SINGAPORE (Reuters) – Asian financial stocks fell on Friday, with the biggest declines in Japan, following a rout in U.S. regional banking stocks on concerns about rising risks and credit quality.
The banking sector’s exposure in two recent U.S. auto bankruptcies has renewed concerns about lending standards more than two years after Silicon Valley Bank collapsed, when high rates led to paper losses on its bonds.
Shares of Japanese banks and insurers fell on Friday, with Tokio Marine, Mizuho and Mitsubishi UFJ Financial Group all down almost 3%.
That came after the U.S. regional banking index fell 6% on Thursday as two smaller banks disclosed separate issues.
Zions Bancorporation said it would take a $50 million loss on two commercial and industrial loans from its California subsidiary, while Western Alliance revealed it had filed a lawsuit over alleged fraud by Cantor Group V, LLC.
Analysts say that while these issues are unlikely to pose systemic risks, they would weigh on sentiment in the short term.
“While they are significant, the scale of bad loans by itself is unlikely to pose risks to the entire system,” said Kyle Rodda, senior financial analyst at Capital.com.
Rodda said the underlying cause of both problems was lax lending standards and fraud, which raised concerns that such behavior was endemic and could lead to further defaults.
Other financial stocks in Asia were also under pressure, with Singapore’s DBS Bank shedding almost 1%, while Australian insurer QBE fell 9%.
The recent bankruptcies of US auto parts supplier First Brands and car dealership Tricolor have highlighted banks’ risk controls and the opacity of the credit market, where the complexity of loans makes it harder to assess participants’ exposure.
The two collapses last month forced some debt investors to reduce their exposure to certain sectors due to concerns about weak consumer and auto lending.
(Reporting by Ankur Banerjee in Singapore, additional reporting by Kevin Buckland in Tokyo and Stella Qiu in Sydney; editing by Sonali Paul)
