...Decline in Gaming Revenue to Have an Indirect Impact on Macao Banks Fitch Ratings believes Macao's economic slowdown ¡ its GDP dropped by 25% yoy in 1Q15 amid strong declines in gaming revenues (Figure 1) ¡ may spill over to its banks, especially if the slowdown is prolonged. This is because a number of sectors ¡ retail, entertainment, tourism, construction and commercial property ¡ feed off gaming. While banks' gaming exposure is small at only 3% of assets as of end-1Q15, loan growth across all sectors has been rapid, with concentration risks on the domestic property sector and mainland China (Figures 2 & 3). Steady performance of mortgage loans (loan-to-value ratio: 55%, debt-servicing ratio: 30%) has supported asset quality (Figure 4). But Fitch does not expect a major deterioration in mortgage quality even though residential property prices have also fallen, as long as unemployment remains low (Figure 5). But mortgage quality will be affected by gaming, which employs 27% of Macao's...
