Outlook for Asia's banking sector should remain stable

Outlook for Asia's banking sector should remain stable

HONG KONG (Dow Jones): Rating agency Fitch said its outlook on
Asia's banking sector will likely remain stable in the medium
term, as it doesn't expect any major credit rating upgrade in the
region in the near term.

Speaking at a seminar on Asia's banking sector, Fitch analysts
said Friday that banking sectors in South Korea, Thailand,
Indonesia, Malaysia and Taiwan have to overcome significant
challenges before Fitch would consider improving their outlooks.

The analysts recognized that some of the countries have made
significant efforts to restructure their banking sectors, but
continued political, economic and social uncertainties still
weigh on them.

In Thailand, for instance, Fitch needs "to see clear signs" of
improved assets and capital before the agency upgrades Thai
banks, said David Marshall, managing director for Asian financial
institutions.

In the case of Indonesia, "economic growth will have to be
sustainable for a while (before Fitch can) consider any
Indonesian bank upgrade," said analyst Peter Tebbutt.

Turning to Malaysia, Tebbutt noted that Malaysian banks'
credit ratings are "a bit of a mixed bag" because of merger
activities currently going on.

Mergers will affect nonperforming loans on the banks' balance
sheets but Tebbutt warned not to expect "any wild changes."

Taiwan also has to overcome a number of challenges, such as
establishing successful asset management corporations, or AMCs,
to dispose of the banks' nonperforming loans.

Taiwan has started setting up AMCs, including joint ventures
with foreign banks like Goldman Sachs and Morgan Stanley Dean
Witter, but whether those AMCs will be a success or not "is still
doubtful," said Fitch Taiwan representative Roxanne Liu.

Another challenge Liu identified is Taiwan's need for an
improved and unified bank supervision body. The unification of
the three current supervising bodies, which has been planned for
years, has so far shown no progress.