ASIA Pacific (APAC) finance companies will face a challenging operating environment and elevated asset risks, giving rise to a negative outlook in 2021, Moody’s Investors Service said today.
“Asset quality deterioration remains a risk for finance companies, given the tenuous and uneven economic recovery across APAC countries, unwinding fiscal support measures and increasing private and household debt,” assistant vice-president and analyst Jeffrey Lee said in a statement today.
He said companies that would be most impacted include those in distressed assets, aircraft leasing and low-income retail lending.
According to Moody’s, although revenue would pick up as a result of a recovery in loan demand, earnings would remain weak because of high credit costs.
It said Korean finance companies are the exception as the outlook for the segment is stable, reflecting recovering revenue and profitability under the Korean government’s extensive support programmes.
Meanwhile, the ratings agency said a broad strengthening in market activities and a gradual economic recovery supported a stable outlook for North Asian securities companies in the year ahead.
It said the outlook for North Asian securities companies was stable, driven by strong profit from buoyant brokerage and capital market activities, despite brokerage commission rates to stay low due to the intense competition and digital disruption.
Additionally, Moody’s said firms’ exposure to high-risk assets would remain moderate as regulators continued to strengthen oversight measures.
It added that the stable outlook is underpinned by securities firms’ strong liquidity and relatively low leverage in China, slower risk asset growth in Korea and improved profitability and low credit and funding risks in Japan. – Dec 8, 2020
