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SARS case won't hurt banks: S&P

"It would have been a far greater shock within the financial system but now they just accept it as one of the risks they have to face in doing business."

Adrian Chee, Standard and Poor's associate director for financial services ratings

A repeat of the SARS outbreak is unlikely to do any major damage to Asian banks as they are already starting to view the disease, like terrorism, as one of the risks to include in their planning, Standard and Poor's (S&P) said yesterday.

"It would have been a far greater shock within the financial system but now they just accept it as one of the risks they have to face in doing business," Adrian Chee, the global credit watchdog's associate director for financial services ratings, said.

"Not only SARS, but terrorism for example as we have recently seen in Bombay [Mumbai] and Jakarta, the impact in the past would have been greater," he said, referring to last month's bomb blasts in the Indian commercial hub and Indonesian capital.

Experience gained dealing with the impact of the SARS outbreak earlier this year would also mean lenders in the region will be able to cope better should a second outbreak occur, Chee said.

A new SARS case in Singapore announced on Tuesday triggered fears of a second outbreak of the disease caused billions of dollars in economic damage earlier this year.

Chee said it was too early to gauge whether the new SARS case in Singapore would affect the banking sector, but based on the first outbreak, the chances were slim.

"Basically, we feel that so far from what we have seen, the impact particularly from SARS in the second quarter of this year on the asset quality of the Singapore banks' portfolio has been quite muted," he said.

S&P also said yesterday that most financial systems in the Asia-Pacific region have a stable outlook heading into next year with the Philippines and Taiwan upgraded from negative.

"There are distinct indications that the wider picture for the regional banking industry is not one of doom and gloom," said Ian Thompson, credit analyst at the the global ratings agency.

"Many Asian economies have begun to grow again since the regional slowdown in 2001, while many Asian banks have gradually strengthened their financial profiles since the years immediately following the 1997 to 1998 Asian financial crisis," he said.

Regional financial systems rated as having a "stable" outlook on the company's report card include Australia, China, Hong Kong, Indonesia, Malaysia, the Philippines, Sing-apore, South Korea and Taiwan.

Only Japan was given a "negative" outlook, while Thailand was the sole country whose financial system was rated positive from stable previously.

The upgraded outlook was given to "reflect a stablization in asset quality that has come about primarily as a result of better economic conditions and actions taken by banks and the government to tackle problem loans," S&P said.

However, Thai banks, which were among the worst hit by the Asian crisis, continue "to be plagued by recurring problem loans because a still-substantial portion of restructured loans have relapsed to delinquent status," it said.

Hong Kong and Singapore both have a stable outlook due to adequate capitalization and loan provisioning levels but their banks are struggling to find a niche in their respective sub-economic regions.

"Most of the banks in Hong Kong and Singapore are facing saturated home markets and finding it difficult to expand abroad," S&P said.

"While China presents business opportunities to banks in Hong Kong and Singapore, risks associated with business expansion in China are a concern," it said.

Taiwan's banking system also has a stable outlook but industry-wide reforms remain a challenge, S&P said.
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