BankingBusiness & EconomyEconomy

Asset quality and Profitability to regress in Banks

Dismissive impacts of COVID-19 will not be subsided completely by the Govt. effort

Moody’s Vice-President, Eugene Tarzimanov stated that downgrading of banks of ASEAN(Association of Southeast Asian Nations) and India have been driven by Indian banks in 2020. Despite a higher share of negative outlooks on banks’ ratings, the majority of the banks in the region are well-positioned at their ratings, he added.

As per Moody, the asset quality and profitability will slump from adequate levels. Countries like Singapore, Malaysia & the Philippines possess the best asset quality with non-performing loans below 2%. Regulators in India, Thailand, and Vietnam have restricted dividends from banks, landing them into a credit positive. The larger banks will derive benefits from deposit inflows as they are considered port in a storm during the times of stress.

Efforts from the government would subdue the pressure put up on the banks but it will not be able to fully eliminate the dismissive impacts.

Even though the current conditions are challenging, the majority of the banks have adequate capital and their funding and liquidity will stand on the stable side in the financial year 2020-21.

As per Moody’s expectation, GDP of most of the ASEAN economies along with India will shrink in 2020 and will show an expansion in 2021. It depends upon relaxation in lock-downs and the motion of economic activities.

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