There are fears that the central bank's recent cap on speculative lending may have come too late. Still digging out Problem loans that went bad when an economic and property bubble burst earlier this decade continue to be a drag on the industry. While the stock market remains moribund, real estate shows signs of recovering. Loan growth is picking up and interest margins are healthy. Although Japanese banks have concentrated more than half of their foreign lending in Asia, the economic slowdown in newly-industrialized nations won't drastically effect profitability.
Most loans are to Japanese manufacturers operating in Asia.
Real estate now accounts for about one-fourth of total lending. Instead of joining forces to meet the capital requirements, smaller banks instead have sought additional funding. Foreign banks have one-third of the total market but further expansion is limited because they are restricted from opening new branches. Another migraine Manila's banks have only just finished liquidating bad debt incurred in 1980s recessions. Now, after three years of heady economic growth, the bad times may roll again.