S&P: Outlook good for region's banks

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Asia-Pacific banks are likely to remain resilient this year after a strong economic recovery throughout much of the region, ratings agency Standard & Poor's says.

S&P, in its latest ratings outlook, said all Australia's big four banks have solid earnings prospects - albeit not at the stellar levels seen before the global financial crisis.

"As most of the Asia-Pacific banking system has benefited from improved earnings, we expect the overall rating trend of the region's banks to remain stable, even if the region's economic growth should slow in 2011.

"Our outlook for the credit quality of the Asia-Pacific banking sector is stable, sustained by robust economic growth and healthy household and corporate sectors," the agency says.

Inflationary pressure remains the single biggest risk that could result in S&P revising its outlook on Asia-Pacific banking to "negative". The impact is likely to come from policy responses to high inflation that could cause steep property price corrections and pressure banks' profitability.

The region's banks are generally well placed to withstand pressure, thanks to their sound capitalisation, good earnings and liquidity, it said.

S&P expected GDP growth in the Asia-Pacific region to exceed growth in most other regions this year. "As a result, the credit standings of the region's banks should find support from relatively high loan growth and moderate credit costs - we do not expect credit costs to surge significantly in the next two years."

Most of the rated banks have sound asset quality, thanks to the region's robust economic growth.