Standard & Poor’s (S&P) said Asian banks excluding Japan were not expected to see a significant deterioration in their credit profile arising from their direct exposure to Lehman Brothers Holdings Inc.
Asian banks should be more concerned about the looming economic slowdown and financial market turmoil than their direct exposure to troubled US financial institutions, the global ratings agency said in a statement yesterday.
S&P’s remarks came amid growing market worries of further banking failures in the US that could adversely impact on Asian economies, after Lehman Brothers filed for bankruptcy on Monday and the US Federal Reserve bailed out American International Group Ltd on Tuesday.
“A few Taiwan, Philippine and Chinese banks appear to have more direct exposure to Lehman Brothers entities,” S&P credit analyst Ritesh Maheshwari said in the statement.
“However, Asian banks’ strengthened balance sheets, as a result of healthy profits over the vibrant economic environment during the past half a decade, can withstand the impact of likely losses from direct exposure, without rating downgrades,” Maheshwari said.
In Taipei, the main bourse’s finance and insurance sub-index dropped 6.56 percent yesterday owing to concerns about the US financial crisis. So far this week, the sub-index has plunged 19.16 percent, compared with the benchmark TAIEX’s 10.6 percent drop, Taiwan Stock Exchange data showed.
While saying Taiwanese banks’ exposure to structured finance products would have a limited impact on their balance sheets, Taiwan Ratings Corp (中華信評), a local subsidiary of S&P’s, yesterday revised its outlook on seven domestic financial institutions to “stable” from “positive” to reflect the heightened risk for the banking and insurance sectors in Taiwan amid the latest turmoil in the US financial sector.
Ratings on these companies remained unchanged, Taiwan Ratings said.
The seven financial institutions are Chinatrust Financial Holding Ltd Co (中信金控), Chinatrust Commercial Bank (中國信託商銀), Cosmos Bank Taiwan (萬泰銀行), EnTie Commercial Bank (安泰銀行), First Insurance Co (第一產險), King’s Town Bank (京城銀行) and Shin Kong Insurance Co (新光產險).
S&P also revised its outlook from “positive” to “stable” on several other Asian financial institutions, while maintaining their ratings. They are Bank of Ayudhya Public Co of Thailand, CITIC Group of China, Philippine National Bank and Malayan Insurance of the Philippines, Dongbu Insurance Co of South Korea, Fortis Insurance Co (Asia) Ltd in Bermuda, as well as CITIC International Financial Holdings Ltd and Ming An Insurance Co (Hong Kong) Ltd in Hong Kong.
“This higher industry risk constrains the upside potential for the credit profiles of these financial institutions over the near term and consequently the likelihood of a ratings upgrade,” S&P’s credit analyst Ryan Tsang (曾宜景) said in the statement.
On Tuesday, Fitch Ratings said that the US turmoil would have limited impact on banks in the Asia Pacific given their relatively small net exposures to Lehman Brothers.
Fitch said Japanese banks had the largest exposure to Lehman Brothers, led by Sumitomo Mitsui Financial Group with its exposure topping ¥103.4 billion (US$990 million), Credit Suisse tallies showed.
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