In its report card on the eight strongest banks in the Asia-Pacific region, Fitch ratings agency said it expected sound profiles would be maintained, despite the current credit-cycle downturn. It rates all eight banks 'AA-'."Each bank faces the risks of China slowdown, climbing household indebtedness and a downturn in the respective property markets of Hong Kong, Singapore and Australia," noted Fitch. These risks were, however, mitigated by the conservative approach of their respective prudential regulators. "Stable, transparent and traditional business models underpinned the banks' strong and sustainable profitability while they maintained a broadly conservative risk appetite," the Fitch report said, adding: "Home-market dominance is a key feature of all the banks analysed."Of these large banks, Fitch singled out HSBC's Hong Kong franchise as "the most complex and diversified", with operations spanning 20 markets. Its domestic lending accounted for 61 per cent of the total at year-end 2015. "We expect HSBC and the Singapore banks to continue expanding their foreign operations more quickly than the rest," Fitch said.The operations of the Australian banks were more domestically focused, particularly ANZ and NAB, which have been refocusing on their home markets since 2015.Pulling back from China-exposed loans was not limited to the Australian banks, though. Fitch noted the average loan exposure to greater China among Singapore's three largest banks - the DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank - had fallen to 23 per cent of total loans by end March 2016, down from 25 per cent at end 2015.Fitch also noted that Australian banks' commercial loans were likely to be the "first source of asset quality problems for them, especially as commodity prices remain weak." Singapore banks have meaningful commodity exposures, as does HSBC, although Fitch said the effect of their commodity price weakness on their credit quality was "moderate" because of sound underwriting and collateral.Fitch also said it expected the eight big banks in the region to continue "accreting" capital from retained earnings.The ratings agency noted that the core capital ratio for Australia's Big Four banks "could decline as they comply with upward adjustments to risk weighted assets, as required by regulators." Reliance on wholesale funding is likely to remain a feature for Australian banks as well, with Fitch pointing out they were 80 to 90 per cent funded by deposits. As a counterpoint, HSBC's Hong Kong operations were characterised by high liquidity as loans accounted for only 40 per cent of assets.