MARKETS, RETAIL BANKING | Staff Reporter, China

APAC developed market banks' revenue prospects to stabilize in 2021

But earnings headwinds and asset quality will remain under pressure.

Banks in Asia-Pacific developed markets are expected to see their business generation and revenue prospects stabilize if not improve in 2021, particularly by H2 2021, reports Fitch Ratings.

This is thanks to the region’s record of coronavirus containment putting the developed markets (DM) in good stead to avert deeper economic shocks.

However, DM banks’ operating environment remains challenging in most jurisdictions, which will complicate the banks' efforts to accelerate any turnaround in performance.

Fitch also expects further deterioration in asset quality and earnings headwinds stemming from modest growth, tight net interest margins, and elevated credit and operating costs. On the other hand, banks' capital and liquidity buffers remain resilient.

Fitch expects to revise more Interest Default Ratings outlooks to stable from negative as economic risks abate—likely from Q2 2021 onwards—providing also that banks' performances are broadly in line with our baseline cases or that downside scenarios will have abated significantly.

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