Asian Banks Roundup of FY25 Results

Asian banks maintain strong capital buffers and defensiveness, outperforming broader regional credit benchmarks in 2026. Analysts favor senior bonds from India/Southeast Asia and selective Tier 2 paper from South Korea and Hong Kong.

Key Takeaways

• 1.Asian financial credit has shown significant resilience and outperformance (1% YTD return) relative to the broader Asia credit market (+0.5%) due to shorter duration and limited exposure to Middle East conflicts.
• 2.Subordinated debt supply is expected to be deeply negative as Asian banks redeem USD instruments without refinancing, thanks to robust capital positions (CET1 ratios averaging 16.1%).
• 3.Investment strategy favors higher-yielding senior bonds from Indian and Southeast Asian banks, while Tier 2 recommendations focus on shorter-dated credits in Hong Kong, South Korea, and Thailand.

Table of Contents

• Asian financials: Defensiveness shining through
• Dwindling bank capital issuance given ample capital buffers
• Investment strategy
• Key risks
• Mainland China: The worst of NIM compression is likely behind us
• Hong Kong: Capital strength and cautious optimism amid CRE challenges
• South Korea: Higher credit costs, lower provisioning coverage ratios
• Singapore: Compressed local rates lead to narrowing net interest margins
• India: Robust loan growth, asset quality improvement evident
• Thailand: Removal of ratings overhang a key credit positive
• Indonesia: Ratings risk amid fiscal and governance concerns for the sovereign
• The Philippines: Asset quality is the biggest concern

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