Moody's Investors Service on Wednesday said the outlook for global banks for 2024 is negative as central banks' tighter monetary policies have resulted in lower GDP growth.
It said Indian banks' profitability will increase further on lower provisioning expenses and robust growth in higher-yielding retail segments.
"Our outlook for global banks for 2024 is negative as central banks' tighter monetary policies have resulted in lower GDP growth.
"Reduced liquidity and strained repayment capacity will squeeze loan quality, leading to greater asset risks," Moody's said in its global banking outlook report.
Profitability gains will likely subside on higher funding costs, lower loan growth and reserve buildups.
Funding and liquidity will be more difficult.
It said the operating environment will deteriorate under tight monetary policies.
Major central banks will start to cut rates, but money will remain tight, resulting in lower GDP growth in 2024. Inflation is slowing, but geopolitical and climate risks remain.
China's economic growth is set to slow on muted private spending, weak exports and an ongoing property market correction.
"Asset risks for Chinese banks will increase from the country's economic slowdown as well as the prolonged stress among property developers and local government financing vehicles," Moody's said.