Moody’s Investor Services expect profitability of banks in Asia-Pacific (APAC) to deteriorate in the next few years as the coronavirus outbreak accelerates structural changes in their markets.
“While banks in the region are all facing a growing need to change their business models to overcome these challenges, laggard institutions are at a greater disadvantage. This report covers 17 economies in APAC.”
Operating expenses will grow faster as coronavirus outbreak accelerates digital transformation increases in operating expenses are likely to accelerate in the next few years due to investment in technology as the coronavirus outbreak boosts demand for the digitalization of banking services.
Lockdowns and social distancing measures have spurred growth in online banking transactions. For instance, the largest bank in Singapore, DBS Bank Ltd reported that cashless transactions at the bank nearly doubled in volume in the first three months of 2020 from the same period in the prior year. The use of digital banking services is likely to continue to grow as bank customers become more accustomed to them. “While digitalization will help banks improve efficiency because it significantly lowers costs for acquiring customers and processing transactions, we expect any efficiency gains from digitalization to be limited in the next few years because banks will continue to reinvest cost savings in technology development.”
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