Asia-Pacific Banks to Withstand US Tariffs but Loan Growth May Falter

Strategic Insights -

Trade tensions and uncertainty in the wake of new US tariffs are likely to slow economic growth and disrupt supply chains in the Asia-Pacific region, despite banks having the capital and liquidity to absorb losses. The region's exports to the US are significant, and ongoing trade tensions will weigh on consumer and business sentiment, potentially dampening loan growth. To mitigate these risks, governments have announced support measures and interest rate cuts are underway, which should help contain a rise in bad loans.

Key Takeaways:

  • Banks in the Asia-Pacific region, including those in the Philippines, are expected to withstand the shock of new US tariffs, according to Moody's Ratings.
  • Loan growth may falter due to trade uncertainty weighing on business and consumer confidence.
  • The region's reliance on exports to the US leaves it exposed to higher tariffs.
  • Trade tensions are likely to slow economic growth and disrupt supply chains.
  • Most banks have the capital and liquidity to absorb losses.
  • Government support measures, such as interest rate cuts, are in place to contain a rise in bad loans.
  • President Marcos confirmed that the US would impose a 19% tariff on Philippine exports.
  • Lenders in the Philippines have leaned more heavily on retail borrowing, with retail lending surging 24% to P1.74 trillion in June.
  • Bank lending rose 12.1% in June from a year earlier to P13.55 trillion, while business loans climbed 11.1% to P11.49 trillion.
  • Central banks in the region are in the midst of easing cycles to support credit growth.
  • The Bangko Sentral ng Pilipinas has lowered its benchmark rate by 1.25 percentage points this year to 5.25%.

Statistics:

  • Bank lending rose 12.1% in June from a year earlier to P13.55 trillion.
  • Business loans climbed 11.1% to P11.49 trillion.
  • Retail lending surged 24% to P1.74 trillion in June.
  • The Bangko Sentral ng Pilipinas has lowered its benchmark rate by 1.25 percentage points this year to 5.25%.
  • Central banks across APAC have started lowering rates and expect the interest rate environment to become more accommodative over the second half of 2025.

Sources:

  • Moody's Ratings
  • Bangko Sentral ng Pilipinas
  • World Bank
  • Philippine Statistics Authority
  • Inquirer.net
  • Business Mirror