economic growth in 2020. This is due to the bank's focus on large corporate borrowers and significant proportion of low-risk assets, including mortgage and infrastructure loans. We also expect CCB's provision coverage of nonperforming assets (which include special mention and forborne loans) to remain reasonable. Furthermore, we anticipate CCB's profitability will be substantially hit due to an increase in credit provisions as well as a compression in net interest margin amid low interest rates. However, CCB's strong customer network should help the bank outperform its peers amid sectorwide competition for deposits. At March 31, 2020, CCB's Tier-1 ratio and capital adequacy ratio stood at 14.5% and 17.22%, respectively, the highest among the Chinese banks we rated. We expect the bank's capital to remain adequate for its operations in the next 24 months.

We anticipate China's economy will recover in 2021, helping put CCB's earning growth back on track. The bank's very strong business position, above-average funding, and strong liquidity profile underpin our view.

(Contact: Liu, Phyllis; phyllis.liu@spglobal.com)

China CITIC Bank Co. Ltd. (CNCB)

We expect CNCB's capitalization to remain weak till the end of 2021. However, we believe the bank has sufficient rating buffer to weather the earnings pressure from COVID-19. CNCB's nonperforming assets (which include forborne loans) are likely to increase significantly, even though reported NPLs may only rise mildly owing to the government's forbearance policy to support borrowers' recovery. The bank's credit costs could surge if potential losses on forborne loans rise and are booked in 2020. This could further weaken its capitalization. That said, CNCB's RMB40 billion perpetual bond issuance in 2019 has bolstered its capital base by about 30 bps, providing some buffer to absorb the COVID-19 impact.

We anticipate China's economy will recover in 2021, benefitting CNCB and supporting the bank's earnings growth. CNCB's established franchise and sticky corporate clientele should help it mitigate headwinds brought about by the pandemic.

(Contact: Huang, Michael; michael.huang@spglobal.com)

China Merchants Bank Co. Ltd. (CMB)

We expect CMB's capitalization to remain resilient despite the pressures arising from COVID-19. The pandemic is likely to weaken the quality of CMB's retail lending, especially its credit card loans, resulting in elevated credit losses. The bank's net interest margin also faces downward pressure from lower interest rates amid policies to support China's economic recovery. Mitigating these negatives are CMB's favorable funding costs, above-average loan-loss provisions, and below-average level of nonperforming assets (NPA), which should help cushion the earnings pressures despite our expectation of a sharp decline in China's GDP growth in 2020. We expect the bank's provision coverage of NPA (which include special mention and forborne loans) to remain reasonable during the pandemic.

CMB may face some capitalization pressure due to rapid loan growth, if the growth rate exceeds the rate of capital retention from both internal and external sources. We expect the bank's planned issuance of RMB50 billion of hybrid capital to offset such pressure.

(Contact: Xu, Robert; robert.xu@spglobal.com)

China Minsheng Banking Corp. (CMBC)

We expect CMBC's capitalization to remain weak, despite raising RMB60 billion in additional tier-1 capital in 2019. This is due to the bank's high loan exposure to small and midsize enterprises (SMEs), which is under more stress from COVID-19. Potential credit losses from SME loans may weigh on provisions and profitability. CMBC's long experience in SME lending and high collateralization for such loans mitigate these risks. We believe its provisions to nonperforming assets (which include special mention and forborne loans) will remain reasonable during the pandemic.

CMBC's fast loan growth could also add pressure on its capitalization, if the growth rate exceeds the rate of capital retention from both internal and external sources. We view CMBC as well placed to combat the current low interest rate environment, given its focus on higher-margin lending products and its fee income is a greater source of revenue relative to some peers. CMBC's planned issuance of RMB50 billion in convertible bonds should help increase its capital buffer too.

(Contact: Xu, Robert; robert.xu@spglobal.com)

Hua Xia Bank Co Ltd. (HXB)

We expect the asset quality of HXB to remain weaker than other joint stock banks, despite a meaningful improvement in 2019. The bank's larger exposure to small corporates makes it more vulnerable to slowing economic growth, which may have been exacerbated by the onset of COVID-19. We also expect HXB's net interest margin to fall in line with other Chinese banks.

We believe HXB will face some capitalization pressure during the pandemic. The bank's nonperforming assets (which include special mention and forborne loans) are likely to increase significantly during the pandemic, even though reported NPLs may only rise mildly owing to the government's forbearance policy to support borrowers' recovery. The bank's cleanup of its loan book, which began in the first half of 2017, has largely been completed. However, substantial challenges for the bank persist with difficulty in lowering its special mention loan ratio, which remains high at 3.61% of gross loans as of March 31, 2020, compared with the industry average of 2.97%.

(Contact: Xu, Robert; robert.xu@spglobal.com)

Industrial and Commercial Bank of China (ICBC)

We expect ICBC's stable and resilient business profile, supported by the bank's status as the world's largest by asset size, to allow it to weather the impact of COVID-19. ICBC's profitability will likely decline over the next 12 months amid lower interest rates and higher asset quality impairments. We believe ICBC's substantial improvement in capital position in 2019 will help it absorb the impact of COVID-19. We assess asset-quality pressure on ICBC to be manageable and lower than on some smaller banks with a higher risk appetite. This reflects ICBC's focus on retail customers, large corporates, and state-owned enterprises. We expect the bank's provision coverage of nonperforming assets (which include special mention and forborne loans) to remain reasonable during the COVID-19 pandemic.

We anticipate China's economy will recover in 2021, benefitting ICBC and supporting the bank's profit growth. The bank's very strong business position, above-average funding, and strong liquidity support our view.

(Analyst contact: Cheng, Xi; xi.cheng@spglobal.com)

Postal Savings Bank of China Co. Ltd. (PSBC)

We expect PSBC's sound asset quality metrics to come under pressure in 2020, especially from loans currently covered by the regulator's forbearance policy. The bank has a large exposure to inclusive finance lending (13% of gross customer loans as of end-2019), which carries higher risk, and is especially hard hit by the coronavirus outbreak. However, PSBC also has a long history in inclusive finance, with experienced staff in villages and counties where these loans originate. In addition, the bank's higher loan loss provision than the industry average will help to cover its nonperforming assets (which include special mention and forborne loans) and provide additional buffer against COVID-19-related credit losses, in our view.

We expect PSBC to maintain its risk-adjusted capital ratio between 6% and 7% over the next two years. This is despite rising credit costs following COVID-19, double-digit loan growth, and downward pressure on net interest margin amid low interest rates. The bank completed its "A-share" IPO in January 2020, raising RMB32.2 billion net of issuance costs, and issued a RMB80 billion perpetual bond in March 2020. These collectively account for about 15% of the total adjusted capital and support the capital position.

(Contact: Liu, Phyllis; phyllis.liu@spglobal.com )

Shanghai Pudong Development Bank Co. Ltd. (SPDB)

We expect SPDB's profitability and asset quality to be pressured by the COVID-19 outbreak for the remainder of 2020, but believe the bank has sufficient buffer to withstand the impact at its current rating level. In our view, the central bank's loan prime rate cuts will likely strain SPDB's net interest margin in 2020. SPDB's deposit cost increased materially over the past two years because of its focus on expanding retail deposit. Intensifying deposit competition could add sustained pressure on the bank's funding cost. But cheaper wholesale funding, which forms a sizable portion of the bank's funding base, could offset some of the pressure on its net interest margin.

In our view, SPDB could incur higher loan loss provisions as the Chinese economy rapidly slows down in 2020. The bank's nonperforming assets (which include forborne loans), may increase significantly. Reported NPLs are likely to increase only moderately. We expect a wide scope for forbearance and flexible problem loan classification to borrowers affected as a result of the COVID-19 outbreak.

(Contact: Chan, Patrick; Patrick.chan@spglobal.com)

Hong Kong

Bank of China (Hong Kong) Ltd. (BOCHK)

We expect BOCHK's asset quality metrics to weaken over the next one to two years from sound levels in 2019, as reflected in NPLs forming only 0.2% of total loans. The dip in asset quality metrics will be a result of Hong Kong's weakening economy, the negative impact on local SMEs of heightened geopolitical risks and COVID-19, and the bank's rising exposures to mainland China and a few emerging markets in ASEAN.

We foresee continued pressure on BOCHK's net interest margin in the next two years following several rounds of interest rate cuts in the U.S. in the first half of 2020. BOCHK's strong capital is likely to be sufficient to withstand these risks. Despite the social unrest in Hong Kong, BOCHK reported a 5% increase in net profit in 2019, mainly on the back of growth in net interest income.

In our opinion, BOCHK's strengthened collaboration with the broader Bank of China group and its expanded presence in ASEAN countries in recent years should enhance growth opportunities and offset the risks from relatively weak operating conditions.

(Contact: Liu, Phyllis; phyllis.liu@spglobal.com)

The Hongkong and Shanghai Banking Corp. Ltd. (HBAP)

Although we expect significant pressure on credit costs and earnings for HBAP in 2020 due to COVID-19 and low interest rates, we believe the bank is likely to continue to outperform the rest of the HSBC group. HBAP's reported 7% earnings growth and 15.8% return on tangible equity in 2019 despite the civil unrest in its key market of Hong Kong, indicating its performance resilience.

In our view, HBAP's major markets, including Hong Kong and China, are emerging from COVID-19 faster than the other markets. However, significant uncertainty remains on the global economy, with some new geopolitical risks. We expect a notable contraction in HBAP's net interest margin owing to low interest rates, slowdown in loan growth to a low- to mid-single digit, and a significant increase in nonperforming assets in the coming years. That said, we expect HBAP's capital to remain strong over the period.

(Contact: Wang, Fern; fern.wang@spglobal.com)

Standard Chartered Bank (Hong Kong) Ltd. (SCBHK)

The 2020 earnings of SCBHK and its subsidiaries in China, Korea and Taiwan, which represent the Greater China and North Asia (GCNA) hub of the Standard Chartered group, are likely to be hit by low interest rates, higher credit impairments due to economic uncertainties brought about by COVID-19, and newly emerged geopolitical risks. Based on the parent group's first-quarter results, the GCNA region showed good momentum in operating revenues. However, a significant increase in expected credit losses (ECL), albeit from a very low base, overshadowed the gains. The region's statutory profits before tax declined by about 7% year-on-year. A slowdown in SCBHK's profitability and a potential increase in economic risk could weigh on its strong capitalization.

We expect SCBHK's robust business stability and strong funding and liquidity profile to support the bank's creditworthiness. The GCNA region has largely come out from the COVID-19 pandemic and could recover in the later part of this year. Despite the short-term uncertainty, we still see the GCNA region as the long-term growth engine for the Standard Chartered group. The group is likely to benefit from the opening of China's financial markets and the country's strong long-term growth prospects.

(Contact: Varghese, Shinoy; shinoy.varghese1@spglobal.com)

The Bank of East Asia Ltd. (BEA)

BEA's earnings are likely to remain weak in 2020 due to elevated credit costs and pressure on margins from low interest rates. We expect the bank's credit costs to stay higher than the historical average, reflecting macroeconomic uncertainties particularly arising from COVID-19, the group's significant exposure to high-risk commercial real estate (CRE) loans, and the relatively untested and competitive consumer lending business in China.

In our opinion, BEA's sizable concentration in the property sector, especially in mainland China, is a weakness when compared with domestic peers. We view CRE loans in China as particularly risky. Collateral recovery could also be slow, particularly in non-tier-one cities and during economic slowdowns.

BEA's reported net profit for 2019 almost halved from the previous year, mainly due to the higher impairment losses in its mainland China operations. We expect the group's capital buffers built over the years and its moderated risk appetite to support the ratings. Meanwhile, BEA is undertaking a strategic review of its existing business and assets, and is set announce an update on this by end-September 2020. This could result in the disposal of some non-core assets.

(Contact: Varghese, Shinoy; shinoy.varghese1@spglobal.com)

India

Axis Bank Ltd. (Axis)

We lowered our ratings on Axis on June 26, 2020, to reflect our expectation that heightened economic risks facing India's banking system will affect the bank's asset quality and financial performance. While Axis' asset quality is superior to the Indian banking sector average, its level of nonperforming assets (NPAs) will likely remain high compared to international peers'.

Axis reported a loss in the quarter ending March 2020 partly reflecting increased provisioning amidst weak economic environment. Axis continues to maintain relatively good capitalization and, in our view, will continue to be able to raise capital when required. For example, Axis recently announced that it is raising up to Indian rupee (INR) 150 billion (about US$2 billion) by issuing common equity.

(Contact: Puli, Michael; michael.puli@spglobal.com)

Bank of India (BOI)

We expect a very high likelihood that the government of India will continue to provide timely and sufficient extraordinary support to BOI. Consequently, we affirmed our ratings on the bank on June 26, 2020 despite our view that India's banking system faces heightened risks from the economic slowdown associated with COVID-19. BOI's earnings will likely remain weaker than the industry average over the next 12 months especially given the economic slowdown.

The bank could also see a one-off hit on profitability due to deferred tax assets if the bank adopts the new tax rate framework (reduced corporate tax rate), offered by the government. The bank made a loss of INR29 billion in the fiscal year ending March 31, 2020 partly because it increased its provision coverage ratio for bad loans. The bank's consolidated common equity tier 1 ratio improved to 10.6% as of March 31, 2020, from 8.5% in March 2018, after it received an INR147 billion capital infusion from the government. We expect BOI to continue to shift its loan mix toward retail assets and government-guaranteed exposures.

(Contact: Pandey, Amit; amit.pandey@spglobal.com)

HDFC Bank Ltd. (HDFC Bank)

We expect HDFC Bank to maintain a stand-alone credit profile (SACP) stronger than the Indian sovereign for the next two years. Consequently, we affirmed our ratings on the bank on June 26, 2020, despite our view that India's banking system faces heightened risks from the economic slowdown associated with COVID-19. We believe the bank's credit costs will remain significantly lower than peers'.

The rating on HDFC Bank has headroom for a substantial weakening in the bank's stand-alone creditworthiness. That is because we rate the bank two notches below its SACP, reflecting sovereign influences.

For the year ended March 31, 2020, HDFC Bank reported a strong 18% increase in net profit on the back of robust 21% rise in lending and low credit losses of 1.2% of gross loans. We expect HDFC Bank's asset quality and earning metrics to weaken over the next 12-18 months. However, the deterioration will be less than for the broader banking sector reflecting the bank's stronger risk management. We forecast that weak assets for the Indian banking sector will rise to 13%-14% of gross loans over the period, from about 8.5% as on March 31, 2020, and credit costs will rise to about 3.7% from 2.9%.

(Contact: Anand, Nikita; nikita.anand@spglobal.com)

ICICI Bank Ltd. (ICICI)

We expect ICICI to improve its capital position and balance sheet over the next 18 months. Consequently, we affirmed our ratings on the bank on June 26, 2020, despite our view that India's banking system faces heightened risks from the economic slowdown associated with COVID-19. The bank has in recent months divested its equity in some of its insurance subsidiaries. ICICI also recently announced that it is issuing common equity for up to INR150 billion (about US$2 billion). Other capital accretion strategies may include internal capital generation and sale of equity in subsidiaries.

In our base case, we expect ICICI to maintain its strong market position, better asset quality than the system average, and good funding and liquidity over the next 18 months. That said, the bank's nonperforming assets will likely remain high compared to that of international peers.

We have a negative outlook on ICICI because we see a one-in-three risk that the bank's capitalization, earnings, and asset quality will deteriorate more than we expect over the next 18 months. We could lower the ratings if ICICI does not maintain a risk adjusted capital ratio above 10% on a sustained basis. This could happen if credit costs rise sharper than our expectation or if the bank's capital strengthening is less than we expect.

(Contact: Puli, Michael; michael.puli@spglobal.com)

State Bank of India (SBI)

We expect a very high likelihood that the government of India will continue to provide timely and sufficient extraordinary support to SBI. Consequently, we affirmed our ratings on the bank on June 26, 2020 despite our view that India's banking system faces heightened risks from the economic slowdown associated with COVID-19. SBI's earnings will likely be under pressure over the next 12 months due to the slowdown, in our view.

We anticipate the bank's loan growth will be higher than system average given its size, good performance relative to other public sector banks, and government ownership. We expect asset quality metrics to remain closer to private than public sector bank average given SBI's relatively strong management and position as a tier 1 bank that allows it to select its customer base. The bank's funding and liquidity profile should remain market-leading, in our view.

(Contact: Puli, Michael; michael.puli@spglobal.com)

Indonesia

PT Bank Mandiri (Persero) (Mandiri)

We believe the economic slowdown triggered by the COVID-19 pandemic will likely reverse the improvement in Mandiri's asset quality metrics over the past several years. In particular, SMEs and unhedged corporates could lead to a higher rate of NPL formation. Mandiri reported NPL of 2.4% of gross loans as of March 2020, with a substantial rise in loans restructured due to COVID-19 and classified as performing. We expect credit costs to sharply increase to 2.5%-3.0% of gross loans in 2020 from 0.8% in 2019. We expect Mandiri's return on assets to drop to about 1% due to higher credit costs and lower margins.

The bank's margins will likely decline sharply as it has adopted cash accounting for restructured loans, which is a relatively conservative accounting policy. That said, in our view, Mandiri has strong capital buffers that temper downside risks. The bank also has a stable deposit base and good liquidity cushion to meet its short-term obligations.

The negative outlook on Mandiri reflects a one-in-three chance of a downgrade over the next 12 months. We believe deteriorating operating conditions could lead to higher NPLs over the next few quarters. We would lower the rating on Mandiri by a notch if: (a) we lower the sovereign rating on Indonesia by a notch; and (b) a worsening operating environment leads to a substantial rise in NPLs and credit costs.

(Contact: Anand, Nikita; nikita.anand@spglobal.com)

PT Bank Rakyat Indonesia (Persero) Tbk. (BRI)

We expect BRI's profitability to decline amid a high level of restructured loans and provisioning stemming from the COVID-19 fallout. In the first four months of 2020, BRI restructured about 11% of its loans by extending loan maturities by six to 12 months and offering a moratorium on repayments during this period. According to Indonesia's bank regulations, the loans restructured due to COVID-19 may be considered as performing until the end of the restructuring period of a maximum of one year and will not require higher provisioning.

We believe better-performing banks such as BRI will set aside higher provisions to prepare for higher NPLs in the coming quarters, rather than wait for the end of the forbearance period. In our opinion, BRI's superior pre-provision earnings and healthy Tier-1 capital ratio should help it absorb potentially higher provisions.

Our negative outlook on BRI reflects our view that rising economic risks for the Indonesian banking system could lead to a significant deterioration in asset quality and profitability in the coming quarters. We see Indonesian banks' exposure to micro, small and midsize enterprises, commodities, and unhedged corporate borrowers with U.S.-dollar loans to be particularly at risk.

(Contact: Anand, Nikita; nikita.anand@spglobal.com)

Japan

Chiba Bank Ltd. (Chiba Bank)

We expect Chiba Bank's earnings to be under pressure over the next two years due to our forecast of high credit costs, but the bank's sufficient buffer will likely be able to cover losses arising due to the economic downturn. We expect that Chiba Bank will show resilience in the current challenging environment underpinned by its solid business base in its home market of Chiba Prefecture.

We expect the already declining trend in revenue to intensify further in the next 12-18 months, and get somewhat mitigated with the economic recovery and as Chiba Bank realizes the synergies from the tie up with Yokohama Bank.

We forecast that Chiba Bank's annual credit costs are likely to rise sharply in fiscal 2020 (year ending March 2021) to about 60 bps of gross loans in light of the COVID-19 pandemic. We expect credit costs in fiscal 2020 would be about 5x of the actual rate in fiscal 2019, and NPAs to almost double from 2019 levels. We expect both metrics to gradually improve by fiscal 2021.

(Contact: Nagano, Shoki; shoki.nagano@spglobal.com)

Mitsubishi UFJ Financial Group (MUFG)

We expect MUFG to have the buffer to withstand the economic strain stemming from the COVID-19 pandemic, which would come in the form of prolonged pressure on the group's asset quality and revenue. We believe the group's revenue will absorb increased credit costs. The group is also likely to manage the growth of its risk-weighted assets against its weakened capital accumulation.

We forecast MUFG's credit costs to worsen up to 0.6%-0.7% to outstanding loans in fiscal 2020, including its overseas operations, which is in line with our base-case expectation for Japanese major banking groups. Despite our expectation that Japan's GDP will inch back up in 2021, we view that credit costs will remain with some delay in fiscal 2021. Nevertheless, we believe MUFG's experience in maintaining low NPLs and credit costs demonstrates its tolerance for such stresses.

Our ratings on MUFG have substantial headroom against a weakening in its stand-alone creditworthiness because of our expectation that the government is highly likely to provide timely support to the group, if needed.

(Contact: Sugihara, Kensuke; kensuke.sugihara@spglobal.com)

Mizuho Financial Group Inc.; Mizuho Bank Ltd.; Mizuho Trust & Banking Co. Ltd. (Mizuho group)

We expect the Mizuho group's creditworthiness will remain stable for the coming two years. The likelihood of extraordinary government support to the group will mitigate deterioration in the banks' performances under weaker operating conditions brought about by the COVID-19 pandemic, in our view. For the fiscal year ended March 31, 2020, the group posted ¥448.5 billion net profit despite a substantial increase of credit costs (about ¥171.7 billion), including additional forward-looking provisioning of ¥80.4 billion due to the impact from the pandemic.

We believe Mizuho group's regulatory capital remains sound, but the capital ratio may drop in the coming two years. In fiscal 2019, Mizuho Financial Group's common-equity tier-1 capital ratio declined 1.6 percentage points to 11.65% from a year earlier, partly due to a 7% increase of risk-weighted assets. In fiscal 2020 (ending March 2021), the group's guidance was a net operating profit of ¥570 billion, down 15%, reflecting a 16% increase in credit costs to ¥200 billion.

(Contact: Matsuo, Toshihiro: toshihiro.matsuo@spglobal.com)

Nomura Holdings Inc.; Nomura Securities Co. Ltd. (Nomura)

In our view, the Nomura group is likely to maintain its strong franchise in Japan's domestic securities market for the next two years, while it is in the midst of an extensive business overhaul. In fiscal 2019 (ended March 31, 2020), Nomura made mark-to-market losses on loan-related positions amid a sharp rise in volatility as the COVID-19 pandemic rapidly changed markets. Nevertheless, net profit after tax totaled ¥217 billion in fiscal 2019, a recovery from the previous year's net loss of ¥100.4 billion.

We do not expect to see a substantial rise in Nomura's risk appetite for the recent additions of management strategy, including its ambition of expanding its private markets business. Nomura's regulatory risk-weighted assets have also increased due to higher market volatility. Its common equity tier-1 ratio fell to 15.3% at end March 2020, from 17.1% a year earlier, but its capital remains sound, in our view.

(Contact: Matsuo, Toshihiro; toshihiro.matsuo@spglobal.com)

Norinchukin Bank (Norinchukin)

We expect Norinchukin's declining recurring revenue, which excludes such items as capital gains from marketable securities, will not recover quickly. Rising costs for foreign currency-denominated funds have put pressure on revenue. This has a knock-on effect on the bank's investment activities, mainly in foreign securities, which are a pillar of its earnings structure. Yields on marketable securities are already sluggish because of Japan's persistently low interest rates.

We forecast Norinchukin's credit costs to remain low under a stressed economy due to the COVID-19 outbreak because of a small portion of loans to assets. In particular, investment-related income represented 80% of Norinchukin's unconsolidated recurring income in fiscal 2019 (year ending March 2020).

Investment-related income represents a high proportion of the bank's total earnings because it collectively invests extra funds from its lower-tier cooperatives amid limited demand for domestic loans. These factors constrain Norinchukin's business and earnings stability, in our view.

The negative outlook on Norinchukin reflects our view that there is an at least one-in-three chance we will downgrade the bank in the coming two years. This could occur if the steep drop in earnings in fiscal 2019 lasts and the bank doesn't make headway in improving its recurring revenue levels and profitability.

(Contact: Nagano, Shoki; shoki.nagano@spglobal.com)

Resona Bank Ltd. (Resona Bank)

We expect Resona Bank and its parent Resona Holdings Inc. (collectively "Resona") to withstand the pressure on asset quality and revenues stemming from the COVID-19 pandemic. At the same time, Resona remains highly exposed to the persistent negative pressure on profitability in the Japanese banking industry. We expect the group to sustain its profitability by increasing revenue through its scale, and pursuing fiscal consolidation of its newly acquired subsidiary.

We forecast the group's credit costs to worsen up to 0.6%-0.7% of outstanding loans in fiscal 2020, in line with our base-case expectation for Japanese major banking groups. We expect Resona's capitalization to continue improving in line with the group's strategy but it will decelerate.

In our view, this slower-than-expected capital accumulation reflects its buffer against a weakening of the group's stand-alone creditworthiness. Our ratings on Resona Bank have modest headroom against a weakening stand-alone creditworthiness, because we already incorporate two notches of support to its rating based on our expectation that the government is highly likely to provide timely support to the group, if needed.

(Contact: Matsumoto, Satoru; satoru.matsumoto@spglobal.com)

Shinkin Central Bank (SCB)

We expect SCB's net profit may remain highly volatile due to sensitivity to investment holdings as the proportion of the bank's total assets invested in securities is high compared with that of domestic banks. SCB is struggling to profit from a conventionally structured asset portfolio amid continuing low interest rates and an increase in deposits denominated in Japanese yen. In addition, under a management policy that aims to return stable profit to its members in line with its role as the central institution for Japan's shinkin banks, SCB will maintain an investment policy that tolerates a certain level of risk to secure profitability.

We forecast SCB's credit costs to remain low under a stressed economy due to the COVID-19 outbreak. However, declines in yields on securities and loans amid the negative interest rate environment are likely to strain the bank's profitability, in our opinion. SCB's profitability in terms of return on assets is low at 0.1%, compared with that of domestic and international banks.

(Contact: Nagano, Shoki; shoki.nagano@spglobal.com)

Shizuoka Bank Ltd. (Shizuoka Bank)

We expect Shizuoka Bank's earnings to be under pressure over the next two years due to our forecast of high credit costs, but the bank's sufficient buffer would likely be able to cover losses arising due to the economic downturn. We also believe the COVID-19 outbreak will put pressure on the bank's creditworthiness, such as the volatility in price of market securities, and potential non-recurring losses including impairment of investments. However, we expect Shizuoka Bank will show resilience in the current challenging environment underpinned by its solid business base in its home market of Shizuoka Prefecture.

We forecast that Shizuoka Bank's annual credit costs are likely to rise sharply in fiscal 2020 (year ending March 2021) to about 65 bps of gross loans in light of the COVID-19 pandemic. We expect credit costs in fiscal 2020 would be about 5x of the actual rate in fiscal 2019, and NPAs to almost double from 2019 levels. We expect both metrics to gradually improve by fiscal 2021.

(Contact: Nagano, Shoki; shoki.nagano@spglobal.com)

Sumitomo Mitsui Financial Group Inc. (SMFG)

We expect SMFG to maintain a sufficient earnings buffer to absorb stress from COVID-19. This is despite our forecast of lower profits due to higher credit costs in the next year or two. The bank's credit costs could increase up to 60-70 bps in fiscal 2020 (ending March 31, 2021). The group's profit decreased 3% to ¥703.9 billion in fiscal 2019. The lower net operating profit was primarily due to the group's reorganization and the COVID-19 pandemic impact (the group set up an additional ¥40 billion loan loss reserve), despite an increase in earnings from the markets business.

We expect SMFG to maintain adequate capitalization. However, the capital ratio may decline in fiscal 2020 because of an increase in risk-weighted assets. Our ratings on SMFG have substantial headroom against a weakening in its stand-alone creditworthiness. This is because of our expectation that the government is highly likely to provide timely support to the group, if needed.

(Contact: Tateno, Chizuru; chizuru.tateno@spglobal.com)

Sumitomo Mitsui Trust Bank Ltd.

We expect Sumitomo Mitsui Trust's group credit profile will remain stable for the next two years, because it has the capacity to absorb a certain level of economic stress given its solid asset quality and stable business. Nevertheless, the COVID-19 pandemic will stall improvement in the bank's credit quality in the next 12-24 months. The group's pretax profit was ¥289 billion in fiscal 2020 (ending March 31, 2021), which was almost the same as the previous year's, despite posting ¥43.8 billion in credit cost, including ¥25 billion forward-looking provisions related to the impact from the pandemic. The group's credit cost was ¥3 billion in the previous fiscal year.

The group's stable business stems from non-interest-related income, in our view. The group maintains about 55% of gross revenues as fee-related income, even after the group deconsolidated an asset administration trust company in fiscal 2020 that contributed to the group's non-interest related business.

(Contact: Matsuo, Toshihiro; toshihiro.matsuo@spglobal.com)

Korea

NongHyup Bank (NongHyup)

We expect NongHyup will continue to carry out its mandate to improve the economic and social status of Korean farmers by extending low-margin policy loans, and supporting agricultural projects led by the National Agricultural Cooperative Federation amid the economic downturn due to COVID-19. A rise in credit costs and contraction of net interest margins amid lower interest rates will weigh on NongHyup's profitability in 2020. That said, we view the implications of the economic downturn as manageable for NongHyup given the bank's steady focus on improving risk management in the past several years and its adequate capital buffers.

Nonghyup's consolidated net profit declined 14% year on year to Korean won (KRW) 316 billion during the first three months of 2020, mainly due to margin contraction. Its NPLs to gross loans improved to about 0.6% as of end March 2020 from about 0.8% a year earlier. Annualized credit costs decreased to around 10 bps of gross loans during the first three months of 2020, compared with around 15 bps in the same period in 2019.

(Contact: Han, Scott; scott.han@spglobal.com)

Shinhan Bank (Shinhan)

We believe Shinhan will maintain adequate capitalization while sustaining sound asset quality over the next 18-24 months. We expect the bank will be able to manage an increase in credit costs in 2020 amid the COVID-19 outbreak, based on its good track record of risk management and tight underwriting standards throughout past economic cycles. The bank's asset quality was broadly stable with NPLs of 0.46% of gross loans as of March 31, 2020, similar to a year earlier and annualized credit costs of 0.16% of gross loans in the first quarter of 2020 compared with 0.15% a year earlier.

We expect the bank's loan growth to slow to 4%-5%, after a modest pickup in 2020 based on higher demand from SMEs affected by the pandemic, partly backed by guarantees from government agencies. We anticipate Shinhan to focus on risk management and capitalization as the outbreak recedes.

(Contact: Yi, Emily; emily.yi@spglobal.com)

Woori Bank (Woori)

We expect that Woori's moderate loan growth of around 5% a year in the coming few years should support its current capitalization despite some pressure on profitability. The bank's tightened underwriting standards, and efforts to rebalance its loan portfolio focusing on secured retail and small and midsize enterprise loans while lowering the portion of risky large corporate loans in the past several years should help the bank manage rising credit costs in 2020 amid COVID-19. In the first quarter of 2020, Woori's annualized return on assets was largely stable at about 0.6%, similar to that from a year earlier and annualized credit costs remained fairly low at about 0.08% of gross loans. The bank's NPLs were 0.40% of gross loans as of March 31, 2020, compared with 0.47% a year earlier.

The positive outlook reflects our view that Woori will likely sustain its improved asset quality and credit costs at levels comparable to major commercial bank peers over the next 18-24 months. We also expect the bank to maintain adequate capitalization amid the group's potential nonbanking business expansion. We anticipate Korea's economy to rebound in 2021 backed by a recovery in global demand and the government's support measures in response to the pandemic.

(Contact: Yi, Emily; emily.yi@spglobal.com)

Korea Development Bank (KDB)

We expect KDB will continue to play a critical policy role of providing funding and liquidity support to weak corporates especially during the COVID-19 outbreak. The government plans to inject about KRW1.65 trillion as common equity in KDB (about 5% of the bank's total adjusted capital), which should bolster the bank's capitalization and its ability to absorb rising credit losses due to the pandemic.

We expect KDB to maintain its high concentration in large corporate sectors, including shipbuilding, shipping, and construction, which will likely strain its asset quality amid the economic downturn in 2020. KDB reported a net loss of about KRW400 billion on a separate basis during the first quarter of 2020 largely due to a sharp increase in provisioning expenses. That said, we believe profitability is not a key agenda for the bank given its policy roles. The bank's total loans grew around 11% year on year as of March 31, 2020.

(Contact: Han, Scott; scott.han@spglobal.com)

Kookmin Bank (Kookmin)

Kookmin Bank will likely maintain its adequate capitalization and broadly stable asset quality over the next 18-24 months, in our view. We expect the bank to be able to manage upward pressure on credit costs amidst COVID-19 considering its efforts to tighten underwriting standards, write off bad loans, and build in additional provisioning for weak corporates over the past several years. Kookmin's NPLs to gross loans ratio improved to 0.36% as of March 31, 2020, from 0.47% a year earlier. Its annualized credit costs remained fairly low at around 0.11% of gross loans in the first quarter of 2020, largely stable compared with a year earlier.

We expect Kookmin's loan growth to be moderate at 4%-5%, after a modest pickup in 2020 mainly driven by higher demand from SMEs affected by the pandemic, partly backed by guarantees from government agencies. We expect the bank to focus on risk management and capitalization as the outbreak recedes.

(Contact: Yi, Emily; emily.yi@spglobal.com)

KEB Hana Bank (KEB Hana)

We expect KEB Hana will maintain its adequate capitalization and risk profile over the next 18-24 months. We expect an increase in credit losses in 2020 due to the COVID-19 outbreak will likely be manageable for KEB Hana, considering its adequate underwriting standards and risk management. We anticipate Korea's economy to rebound in 2021 backed by a recovery in global demand and the government's support measures in response to the pandemic.

We expect KEB Hana's moderate loan growth of around 5% annually in the coming few years to support its current capitalization. In the first quarter of 2020, the pandemic had limited impact to the bank's profitability with broadly stable annualized return on assets at 0.6%, similar to a year earlier. The bank's annualized credit costs were well-managed at 0.06% of gross loans, and the NPLs were about 0.4% of gross loans as of March 31, 2020 compared with 0.5% a year earlier.

(Contact: Yi, Emily; emily.yi@spglobal.com)

Industrial Bank of Korea (IBK)

We expect IBK to continue to provide significant funding and liquidity support to the SME sector primarily by extending loans, especially as the economy makes a downturn due to the COVID-19 outbreak. We consider that the KRW875 billion capital injection by the government from March to June 2020 (around 4% of the bank's total adjusted capital) and the government's proposed injection of an additional KRW480 billion will mitigate pressure on IBK's capitalization due to an increase in loan growth to around 10% annually in 2020.

The bank has a good track record of managing risks and expertise in SME lending, which will likely prevent significant asset quality deterioration, in our view. In the first quarter of 2020, IBK reported net profit of KRW500 billion, down about 10% year on year, mainly due to lower net interest margins. IBK's annualized credit costs fell slightly to about 40 bps of gross loans from about 50 bps in the same period a year ago.

(Contact: Han, Scott; scott.han@spglobal.com)

Malaysia

CIMB Bank Bhd. (CIMB Bank)

We expect CIMB Bank's loan growth to slow down notably to 2% in 2020 amid intense economic headwinds associated with COVID-19. However, growth will likely rebound strongly to 7% in 2021. We also anticipate a 10 bps compression in the bank's net interest margin this year, in line with low interest rates in CIMB Bank's main markets in Malaysia, Thailand, and Singapore.

In our view, credit costs for CIMB Bank are likely to stay high at 60-70 bps of gross loans over the next two years due to business and cash flow disruptions caused by the pandemic and associated lockdown. That said, we expect the bank's earnings to start to recover next year as business activities normalize.

Our negative outlook on CIMB Bank mirrors that on the Malaysian sovereign. Our ratings on the bank continue to be capped by our sovereign credit ratings because we do not expect the bank to be able to withstand the stress associated with a sovereign default. Consequently, we expect our ratings on CIMB Bank to move in tandem with those on the sovereign.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

Malayan Banking Berhad (Maybank)

We believe Maybank will maintain its solid capital buffer in the next two years to counter strains on asset quality amid COVID-19. The bank's cumulative credit losses over 2020-2021 could increase to 130 bps of gross loans, higher than 45 bps in 2019. We expect the gross impaired loans to remain elevated at above 3% of gross loans for next two years.

In our opinion, the largest banking group in Malaysia will record muted loan growth of around 1% this year, and rebound to 7%-9% growth in 2021 and 2022 in line with our expectation of an economic recovery in its major markets. We also expect a 10 bps net interest margin compression in 2020 as a result of the lowering policy rates in the region.

Our negative outlook on Maybank mirrors that on the Malaysian sovereign. Our ratings on the bank continue to be capped by our sovereign credit ratings because we do not expect the bank to be able to withstand the stress associated with a sovereign default. Consequently, we expect our ratings on Maybank to move in tandem with those on the sovereign.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

Public Bank Bhd. (Public Bank)

We expect Public Bank's asset quality to deteriorate amid COVID-19 and other macroeconomic headwinds. In our view, the decline should be manageable, given that the bank has adequate capital and provisioning buffers. We expect Malaysia's six-month blanket moratorium on repaying interest and principal on loans to retail and SMEs to weigh on bank's asset quality metrics. As of March 31, 2020, about two-thirds of Public Bank's borrowers by loan value had availed themselves of the moratorium.

Margin compression and increased provisioning for credit losses pushed down the bank's profits for the first quarter of 2020 by 5.7% year on year. In our opinion, headwinds from a slowdown in domestic consumption and a marked decline in policy rates will further squeeze Public Bank's net interest margins and drag on the bank's growth prospects.

Our negative outlook on Public Bank mirrors that on the Malaysian sovereign. Our ratings on the bank continue to be capped by our sovereign credit ratings because we do not expect the bank to be able to withstand the stress associated with a sovereign default. Consequently, we expect our ratings on Public Bank to move in tandem with those on the sovereign.

(Contact: Anand, Nikita; nikita.anand@spglobal.com)

New Zealand

ANZ Bank New Zealand Ltd. (ANZ NZ)

ANZ NZ remains New Zealand's largest bank, and we expect its earnings will remain sufficient over the next two years to cover its increased credit losses. Similar to peers, ANZ NZ increased its collectively assessed provisions to NZ$189 million for the first half of fiscal 2020 following the onset of COVID-19. This resulted in core earnings falling by about 10% compared with 12 months earlier. In our view, the temporary hiatus on dividend payments and build toward higher regulatory capital standards to meet the Reserve Bank of New Zealand's future capital requirements should bolster ANZ NZ's capital base.

We forecast a rebound in New Zealand's economy around mid-2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect credit losses will ease to levels consistent with our through the cycle loss expectations of about 50 bps of gross loans in fiscal 2022, from our forecast level of about 80 bps for fiscal 2021. We expect to keep our ratings on ANZ NZ equalized with those on its Australian parent, Australia and New Zealand Banking Group Ltd. (ANZ). Consequently, the negative outlook on ANZ NZ mirrors that on ANZ.

(Contact: DeLange, Nico; nico.delange@spglobal.com)

ASB Bank Ltd. (ASB)

We expect ASB's earnings to remain resilient--albeit at lower levels than in the recent past--in the face of a sharp rise in credit losses and ongoing lending spread compression over the coming two years, because of the coronavirus pandemic and its containment measures. Similar to peers, ASB's net interest margin continues to tighten because of structurally lower interest rates. ASB's net interest margin declined to 2.21% in the six months to Dec. 31, 2019, from 2.28% in fiscal 2019. Nevertheless, we consider ASB entered the crisis well capitalized, and we expect the regulator-imposed temporary restriction on dividend payments will support ASB's absolute level of capital in the short term.

We forecast a rebound in New Zealand's economy around mid-2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect credit losses will ease to levels consistent with our through-the-cycle loss expectations of about 50 bps of gross loans in fiscal 2022, from our forecast level of about 80 bps for fiscal 2021. We expect to keep our ratings on ASB equalized with those on its Australian parent, Commonwealth Bank of Australia (CBA). Consequently, the negative outlook on ASB mirrors that on CBA.

(Contact: Barrett, Lisa; lisa.barrett@spglobal.com)

Bank of New Zealand (BNZ)

BNZ's earnings will remain sufficient to cover significantly increased credit losses over the next two years, in our view. Furthermore, the temporary hiatus on dividend payments and the buildup toward higher regulatory capital standards should bolster BNZ's capital base. Similar to peers, a predominantly COVID-19 related increase in bad-debt provisions (NZ$151 million) saw BNZ's profits decline 33% in the half year to March 31, 2020, compared with the half year to March 31, 2019.

We forecast a rebound in New Zealand's economy around mid-2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect credit losses will ease to levels consistent with our through-the-cycle loss expectations of about 50 bps of gross loans in fiscal 2022, from our forecast level of about 80 bps for fiscal 2021. We expect to keep our ratings on BNZ equalized with those on its Australian parent, National Australia Bank Ltd. (NAB). Consequently, the negative outlook on BNZ mirrors that on NAB.

(Contact: DeLange, Nico; nico.delange@spglobal.com)

Westpac New Zealand Ltd. (WNZL)

We expect that WNZL's earnings should remain resilient and sufficient to weather a sharp rise in credit losses because of the COVID-19 outbreak despite the ongoing compression in net interest margin. WNZL's earnings in the six months to March 31, 2020, declined by about 40% compared with the previous six-month period reflecting mainly increased credit loss provisions. Nevertheless, we expect that WNZL, like its peers, will likely increase its absolute level of capital in the short term aided by nonpayment of dividends on common equity.

We forecast a rebound in New Zealand's economy by around mid-2021 following a significant downturn due to the COVID-19 outbreak. Consequently, we expect credit losses will ease to levels consistent with our through-the-cycle loss expectations of about 50 bps of gross loans in fiscal 2022, from our forecast level of about 80 bps for fiscal 2021. We expect to keep our ratings on WNZL equalized with those on its Australian parent, Westpac Banking Corp. (WBC). Consequently, the negative outlook on WNZL mirrors that on WBC.

(Contact: Jain, Sharad; sharad.jain@spglobal.com)

Singapore

DBS Bank Ltd. (DBS)

We expect DBS' loan book to record anemic growth in 2020 given the sharp slowdown of key markets such as Singapore and greater China amid the pandemic-related lockdown measures. Credit growth will likely pick up to 6%-7% in 2021. Similarly, we project a 15-20 bp compression of the net interest margin in the next 12 months as the bank reprices its loan book down through the period.

We foresee cumulative credit cost increasing to more than 130 bps of gross loans over 2020-2021. Authorities have promoted extensive debt moratorium programs to retail customers and SMEs in DBS' key markets. This, together with the bank's debt rescheduling and restructuring efforts on behalf of its corporate clients, will likely push a large chunk of NPL formation to 2021, in our opinion. We expect DBS' NPLs will peak at around 3% of gross loans next year, before gradually coming down in 2022. We expect the bank to maintain its common equity Tier 1 ratio at above 12.5% in the next 18-24 months.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

Oversea-Chinese Banking Corp. Ltd. (OCBC)

OCBC's bottom line will likely to take a hit in 2020 in its key operating markets of Singapore, greater China, Malaysia, and Indonesia. This comes amid escalating economic headwinds in those markets in the wake of COVID-19 lockdown measures. Our base case assumes flattish loan growth (of 1%), sharply narrower net interest margin (a decline of 15-20 bps) over 2020, rising credit costs (an aggregate of 130-140 bps of gross loans over 2020-2021), and sluggish fee income outlook. The earning contribution from OCBC's insurance subsidiary, Great Eastern Holdings, will likely stay volatile as capital market remain bumpy.

OCBC's solid capital buffer, strong underwriting record, and good revenue diversification will help counter the intensive economic headwinds this year and the next. We expect the bank to maintain its common equity Tier 1 ratio above 13% despite the sharply rising credit cost. Its earnings will provide sufficient buffer to ring fence the capital position. We also expect the bank to curtail discretionary spending over the next 18-24 months to contain the cost-to-income ratio at a relatively stable level.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

United Overseas Bank Ltd. (UOB)

We believe UOB has sufficient capital buffer to tide over the next 12-24 months, despite the difficult operating environment. UOB has consistently strengthened its balance sheet and maintained healthy Tier 1 capital adequacy ratios of about 15%. Profits in 2020 will be subdued but sufficient to cover credit costs, given the Singapore government's relief measures for households and businesses.

We forecast an increase in the bank's NPLs to around 2% of gross loans in 2020, from 1.5% in 2019. We also expect its credit costs to double from historical norms of 20 bps–30 bps of gross loans, mirroring past recessions such as the global financial crisis. Nevertheless, UOB's NPLs and credit costs are increasing from a low base and we believe they can be largely covered by profits. As such, we expect the bank's capital position to remain intact.

Our estimates assume that UOB's loan growth will be in the low single-digit level in 2020, before recovering to about 5% in 2021. We also assume Singapore's real GDP will contract by 3.8% in 2020 and return to positive territory in 2021.

(Contact: Tan, Ivan; ivan.tan@spglobal.com)

Taiwan

CTBC Bank Co. Ltd. (CTBC)

In our view, CTBC has sufficient earnings buffer to absorb higher credit losses in 2020 under the unfavorable credit conditions. We anticipate the bank's profitability will be tempered by strained net interest margins, weaker trading performance, and higher credit provision costs during the year. However, we believe the bank can still sustain its strong capitalization and solid liquidity.

We forecast Taiwan's GDP to rebound to 4% growth in 2021, following negative 1.2% growth in 2020 due to the COVID-19 outbreak. We also expect CTBC's earnings to rebound from next year with steady growth both in domestic and overseas lending.

We believe CTBC's strong capital level should help it to absorb increased credit losses due to the COVID-19 outbreak. The bank's higher-margin exposures overseas and diversified revenue sources shall underpin profitability that is higher than the peer group average on a consolidated basis over the next few quarters.

(Contact: Lan, Yuhan; yuhan.lan@spglobal.com)

Mega International Commercial Bank Co. Ltd. (Mega Bank)

We expect Mega Bank to report weaker earnings performance in 2020 compared with 2018-2019 as a result of higher credit costs associated with the economic impact of COVID-19. Moreover, policy rate cuts and volatile capital markets globally and domestically will also strain the bank's net interest income and trading revenues over the same period. We expect Mega Bank to gradually restore its growth and earnings in 2021. In our view, the bank's strong capitalization and adequate liquidity provide solid cushion against economic volatility.

We believe that Mega Bank's strong capitalization will help it to absorb potential credit losses stemming from the COVID-19 outbreak. We expect the industry's credit losses to increase to 73 bps of gross loans in 2020, from 23 bps in 2018. As one of the designated domestic systemically important bank in Taiwan, Mega Bank will continue to sustain its strong capital buffer under its prudent capital management.

(Contact: Fan, Eunice; eunice.fan@spglobal.com)

Thailand

Bangkok Bank Public Co. Ltd. (Bangkok Bank)

We expect Bangkok Bank to focus on consolidation in 2020 given the economic headwinds stemming from COVID-19, and following its recent acquisition of Bank Permata, a medium sized bank in Indonesia (about 15% of Bangkok Bank's balance sheet). We expect overall loan book growth for the merged entity to be only in the low single digits this year, before recovering in 2021. In our view, the higher margin of Bank Permata's portfolios will help Bangkok Bank manage downside pressures on its net interest margin.

We expect our risk-adjusted capital ratio on Bangkok Bank to dip temporarily to about 7% due to Bank Permata acquisition, from 8% as of December 2019. We expect that the bank will raise capital in the next year to restore its capital position. Additionally, we expect Bangkok Bank's credit costs will rise this year to above 200 bps of gross loans, from 160 bps in 2019, on account of the hit from COVID-19. The bank's sound earning capabilities and the good loan growth prospects in the infrastructure sector will help to cushion some of this pressure.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

Kasikornbank PCL (Kbank)

We expect Kbank's asset quality metrics to deteriorate in 2020. The COVID-19 outbreak has exacerbated an economic slowdown already underway due to weak external demand, pushing the economy into recession. We forecast Thailand's GDP to contract by 4.2% in 2020. Export-orientated SMEs are vulnerable in this challenging environment. Thailand's high household leverage, which at 79% of GDP is one of the highest among emerging markets, also poses risks. We forecast the bank's reported NPLs could increase to 4%-5% of gross loans in 2020, from 3.65% in 2019.

Relief measures taken by the government may lessen the strain and delay recognition of problem loans, but are unlikely to eliminate risks for weaker and more vulnerable debtors, in our view. The government has rolled out three rounds of stimulus targeting workers and SMEs, including providing cash handouts and soft loans at zero interest rates. Kbank has maintained a high loan loss reserve level covering about 140% of NPLs. The bank's good Tier 1 capital ratio of 15.2% also offers buffer against downside risks.

(Contact: Tan, Ivan; ivan.tan@spglobal.com)

Krung Thai Bank Public Co. Ltd. (KTB)

After showing signs of stabilizing, KTB's weak loans are set to increase due to the economic slowdown and the bank's large exposure to a few stressed borrowers. KTB's weak assets of about 18% of gross loans are already one of the highest among our rated Thai banks. The central bank announced COVID-related debt relief schemes such as soft loans, moratoriums on debt repayments, and debt restructuring, which may temper the impact on KTB.

We anticipate that implementation of the Thailand adaptation of International Financial Reporting Standard (IFRS) 9 beginning January 2020, sustained weakness in macroeconomic conditions, and KTB's evolving risk management practices will push credit costs higher this year. Credit costs increased to 1.6% of gross loans in the first quarter of 2020 compared with 0.9% in the previous quarter. At the same time, we expect the pandemic should accelerate KTB's digital banking strategy and physical branch consolidation. The bank's mobile banking app platform witnessed a 70%-80% growth in transactions after the outbreak began. Consequently, the bank also recently announced plans to downsize branch network this year.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

Siam Commercial Bank Ltd. (SCB)

We expect SCB's capital position and earnings to stay resilient in the next two years despite rising credit costs due to COVID-19. Given the negative impact of the pandemic on borrowers in Thailand, we expect the bank's credit costs to stay in the range of 160-190 bps of gross loans in 2020 and 2021. SCB's risk-adjusted capital (RAC) ratio improved to above 9.0% as of Dec. 31, 2019, from 7.5% a year earlier, after the bank divested its stake in SCB Life Assurance in 2019. Barring any inorganic investments and share buybacks, we expect the bank's RAC ratio to stay above 8.0% in the next 12-24 months.

In our view, SCB's net interest margin is likely to contract by 15-20 bps during next two years due to low interest rates and the bank's cautious stance toward growing its high yielding unsecured retail book. We expect SCB's loan book to grow by 2%-3% in 2020 and expand by about 8% in 2021, in line with our forecast for Thailand's GDP.

(Contact: Duan, Nancy; nancy.duan@spglobal.com)

S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. We are using this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

Appendix

Table 1

Asia-Pacific Top 60 Banks Key Ratios
Net interest income/average earning assets (NIM) (%) New loan loss provisions/average customer loans (%) Core earnings/average adjusted assets (%) Gross nonperforming assets/customer loans + other real estate owned (%)
2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019
Australia Australia and New Zealand Banking Group Ltd. 2.0 1.9 1.8 0.2 0.1 0.1 0.8 0.8 0.7 0.9 0.8 0.9
Australia National Australia Bank Ltd. 1.9 1.9 1.8 0.2 0.1 0.2 0.8 0.8 0.8 0.7 0.7 0.9
Australia Commonwealth Bank of Australia 2.1 2.1 2.1 0.2 0.2 0.2 1.2 1.0 1.0 0.8 0.9 0.9
Australia Macquarie Bank Ltd. 1.5 1.5 1.4 0.0 0.2 0.6 0.9 0.7 0.6 1.2 1.9 1.3
Australia Westpac Banking Corp. 2.1 2.1 2.1 0.1 0.1 0.1 1.1 1.1 0.9 0.7 0.8 1.0
China Agricultural Bank of China Ltd. 2.6 2.5 2.3 1.0 1.2 1.1 1.0 0.9 0.9 1.8 3.6 3.1
China Bank of China Ltd. 2.1 2.1 1.9 0.8 0.9 0.8 1.0 0.9 0.9 1.6 3.7 3.1
China Bank of Communications Co. Ltd. 1.7 1.6 1.7 0.7 0.9 1.0 0.8 0.8 0.8 2.0 3.3 3.1
China China CITIC Bank Corp. Ltd. 1.9 2.0 2.2 1.8 1.7 2.0 0.7 0.8 0.7 2.8 3.5 3.3
China China Construction Bank Corp. 2.5 2.5 2.4 1.0 1.1 1.1 1.1 1.1 1.1 1.5 3.6 3.6
China China Merchants Bank Co. Ltd. 2.7 2.7 2.7 1.8 1.6 1.5 1.2 1.3 1.3 1.6 2.5 2.0
China China Minsheng Banking Corp. Ltd. 1.6 1.4 1.7 1.2 1.5 1.9 0.9 0.9 0.9 2.7 4.3 3.8
China Hua Xia Bank Co. Ltd. 2.2 2.2 2.4 1.4 1.4 1.7 0.8 0.8 0.8 3.6 5.2 4.5
China Industrial and Commercial Bank of China Ltd. 2.5 2.5 2.4 0.9 1.1 1.1 1.2 1.1 1.1 1.7 3.8 3.6
China Postal Savings Bank of China Co. Ltd. 2.6 3.0 2.8 0.8 1.4 1.2 0.6 0.6 0.6 0.8 1.3 1.4
China Shanghai Pudong Development Bank Co. Ltd. 2.0 2.0 2.1 1.8 1.8 2.0 0.9 0.9 0.9 2.2 4.2 4.1
Hong Kong Bank of China (Hong Kong) Ltd. 1.6 1.6 1.6 0.1 0.1 0.2 1.2 1.2 1.2 0.2 0.2 0.2
Hong Kong Standard Chartered Bank (Hong Kong) Ltd. 1.4 1.2 1.6 (0.0) 0.1 0.2 0.8 0.6 0.7 0.7 0.5 0.5
Hong Kong The Hongkong and Shanghai Banking Corp. Ltd. 1.9 1.9 1.9 0.1 0.1 0.2 1.3 1.4 1.4 0.5 0.6 0.5
Hong Kong The Bank of East Asia Limited 1.8 1.8 2.0 0.4 0.3 1.4 0.8 0.7 0.4 1.4 0.8 1.3
India Axis Bank Ltd. 3.2 3.3 3.4 3.8 1.9 2.3 0.1 0.7 0.2 8.8 6.5 5.5
India Bank of India 1.8 2.4 2.5 4.1 4.2 3.6 (1.0) (0.9) (0.5) 20.7 17.8 14.7
India HDFC Bank Ltd. 4.8 4.8 4.5 0.9 0.9 1.2 1.9 1.9 1.9 1.5 1.4 1.5
India ICICI Bank Ltd. 3.2 3.4 3.5 3.2 3.2 2.1 1.0 0.5 0.9 10.9 7.8 5.9
India State Bank of India 2.6 2.9 3.0 3.6 2.2 1.5 (0.1) 0.1 0.5 12.0 8.2 6.3
Indonesia PT Bank Mandiri (Persero) 5.9 5.6 5.5 1.6 1.1 0.8 2.1 2.3 2.4 9.0 7.5 7.5
Indonesia PT Bank Rakyat Indonesia (Persero) Tbk. 8.2 7.6 7.3 1.7 1.5 1.8 2.7 2.7 2.5 6.8 7.0 7.2
Japan Chiba Bank Ltd. 1.0 1.0 0.9 0.0 0.1 0.1 0.4 0.3 0.3 1.3 1.2 1.1
Japan Mitsubishi UFJ Financial Group Inc. 1.0 1.0 0.9 0.0 0.0 0.2 0.4 0.4 0.4 1.2 0.9 1.0
Japan Mizuho Financial Group Inc. 0.6 0.6 0.5 (0.2) 0.0 0.2 0.3 0.3 0.2 0.8 0.8 0.8
Japan Nomura Holdings Inc. 0.3 0.2 0.4 N.M. N.M. N.M. 0.5 (0.2) 0.6 N/A N/A N/A
Japan Norinchukin Bank 0.2 0.1 0.1 (0.1) 0.0 0.0 0.1 0.1 0.1 0.4 0.2 0.2
Japan Shinkin Central Bank 0.4 0.3 0.4 (0.0) (0.2) 0.0 0.1 0.1 0.1 0.6 0.4 0.3
Japan Resona Holdings Inc. 1.1 1.1 1.0 (0.1) 0.0 0.1 0.5 0.3 0.3 1.6 1.5 1.4
Japan Shizuoka Bank Ltd. 1.1 1.1 1.0 (0.0) 0.1 0.1 0.4 0.4 0.3 1.1 1.1 1.1
Japan Sumitomo Mitsui Financial Group Inc. 1.1 1.1 1.0 0.1 0.1 0.2 0.5 0.4 0.4 0.9 0.9 0.8
Japan Sumitomo Mitsui Trust Holdings 0.5 0.4 0.4 (0.0) 0.0 0.2 0.3 0.3 0.3 0.3 0.3 0.3
Korea Industrial Bank of Korea 2.2 2.2 2.0 0.7 0.7 0.6 0.6 0.6 0.5 1.3 1.3 1.2
Korea KEB Hana Bank 1.8 1.8 1.7 0.3 0.1 0.1 0.7 0.7 0.5 0.7 0.5 0.4
Korea Kookmin Bank 1.8 1.9 1.8 0.1 0.0 0.0 0.7 0.6 0.7 0.6 0.5 0.4
Korea Korea Development Bank 1.1 1.0 0.9 0.7 (0.3) 0.1 0.3 0.4 0.0 3.0 3.5 2.3
Korea NongHyup Bank 1.8 1.9 1.8 0.4 0.3 0.1 0.3 0.5 0.6 1.0 0.8 0.5
Korea Shinhan Bank 1.7 1.8 1.7 0.2 0.1 0.2 0.6 0.7 0.6 0.5 0.5 0.5
Korea Woori Bank 1.8 1.8 1.7 0.3 0.1 0.0 0.4 0.6 0.6 0.7 0.6 0.4
Malaysia CIMB Bank Bhd. 2.5 2.4 2.3 0.4 0.3 0.2 1.0 1.0 0.9 2.4 2.2 2.5
Malaysia Malayan Banking Bhd. 2.6 2.6 2.5 0.4 0.3 0.5 1.1 1.1 1.1 2.4 2.5 2.7
Malaysia Public Bank Bhd. 2.3 2.3 2.2 0.1 0.1 0.1 1.4 1.4 1.3 0.5 0.6 0.5
New Zealand ANZ Bank New Zealand Ltd. 2.3 2.3 2.2 0.1 0.0 0.1 1.2 1.3 1.1 0.5 0.4 0.5
New Zealand ASB Bank Ltd. 2.3 2.3 2.3 0.1 0.1 0.1 1.2 1.3 1.3 0.6 0.7 1.0
New Zealand Bank of New Zealand 2.1 2.1 2.1 0.1 0.1 0.1 1.1 1.1 1.2 0.5 0.5 0.9
New Zealand Westpac New Zealand Ltd. 2.0 2.1 2.2 (0.1) 0.0 (0.0) 1.1 1.1 1.1 0.3 0.4 0.5
Singapore DBS Bank Ltd. 1.8 1.9 1.9 0.6 0.2 0.2 0.8 1.1 1.2 1.7 1.5 1.5
Singapore Oversea-Chinese Banking Corp. Ltd. 1.7 1.7 1.8 0.3 0.1 0.3 1.2 1.2 1.3 1.5 1.5 1.5
Singapore United Overseas Bank Ltd. 1.8 1.9 1.9 0.3 0.2 0.2 1.0 1.1 1.1 1.9 1.6 1.6
Taiwan CTBC Bank Co. Ltd. 1.5 1.6 1.6 0.1 0.2 0.2 0.8 0.8 0.8 0.4 0.4 0.4
Taiwan Mega International Commercial Bank Co. Ltd. 1.3 1.3 1.2 0.3 0.1 0.0 0.7 0.8 0.8 0.1 0.1 0.1
Thailand Bangkok Bank Public Co. Ltd. 2.4 2.5 2.5 1.1 1.1 1.6 1.1 1.1 1.1 8.7 8.7 9.2
Thailand KASIKORNBANK PCL 3.9 3.8 3.7 2.4 1.8 1.7 1.4 1.5 1.4 8.0 8.4 8.6
Thailand Krung Thai Bank Public Co. Ltd. 3.2 3.1 3.2 2.3 1.3 1.1 0.8 1.1 1.3 10.2 10.2 9.2
Thailand Siam Commercial Bank Public Co. Ltd. 3.5 3.5 3.8 1.3 1.2 1.7 1.5 1.3 0.8 5.1 5.0 6.2
Note: For banks in India and Japan, 2019 reflects fiscal year ending March 31, 2020. Columns for prior years also reflect a similar approach for presentation of fiscal year end numbers. Nomura Holding Ltd. is an investment bank that does not have significant loans on its balance sheet. Chinese banks' gross nonperforming assets in 2018 and 2019 were recalibrated to include a portion of special mention loans. NIM—Net interest margin. Source: S&P Global Ratings.

Related Research

This report does not constitute a rating action.

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

Primary Credit Analyst:Sharad Jain, Melbourne (61) 3-9631-2077;
sharad.jain@spglobal.com
Secondary Contacts:Geeta Chugh, Mumbai (91) 22-3342-1910;
geeta.chugh@spglobal.com
Harry Hu, CFA, Hong Kong (852) 2533-3571;
harry.hu@spglobal.com
Ryoji Yoshizawa, Tokyo (81) 3-4550-8453;
ryoji.yoshizawa@spglobal.com
Gavin J Gunning, Melbourne (61) 3-9631-2092;
gavin.gunning@spglobal.com
Vera Chaplin, Melbourne (61) 3-9631-2058;
vera.chaplin@spglobal.com
Research Assistant:Priyal Shah, CFA, Mumbai

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