S&P sees credit losses easing in Asia

MANILA, Philippines — Prospects for economic rebound in Asia Pacific, including the Philippines, are expected to support banks and their borrowers, resulting in lower credit losses, according to S&P Global Ratings.

In a report, the debt watcher said credit losses across the world’s banking may reach $1.6 trillion for 2021 and 2022, or eight percent lower than the previous forecast of $1.8 trillion.

However, S&P said it does not expect a return to a more benign pre-pandemic credit losses as the COVID-19 pandemic continues to rage.

“As the COVID-19 pandemic shows early signs of coming under control across large parts of the world, the policy responses to its economic consequences are starting to unwind, so far in an orderly manner. In turn, the effects of the pandemic on banks’ asset quality are becoming a little less uncertain and a little less negative compared to our February 2021 forecasts,” it said.

For Asia Pacific, S&P said credit losses may reach $1.53 trillion between 2020 and 2022, slightly lower than the $1.57 trillion forecast in February amid prospects of a strong rebound from the pandemic-induced recession.

“We also expect credit losses as a percentage of loans to decrease in nearly all Asia-Pacific countries over the next two years. Targeted assistance to stretched borrowers will likely continue in many places until pandemic-related challenges abate substantially,” it said.

S&P expects credit losses in Asia Pacific to be lower this year and next year compared to 2020.

“Most banking jurisdictions will still find it challenging to lower credit losses to 2019 pre-pandemic levels by end-2022,” S&P said.