Lending incomes at many large Asia-Pacific banks are expected to dip in 2024, as margins come under increasing pressure, according to S&P Global Market Intelligence data & analysis.

Key highlights from the analysis include

·         Twelve of the region’s 20 largest banks by assets are expected to post declines in net interest income (NII), according to analyst consensus estimates compiled by S&P Global Market Intelligence. Lenders’ NII — the difference between what banks earn on loans and pay for deposits — is likely to revert to growth in 2025, according to the estimates.

·         Industrial and Commercial Bank of China Ltd. (ICBC), the world’s largest bank by assets, is estimated to log NII of $92.33 billion in 2024, down from $92.56 billion in 2023, before eventually rebounding to $94.11 billion in 2025, according to the estimates. Similarly, China Construction Bank Corp. and Bank of China Ltd. are both expected to post declines in their NII for 2024 before seeing growth in 2025.

·         Japan’s three megabanks are likely to see gains in their net interest margin (NIM) from the higher interest rates, but their NII would be dragged by their international business. Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc.’s NII are expected to decline in 2024 from 2023. Only Sumitomo Mitsui Financial Group Inc. is expected to log an increase in NII for 2024 to $13.03 billion from $12.71 billion in 2023.

·         Analysts estimates that majority of the region’s largest banks will see declines in NIMs as interest rates come off a peak. Singapore’s DBS Group Holdings Ltd. is expected to have the highest NIM in 2024 among the sampled Asia-Pacific banks with a NIM of 2.09%, but this will still be a decline from the lender’s NIM of 2.15% in 2023. Singapore banks are expected to keep their interest margins stable as the US Federal Reserve now expects to delay rate cuts.

Please find the full analysis here.

Source: S&P Global Market Intelligence