Banks may feel SARS pain in China, SE Asia

Banks may feel SARS pain in China, SE Asia

Agence France-Presse, Hong Kong

Standard and Poor's (S and P) said on Thursday the outbreak of
a pneumonia-like illness in greater China and Southeast Asia is
unlikely to have any immediate impact on its ratings on banks and
insurance companies in the region.

However, the short-term financial performance of banks and the
business growth of insurance companies operating in the regional
economies worst affected by Severe Acute Respiratory Syndrome
(SARS) are likely to come under pressure, the global ratings
agency said in a statement.

"SARS is likely to pressure the immediate financial
performance of banks in the region's worst-affected economies,
particularly Hong Kong, by subduing business and increasing the
risk of loan defaults," S and P said.

"However, it is unlikely to seriously affect their medium term
financial profiles," if the SARS outbreak will not escalate into
a pandemic, it said.

S and P said banks' commercial customers face disruptions to
business and shifting consumption patterns in the worst-affected
economies, as businesses in travel, tourism, hospitality and
retail industries are facing reduced sales, which will squeeze
cashflows, with negative follow-on consequences for banks' loan
performance.

However, in the insurance industry, possible travel and
medical insurance claims generated by SARS are likely to be
limited, while business interruption risk caused by the illness
is not likely to be covered by most existing policies.

So far, some 3,000 cases of SARS had been reported globally, S
and P said. Of these, two-thirds had been recorded in Hong Kong
and in mainland China, where the infection is thought to have
originated.