S&P maintains stable rating for Hong Kong banks

Rating also applies to banks in mainland China and Taiwan.

Standard & Poor's Ratings Services said banks in Hong Kong should benefit from better economic growth this year. Improved growth will likely support the steady performance of Hong Kong's banking sector.

Stubbornly high property prices, however, will continue to test banks' ability to manage their high exposure in the property sector, S&P said.

It noted that a continuing slowdown in China’s growth will continue to test banks' asset quality and profitability. S&P warned that China’s banking sector’s exposure to debt-laden local government financial platforms remains a risk.

It also expects the loan quality and profitability of China’s banking sector to deteriorate further in 2013 because of a much weaker export sector and overcapacity in certain industries.

In addition, the ongoing liberalization of interest rates in China is likely to put pressure on banks' net interest margins and profitability. Nonetheless, S&P said banks' stand-alone credit profiles underpin its stable outlook on the banking sector.

Banks in Taiwan will benefit from mild economic growth, ample liquidity, and low interest rates, but the banking sector’s overseas credit exposure is rising, and this could increase banks' susceptibility to ongoing global economic volatility.