Asia Loan Bankers Face Heightened Competition and Margins in 2026

s bankers in Asia are preparing for a more competitive market that is squeezing returns from lending, as syndicated deal flow remains subdued. Loan volumes denominated in US dollars, euros, and yen—often termed G3 currencies—fell 6.7% to $189 billion in 2025, reaching a two-year low in the Asia Pacific region outside Japan. This decline is attributed to uncertainty around tariffs and high US interest rates, which have delayed borrowing or shifted some companies to local currency funding according to Bloomberg.

Meanwhile, bond sales in Asia Pacific outside Japan rose 27% to $317 billion, a four-year high, further reducing the reliance on loans for financing. This shift has tilted the market in favor of borrowers, as strong lender demand, deep regional liquidity, and the rise of private credit have enabled borrowers to secure increasingly favorable terms according to Bloomberg.

Margins have tightened even in traditionally higher-yielding sectors like digital infrastructure. With loan demand outpacing supply, bankers anticipate further pricing compression, especially for strong borrowers, though the pace of compression is expected to slow as internal cost-of-funds constraints come into play according to Bloomberg.

Why Is This Happening?

Asia's abundant liquidity has attracted European borrowers such as Dutch industrial builder CTP NV and French car leasing firm Ayvens SA, along with repeat participants from the Gulf. Borrowers from the Middle East raised a record $15.8 billion in syndicated loans in the Asia Pacific region in 2025. This trend is expected to continue as the United Arab Emirates and Saudi Arabia push forward with large-scale infrastructure projects according to Bloomberg.

European and Middle Eastern borrowers have been seeking better pricing and terms than what is available in Western markets, according to Stephanie Vallance of Australia & New Zealand Banking Group. These transactions have seen strong participation from the Asian investor pool according to Bloomberg.

What Are the Market Implications?

Digital infrastructure lending is expected to remain a major theme in 2026, driven by the demand for data centers supporting AI, cloud computing, and digitalization. Jumbo deals, such as the $3.8 billion facility to back the purchase of ST Telemedia Global Data Centres, will help boost volumes. However, pricing for the sector has compressed significantly, with margins for operating companies dropping from 270–280 basis points above the US benchmark to the mid-200s according to Bloomberg.

Banks are also shifting focus to holding company deals, which can fetch higher margins of 4% to 5%. Unlike operating company loans, these deals are typically backed by private equity firms or infrastructure funds and have seen strong support from the private credit market according to Bloomberg.

Where Will Activity Be Focused?

Australia's loan market is expected to remain robust in 2026, supported by refinancing activity, mergers and acquisitions, and competitive pricing. Volumes rose 13% year-on-year to $128 billion in 2025, making Australia a key contributor to the region's totals. Major M&A transactions, including the A$4 billion acquisition of National Storage REIT and the A$6.5 billion purchase of Alinta Energy, are anticipated to drive loan demand further according to Bloomberg.

In China, borrowers are favoring renminbi loans due to onshore interest rates, which are significantly lower than US rates. This trend is expected to continue into the first half of 2026. Additionally, Chinese banks are offering longer loan tenors, which are being utilized by both financial sponsors and corporations according to Bloomberg.

The Gulf region's appetite for loans is also expected to grow. With ambitious infrastructure projects underway, and a record amount raised in 2025, the Middle East is likely to remain a key source of borrowing activity in the Asia Pacific region according to Bloomberg.