Asian Banks' Loan-to-Deposit Ratios

Not wanting to make a prediction on how Asian stock markets will close today, I shall use the time to share with readers some data on the Asian economies instead. From time to time, you will hear me tout bullish thoughts of Asia, but these are usually fundamental arguments which frankly, the markets ignore. These days, trading has become very technical and depend more on liquidity.

So, as we put aside the trading view and look squarely at Asia's fundamentals, one reason we can remain bullish on (Asia) is the relative strength of Asian Banks. Firstly, Asian Banks were hardly affected by the Structured Credit blow-up. Some banks did take a small hit, but nothing life-threatening. Secondly, as we look at the average Loan-to-Deposit ratios, Asian Banks in general have the capacity to lend with most Banks averaging 0.75 times. This is important, as it measures the ability of Banks to lend, if forced to. China, for example, lent heavily in the 1Q09 after the Central Government "suggested" that Banks should lend more aggressively.

Of course, a purist would argue that it is wrong that Government intervenes in such manner, but what if it was collectively good for the economy? I think the argument is less straight-forward. Still, the above chart is a reminder, that Asian Banks are strong and have the capacity to lend. But will they? Well, looking at China, they did.