Fitch Ratings Adjusts Banking Sector Outlooks for APAC Amid US Trade Policies

Strategic Insights -

Fitch Ratings has revised the outlooks for banking sectors in South Korea, Taiwan, Thailand, and Vietnam to reflect the potential impact of US trade policies on these economies. The ratings agency has adjusted its 'neutral' outlook for APAC's banking sector to 'deteriorating' for 2025, citing exposure to US trade policies, particularly tariffs. The banking sector in China, meanwhile, continues to face persistent challenges, including government policies, weakened profitability, and asset quality pressure.

Key Takeaways:

  • Fitch Ratings has adjusted its outlooks for banking sectors in South Korea, Taiwan, Thailand, and Vietnam to 'deteriorating' for 2025, reflecting the potential impact of US trade policies on these economies.
  • The agency has moved the banking sector outlook to 'deteriorating' from 'neutral' in South Korea, Taiwan, and Thailand, citing higher export exposure and sales to the US, which will likely weaken banks' loan growth, asset quality, and profitability.
  • Fitch has moved the banking sector outlook to 'neutral' from 'improving' in Vietnam to reflect tariff risks, with the country having the highest degree of export exposure to the US market in APAC.
  • Policy interest rates could be lower than anticipated in South Korea, Taiwan, and Thailand under a higher tariff scenario, weighing on net interest margins (NIM) for these countries.
  • The softer economic outlook in Vietnam is likely to result in higher credit costs, leading to slower profit growth for the year, but also suggests that non-performing loan rates may rise only moderately.
  • Loan growth quotas in Vietnam could increase further, with a 2025 system loan growth quota of 16%, which may partially offset pressure on lending yields and provisioning needs.

Statistics:

  • 2025 system loan growth quota in Vietnam is 16% (Fitch).
  • Net interest margins (NIM) in South Korea, Taiwan, and Thailand could be lower than anticipated under a higher tariff scenario (Fitch).
  • Non-performing loan rates in Vietnam may rise only moderately (Fitch).

Sources:

  • Fitch Ratings, "Asian Banks: US Trade Policies Pose Risks" (no date).
  • Fitch Ratings, "Fitch Revises APAC Banking Sector Outlook Amid US Trade Policy Risks" (no date).
  • Fitch Ratings, "VN National Ratings" (no date).