HONG KONG: The Covid-19 coronavirus outbreak will add $100 billion in credit losses to banks in the Asia-Pacific region this year with Chinese lenders bearing the brunt of the damage, according to S&P Global Inc.
"Some activity will be lost forever, ” Shaun Roache, S&P’s Asia-Pacific chief economist, wrote in a note on Tuesday."We estimate an income loss of about $211 billion, which will blow a hole in balance sheets across the region.”
The Covid-19 crisis will likely exert sharp, short-term pressure on Chinese banks and almost a quarter of the ratings and outlooks on the Chinese property sector may come under pressure, S&P said in the report. While Beijing has asked banks to step up with support, it has also acted to mitigate the chaos. Authorities are now allowing the nation’s lenders to delay recognizing bad loans from smaller businesses, giving temporary reprieve to trillions of yuan of debt. Regulators also told lenders not to downgrade loans with missed payments or report delinquencies to the country’s centralized credit-scoring system before the end of June, according to the statement.
Property transactions in China may remain on hiatus for the coming weeks and construction is also largely paused. Leverage and profitability may deteriorate in the next one to two years, denting credit profiles in the sector, S&P said.
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