Moody’s: Asia-Pacific banks well-capitalized amid tariff woes
Banks across Asia-Pacific, including in the Philippines, are expected to withstand the shock of new US tariffs, though loan growth may falter as trade uncertainty weighs on business and consumer confidence, Moody’s Ratings said.
The region’s reliance on exports to the United States leaves it exposed to higher tariffs, the credit ratings agency noted. Ongoing trade tensions are likely to slow economic growth and disrupt supply chains, it added, but most banks have the capital and liquidity to absorb losses.
Government support measures and interest rate cuts should also help contain a rise in bad loans.
“Uncertainty surrounding the interpretation and implementation of any final agreements will weigh on consumer and business sentiment, and risk further dampening loan growth,” Moody’s said.
“To offset risks stemming from the weaker economic outlook, several governments have announced measures to support businesses affected by trade disruptions in recent months,” it added.
President Marcos confirmed after a bilateral meeting with US President Donald Trump in Washington that Washington would proceed with the imposition of a 19-percent tariff on Philippine exports—higher than the 17 percent announced in April, but slightly below the 20 percent floated in early July.
In the Philippines, lenders have leaned more heavily on retail borrowing to offset weaker demand for corporate loans. Still, latest data showed bank lending rose 12.1 percent in June from a year earlier to P13.55 trillion, the fastest pace in four months.
Meanwhile, business loans climbed 11.1 percent to P11.49 trillion, while retail lending surged 24 percent to P1.74 trillion.
Across the region, central banks are in the midst of easing cycles to support credit growth. In Manila, the Bangko Sentral ng Pilipinas has lowered its benchmark rate by 1.25 percentage points this year to 5.25 percent.
Moody’s said that while cheaper borrowing costs could limit the growth of bad loans, they may also squeeze bank profit margins.
“Central banks across APAC have also started lowering rates and we expect the interest rate environment to become more accommodative over the second half of 2025,” Moody’s said.
“While this will contain the increase of new impaired loans, this will put pressure on profitability of banks because of tighter margins,” it added.
