Moody’s Investors Services said today its outlook for China's financial institutions over the next 12 months is negative because slowing economic growth and trade uncertainties result in a challenging operating environment for financial institutions.
Moody's expects that authorities in China will maintain accommodative monetary policies.
Low interest rates and bond yields will weigh on the banks' net interest margins and insurance companies' investment returns, but reduce funding costs for distressed asset management companies, leasing companies, and securities companies, the rating agency said.
Nevertheless, larger banks and insurance companies' reasonably good capitalisation and securities companies' low balance sheet leverage partially mitigate concerns over the more challenging operating environment, the firm added.
Moody's also expects government support for larger banks, state-owned distressed asset management companies and bank-owned leasing companies to remain strong.
“For insurance companies, their changing product mix is a favourable development. Life insurance companies are increasing contributions from their recurring premium products,” said Sonny Hsu, a Moody's VP and senior credit officer.