Coverage: Q1 2025 · Information to 5 June 2025
Originally Published as TGB Premium Intelligence
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TGB Quarterly Regional Banking Monitor · 5 June 2025
Most Asia-Pacific central banks eased in the first quarter of 2025 while the Bank of Japan raised its policy rate to around 0.5%, leaving banks well capitalised but facing narrower margins and pockets of rising bad loans.
The desk view
The first quarter of 2025 split Asia-Pacific monetary policy in two. The Bank of Japan raised its policy rate to around 0.5% on 24 January, while the central banks of India, Korea, Australia, Indonesia and Thailand all cut. Easing gathered pace after the US imposed tariffs in early April, with further cuts in India, Thailand, Australia, Indonesia and Korea and a 0.1 percentage point policy rate cut in China by the end of May. Capital is not the constraint: total capital ratios range from 15.28% in China to 25.38% in Indonesia. The pressure points are margins and asset quality in Thailand, Korea and Australian housing.
The regional picture
Monetary policy in Asia-Pacific moved in opposite directions in the first quarter of 2025. The Bank of Japan raised its policy rate from around 0.25% to around 0.5% on 24 January, by an 8-1 vote. Bank Indonesia, the Reserve Bank of India, the Reserve Bank of Australia, the Bank of Korea and the Bank of Thailand each cut once between 15 January and 26 February. China's one-year loan prime rate was 3.1% at the January and March fixings, and Malaysia held its policy rate at 3% in March.
US tariffs changed the outlook in the second quarter. The Monetary Authority of Singapore said on 14 April that prospects for global trade and growth had dimmed in early April as the US imposed tariffs on imports from most countries. The Reserve Bank of Australia had already said on 1 April that recent US tariff announcements were affecting confidence globally, and the Bank of Japan reported on 23 April that markets at home and abroad had fluctuated significantly since the beginning of April. India and Thailand cut again in April, and China, Australia, Indonesia and Korea eased in May. The Monetary Authority of Singapore, which runs an exchange-rate policy, flattened the appreciation path of its policy band slightly in January and again in April.
Policy decisions, January to May 2025
| Economy | Decisions in Q1 2025 | Decisions in April and May 2025 | Level at end of May 2025 |
|---|---|---|---|
| Japan (call rate) | Raised from around 0.25% to around 0.5% (24 January); held (19 March) | Held (1 May) | Around 0.5% |
| China (1-year LPR; 7-day reverse repo) | LPR 3.1% (20 January, 20 March) | Reverse repo cut from 1.5% to 1.4% (announced 7 May); LPR 3.0% (20 May) | LPR 3.0%; reverse repo 1.4% |
| India (repo rate) | Cut 25bp to 6.25% (7 February) | Cut 25bp to 6.00% (9 April) | 6.00% |
| Australia (cash rate) | Cut to 4.10% (18 February) | Held (1 April); cut 25bp to 3.85% (20 May) | 3.85% |
| South Korea (Base Rate) | Cut 25bp to 2.75% (25 February) | Cut 25bp to 2.50% (29 May) | 2.50% |
| Indonesia (BI-Rate) | Cut 25bp to 5.75% (15 January) | Cut 25bp to 5.50% (21 May) | 5.50% |
| Thailand (policy rate) | Cut 0.25pp to 2.00% (26 February) | Cut 0.25pp to 1.75% (30 April) | 1.75% |
| Malaysia (OPR) | Held at 3% (6 March) | Held at 3% (8 May) | 3% |
Source: Bank of Japan, Change in the Guideline for Money Market Operations (24 January 2025), 24 January 2025; Bank of Japan, Financial System Report (April 2025), 23 April 2025; Bank of Japan, Statement on Monetary Policy (19 March 2025), 19 March 2025; Bank of Japan, Statement on Monetary Policy (1 May 2025), 1 May 2025; People's Bank of China, Announcement on Loan Prime Rate (January 20, 2025), 20 January 2025; People's Bank of China, 2025年3月20日全国银行间同业拆借中心受权公布贷款市场报价利率（LPR）公告, 20 March 2025; People's Bank of China, 2025年5月20日全国银行间同业拆借中心受权公布贷款市场报价利率（LPR）公告, 20 May 2025; People's Bank of China, SCIO Holds Press Conference on Launching Financial Policy Package to Stabilize the Market and Expectations, 7 May 2025; Reserve Bank of India, Monetary Policy Statement, 2024-25 Resolution of the Monetary Policy Committee February 5 to 7, 2025, 7 February 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26 Resolution of the Monetary Policy Committee April 7 to 9, 2025, 9 April 2025; Reserve Bank of Australia, Statement by the Reserve Bank Board: Monetary Policy Decision (Media Release 2025-03), 18 February 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-10), 1 April 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-13), 20 May 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (February 25, 2025), 25 February 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (May 29, 2025), 29 May 2025; Bank Indonesia, BI-Rate Lowered 25bps to 5.75% Maintaining Stability, Strengthening Economic Growth, 15 January 2025; Bank Indonesia, BI-Rate Lowered by 25bps to 5.50% Maintaining Stability, Strengthening Economic Growth, 21 May 2025; Bank of Thailand, Monetary Policy Committee's Decision 1/2025, 26 February 2025; Bank of Thailand, Monetary Policy Committee's Decision 2/2025, 30 April 2025; Bank Negara Malaysia, Monetary Policy Statement (6 March 2025), 6 March 2025; Bank Negara Malaysia, Monetary Policy Statement (8 May 2025), 8 May 2025.
Policy rates at end-May 2025, %
Source: Bank of Japan, Statement on Monetary Policy (1 May 2025), 1 May 2025; People's Bank of China, SCIO Holds Press Conference on Launching Financial Policy Package to Stabilize the Market and Expectations, 7 May 2025; Bank of Thailand, Monetary Policy Committee's Decision 2/2025, 30 April 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (May 29, 2025), 29 May 2025; Bank Negara Malaysia, Monetary Policy Statement (8 May 2025), 8 May 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-13), 20 May 2025; Bank Indonesia, BI-Rate Lowered by 25bps to 5.50% Maintaining Stability, Strengthening Economic Growth, 21 May 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26 Resolution of the Monetary Policy Committee April 7 to 9, 2025, 9 April 2025; National Financial Regulatory Administration (published on the State Council portal, gov.cn), 2025年一季度银行业保险业主要监管指标数据情况, 18 May 2025; Financial Supervisory Service (Korea), Capital Ratios of Banks and Bank Holding Companies, March 2025, 29 May 2025; Bank of Thailand, Banking Sector Quarterly Brief (Q1 2025), 20 May 2025; Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for December 2024, 13 March 2025; Reserve Bank of India, Financial Stability Report, December 2024, Chapter II: Financial Institutions: Soundness and Resilience, 30 December 2024.
Banking data follow different calendars: Chinese, Korean, Thai and Indonesian figures refer to March 2025 or the first quarter, Australian data to December 2024 and Indian data to September 2024.
Japan: higher rates, higher bank earnings
The January increase took the basic loan rate to 0.75%, effective from 27 January. The Policy Board held unanimously on 19 March, when CPI inflation excluding fresh food had recently been 3.0-3.5%, and again on 1 May.
The Bank's April 2025 Financial System Report judged that the financial system had been maintaining stability on the whole. Domestic bank lending was growing at around 3% a year, and many banks had recently raised ordinary deposit rates to around 0.2%. Because lending rates have tended to rise by more than deposit rates, the Bank expects higher rates to boost banks' profits in general over a somewhat longer term. MUFG's profits attributable to owners of the parent rose 25.0% to ¥1,862.9 billion in the year to 31 March 2025, and its CET1 ratio rose 0.65 percentage point to 14.18%. Japan is the only economy in this monitor where the policy rate rose in the quarter, and its central bank expects the rate cycle to support bank profits.
China: easing arrives in May as profitability stays thin
Aggregate financing to the real economy grew 8.4% and loans 7.4% year on year at the end of the first quarter, according to the People's Bank of China. On 7 May it announced a cut in the 7-day reverse repo rate from 1.5% to 1.4% and a 0.5 percentage point cut in the reserve requirement ratio, expected to release about RMB1 trillion of long-term liquidity. The one-year loan prime rate fell to 3.0% on 20 May, a 10bp reduction.
National Financial Regulatory Administration data show a stable but low-return system. Commercial banks' NPL ratio rose 0.01 percentage point in the first quarter to 1.51%, as non-performing loans increased by RMB157.4 billion to RMB3.4 trillion. Return on equity was 8.82% and return on assets 0.68%. Provision coverage fell 3.06 percentage points to 208.13%, while the capital adequacy ratio was 15.28% and the liquidity coverage ratio 146.20%. The PBOC said it would guide commercial banks to lower deposit rates accordingly, which matters for banks whose return on equity is already in single digits.
India: two cuts and an accommodative stance
The Reserve Bank of India cut the repo rate by 25bp to 6.25% on 7 February and by a further 25bp to 6.00% on 9 April, when it moved its stance from neutral to accommodative. Headline CPI inflation had fallen to 3.6% in February 2025, and the committee projected inflation of 4.0% and GDP growth of 6.5% for 2025-26.
The banks went into the easing cycle in strong shape. The December 2024 Financial Stability Report put the gross non-performing asset ratio of scheduled commercial banks at a 12-year low of 2.6% in September 2024, with a CRAR of 16.7% and a CET1 ratio of 14.0%. Return on assets was 1.4% and return on equity 14.6%, and bank credit was growing at 11.3% year on year in mid-December 2024.
Australia: easing from a high level
The Reserve Bank of Australia lowered its cash rate target to 4.10% on 18 February, held on 1 April and cut by 25bp to 3.85% on 20 May. By then annual trimmed mean inflation had fallen to 2.9% in the March quarter, below 3% for the first time since 2021.
APRA's December 2024 statistics show flat earnings and firm capital. Deposit-taking institutions earned A$39.6 billion after tax in the year to December 2024, up 0.4%, with a total capital ratio of 20.1% and a liquidity coverage ratio of 132.2%. Residential non-performing loans rose to 1.05% from 0.85% a year earlier. The RBA's April 2025 Financial Stability Review put the banking sector's CET1 ratio at 12.1% in December 2024. Commonwealth Bank of Australia reported cash profit of A$5.13 billion for the half year to 31 December 2024, up 2%, with a net interest margin of 2.08%.
South Korea: deeper cuts as growth falters
The Bank of Korea cut its Base Rate from 3.00% to 2.75% on 25 February and to 2.50% on 29 May, by which time it had lowered its 2025 growth forecast from 1.5% to 0.8%. Headline and core CPI inflation were both 2.1% in April.
Domestic banks' net income rose 28.7% to KRW6.9 trillion in the three months to March 2025, helped by the absence of the KRW1.8 trillion of ELS compensation booked in Q1 2024, although interest income fell by KRW0.1 trillion. The CET1 ratio rose 0.13 percentage point to 13.20% at the end of March. Asset quality is weakening slowly. The substandard-or-below loan ratio rose to 0.59% from 0.54% three months earlier, and the won-loan delinquency rate was 0.53%, 0.10 percentage point higher than a year earlier.
Indonesia: liquidity support alongside rate cuts
Bank Indonesia cut the BI-Rate by 25bp to 5.75% on 15 January and to 5.50% on 21 May, and cut the Macroprudential Liquidity Buffer for conventional banks from 5% to 4% from 1 June. Credit growth slowed from 10.39% in 2024 to 8.88% in April 2025. The capital adequacy ratio was 25.38% in March 2025, with a gross NPL ratio of 2.17%.
Thailand: contracting credit, rising bad loans
The Bank of Thailand cut its policy rate to 2.00% on 26 February and to 1.75% on 30 April. Banking-system loans contracted by 1.3% year on year in the first quarter of 2025, and NPLs rose to 548.1 billion baht, an NPL ratio of 2.90%, driven mainly by SME and mortgage loans. The BIS capital ratio was 20.7%, and the central bank said net interest income declined following rate cuts. Thai bank credit is contracting, while the latest data show loans growing by 7.4% in China (March), 11.3% in India (mid-December 2024) and 8.88% in Indonesia (April), and the Thai NPL ratio is above the ratios reported for those three systems.
Singapore and Malaysia
The Monetary Authority of Singapore expects 2025 GDP growth of 0.0-2.0%. DBS Group's first-quarter net profit fell 2% to SGD 2.90 billion because of the 15% global minimum tax, with a return on equity of 17.3%. Its commercial book net interest margin fell nine basis points to 2.68% on lower interest rates, and it took SGD 205 million of general allowances in light of macroeconomic and geopolitical uncertainty. Bank Negara Malaysia held its policy rate at 3% in March and May.
Selected large banks: latest reported results
| Bank | Period | Net profit | Return on equity | CET1 ratio |
|---|---|---|---|---|
| MUFG (Japan) | Year to 31 March 2025 | ¥1,862.9bn, +25.0% | Not available | 14.18% |
| Commonwealth Bank of Australia | Half year to 31 December 2024 | A$5.13bn cash NPAT, +2% | 13.7% | 12.2% |
| DBS Group (Singapore) | First quarter of 2025 | SGD 2.90bn, -2% | 17.3% | 17.4% (transitional) |
Source: Mitsubishi UFJ Financial Group, Consolidated Summary Report for the fiscal year ended March 31, 2025, 15 May 2025; Commonwealth Bank of Australia, Financial results 1H25, 12 February 2025; DBS Group, First-quarter profit before tax at record SGD 3.44 billion as total income grows 6% to new high of SGD 5.91 billion; net profit at SGD 2.90 billion with ROE at 17.3%, 8 May 2025.
Cross-country comparison
Asia-Pacific banking systems: capital, asset quality and returns (reference dates in brackets)
| Economy | Total capital ratio | NPL measure | Returns or earnings |
|---|---|---|---|
| China | 15.28% (end-Q1 2025) | NPL ratio 1.51% (end-Q1 2025) | ROE 8.82% (Q1 2025) |
| India | 16.7% (Sep 2024) | GNPA ratio 2.6% (Sep 2024) | ROE 14.6% (Sep 2024) |
| Australia | 20.1% (Dec 2024) | NPL share around 1.1% (Dec 2024) | NPAT A$39.6bn, +0.4% (2024) |
| South Korea | 15.68% (Mar 2025) | Substandard-or-below 0.59% (Mar 2025) | Net income KRW6.9tn, +28.7% (Q1 2025) |
| Indonesia | 25.38% (Mar 2025) | Gross NPL 2.17% (Mar 2025) | Not available |
| Thailand | 20.7% (Q1 2025) | NPL ratio 2.90% (Q1 2025) | Not available |
Source: National Financial Regulatory Administration (published on the State Council portal, gov.cn), 2025年一季度银行业保险业主要监管指标数据情况, 18 May 2025; Reserve Bank of India, Financial Stability Report, December 2024, Chapter II: Financial Institutions: Soundness and Resilience, 30 December 2024; Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for December 2024, 13 March 2025; Reserve Bank of Australia, Financial Stability Review – April 2025: Resilience of the Australian Financial System, 30 April 2025; Financial Supervisory Service (Korea), Capital Ratios of Banks and Bank Holding Companies, March 2025, 29 May 2025; Financial Supervisory Service (Korea), Domestic Banks' SBLs, March 2025, 30 May 2025; Financial Supervisory Service (Korea), Bank Earnings, First Quarter 2025, 23 May 2025; Bank Indonesia, BI-Rate Lowered by 25bps to 5.50% Maintaining Stability, Strengthening Economic Growth, 21 May 2025; Bank of Thailand, Banking Sector Quarterly Brief (Q1 2025), 20 May 2025.
Total capital ratios range from 15.28% in China to 25.38% in Indonesia, which leaves room to absorb further loan losses as growth slows. The more immediate pressure is on earnings: Chinese commercial banks' return on equity was 8.82%, and both the Thai banking system and DBS in Singapore have reported lower net interest income or margins as rates fall.
Outlook risks
Trade policy is the common risk. The Bank of Korea has cut its 2025 growth forecast to 0.8%, and Singapore expects growth of 0.0-2.0%. In Thailand, contracting credit and an NPL ratio of 2.90% leave banks exposed if the slowdown deepens. In Australia, residential non-performing loans of 1.05% are the indicator to follow as the cash rate falls. Japan faces the opposite question: whether the market volatility since April interrupts a rate cycle that is lifting bank profits.
What to watch
- 4 to 6 June 2025: the RBI Monetary Policy Committee meets for the first time since moving to an accommodative stance.
- 30 June 2025: new loan disbursements under the Bank of Japan's Fund-Provisioning Measure to Stimulate Bank Lending end, as scheduled.
- From 2027: Additional Tier 1 instruments start to be replaced by other forms of capital in Australian bank capital rules.
Primary sources: Bank of Japan, Change in the Guideline for Money Market Operations (24 January 2025), 24 January 2025; Reserve Bank of India, Monetary Policy Statement, 2024-25 Resolution of the Monetary Policy Committee February 5 to 7, 2025, 7 February 2025; Reserve Bank of Australia, Statement by the Reserve Bank Board: Monetary Policy Decision (Media Release 2025-03), 18 February 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (February 25, 2025), 25 February 2025; Bank Indonesia, BI-Rate Lowered 25bps to 5.75% Maintaining Stability, Strengthening Economic Growth, 15 January 2025; Bank of Thailand, Monetary Policy Committee's Decision 1/2025, 26 February 2025; Monetary Authority of Singapore, MAS Monetary Policy Statement - April 2025, 14 April 2025; National Financial Regulatory Administration (published on the State Council portal, gov.cn), 2025年一季度银行业保险业主要监管指标数据情况, 18 May 2025; Financial Supervisory Service (Korea), Capital Ratios of Banks and Bank Holding Companies, March 2025, 29 May 2025; DBS Group, First-quarter profit before tax at record SGD 3.44 billion as total income grows 6% to new high of SGD 5.91 billion; net profit at SGD 2.90 billion with ROE at 17.3%, 8 May 2025; Bank of Thailand, Banking Sector Quarterly Brief (Q1 2025), 20 May 2025; Financial Supervisory Service (Korea), Domestic Banks' SBLs, March 2025, 30 May 2025; Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for December 2024, 13 March 2025; Bank Indonesia, BI-Rate Lowered by 25bps to 5.50% Maintaining Stability, Strengthening Economic Growth, 21 May 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26 Resolution of the Monetary Policy Committee April 7 to 9, 2025, 9 April 2025; Bank of Thailand, Monetary Policy Committee's Decision 2/2025, 30 April 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-13), 20 May 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (May 29, 2025), 29 May 2025; People's Bank of China, SCIO Holds Press Conference on Launching Financial Policy Package to Stabilize the Market and Expectations, 7 May 2025; Reserve Bank of India, Financial Stability Report, December 2024, Chapter II: Financial Institutions: Soundness and Resilience, 30 December 2024; Bank of Japan, Financial System Report (April 2025), 23 April 2025; People's Bank of China, Announcement on Loan Prime Rate (January 20, 2025), 20 January 2025; People's Bank of China, 2025年3月20日全国银行间同业拆借中心受权公布贷款市场报价利率（LPR）公告, 20 March 2025; Bank Negara Malaysia, Monetary Policy Statement (6 March 2025), 6 March 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-10), 1 April 2025; Bank of Japan, Statement on Monetary Policy (19 March 2025), 19 March 2025; Bank of Japan, Statement on Monetary Policy (1 May 2025), 1 May 2025; People's Bank of China, 2025年5月20日全国银行间同业拆借中心受权公布贷款市场报价利率（LPR）公告, 20 May 2025; Bank Negara Malaysia, Monetary Policy Statement (8 May 2025), 8 May 2025; Mitsubishi UFJ Financial Group, Consolidated Summary Report for the fiscal year ended March 31, 2025, 15 May 2025; Reserve Bank of Australia, Financial Stability Review – April 2025: Resilience of the Australian Financial System, 30 April 2025; Commonwealth Bank of Australia, Financial results 1H25, 12 February 2025; Financial Supervisory Service (Korea), Bank Earnings, First Quarter 2025, 23 May 2025; Financial Supervisory Service (Korea), Delinquency Rate on Domestic Banks' WD Loans, March 2025, 21 May 2025.