New Zealand banks leads in loan-to-deposit ratio

Bests 13 other Asia-Pacific countries, said Moody's Investors Service.

Moody's Asia Pacific Banking Outlook 2013 report shows the loan-to-deposit ratio for New Zealand’s banking system above 140%, well ahead of second placed Australia at 120%. Of the 14 countries surveyed Hong Kong came lowest at about 70%.

A loan-to-deposit ratio can be used to assess a bank's liquidity by dividing its total loans by its total deposits. A high ratio means that banks might not have enough liquidity to cover any unforeseen fund requirements. If the ratio is too low, banks may not be earning as much as they could be.

Moody's "heat map" has New Zealand banks' asset quality, funding and liquidity, plus capitalisation in the stable/moderately improving category. Profitability, on the other hand, is in the moderately weakening category.

Moody’s said the overall stable credit outlook for Asia-Pacific banks is matched by stable outlooks on 11 of the 14 banking systems, with just India and Vietnam having negative outlooks, and the Philippines a positive outlook.

"For Asian banks, more concerning than ongoing economic weakness in the euro area would be the US slipping back into recession, perhaps as a result of a political failure to deal with the country’s near-term fiscal challenges. The US is a large export market for Asia and a US recession would choke off the economic recovery we see as our base case in the region," said Moody’s.