Japanese megabanks set for better conditions in 2026

In contrast, Chinese banks and Hong Kong banks face “deteriorating” sector outlooks.

Japanese megabanks will see improving conditions in 2026 whilst Chinese banks will face persistent growth challenges and risks, according to Fitch Ratings.

For Japan, business conditions will be supported by a rise in domestic interest rates and stable credit growth, which in turn will result in higher profitability for the megabanks, the ratings agency said in its “Global Banks 2026 Outlook Compendium” report released on 15 December 2025.

In contrast, China’s banking sector has a ‘deteriorating’ outlook, reflecting Fitch’s expectation that risks remain for the banking system.

“Persistent growth challenges amid trade tensions and domestic property weakness continue to weigh on the sector’s business generation and asset quality,” Fitch said.

Hong Kong’s banking sector outlook also remains ‘deteriorating’, as lingering macroeconomic risks (including from commercial real estate) will continue to pressure core bank earnings and asset quality, it said.

Commercial real estate continues to be an asset quality pressure for China and Hong Kong.

Globally, the things to watch out for in 2026 include rising bank exposure to non-bank financial institutions, and potential risk of private credit stress spilling back into banks, said Fitch Ratings.

“Overall, our 2026 global banking sector outlook is ‘neutral’. Our most notable change is an ‘improving’outlook for the Japanese megabanks, alongside better conditions across several southern European banking systems,” said Cynthia Chan, global head of banks, Fitch Ratings.

“Against a backdrop of broader resilience, we maintain ‘deteriorating’ banking sector outlooks for several large systems, including Canada, China, France, Hong Kong, and Mexico,” Chan said.