APAC Banking Outlook Faces USD180bn Downside Risk, Warns S&P

The APAC banking outlook remains broadly stable despite growing geopolitical risks, although Asia-Pacific banks could face an additional USD180bn in credit losses if conflict in the Middle East persists, according to S&P Global Ratings.

The warning forms part of the agency's latest midyear assessment of regional banking conditions.

S&P said that 92% of Asia-Pacific bank ratings continue to carry stable outlooks, reflecting expectations that credit ratings will remain largely unchanged over the next 12 to 24 months.

While most banks have only limited direct exposure to the Middle East and manageable indirect risks, prolonged disruption could weaken credit quality in some markets.

The ratings agency also highlighted technological developments, particularly AI-enabled cyber threats, as an emerging medium-level risk facing regional lenders alongside geopolitical uncertainty.

Despite these challenges, S&P believes banks across Asia-Pacific generally remain well capitalised and financially resilient, supporting a stable APAC banking outlook over the medium term.