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Non-Bank Financial Institutions

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outlooks 2020

Emerging Asia's Finance and Leasing Cos Face a Challenging 2020

The operating environment for finance and leasing companies in China, India and Indonesia is likely to remain challenging in 2020, with tight funding conditions, a weak economic background and deteriorating asset quality testing the resilience of issuers' financial profiles and business models, says Fitch Ratings. We have assigned a negative outlook to the sector.

 

Related Report: 2020 Outlook: APAC Emerging Market Finance and Leasing Companies

View all Outlooks: Credit Outlooks 2020

Outlooks 2020

Traditional Investment Mgrs See Continued Asset, Margin Downside

Global investment managers (IMs) face continued pressures in 2020, including elevated competition and a challenging investment environment. While these dynamics increase downside risk, particularly for traditional IMs relative to alternative IMs, larger, well-capitalized and diversified IMs are expected to withstand these multiple sector headwinds.

Outlooks 2020

Strong Franchises Back Stable Financial Market Infrastructure Outlook

Fitch Ratings' global rating and sector outlooks for financial market infrastructure companies (FMIs) are stable, reflecting strong franchises, increasingly diversified business models and generally strong financial metrics including solid capitalization, strong liquidity and moderate leverage.

FICO Score Variances Complicate Assessing Consumer Default Risk

Assessing downside risk of U.S. consumer credit can be more difficult if different versions of credit scores are used when lending, underwriting standards are relaxed amid a supportive economy, or when lenders are reaching for growth.

Outlooks 2020

Business Model Changes Support Stable 2020 Brokerage and Advisory Outlook

The stable sector outlook reflects the industry's progress in diversifying and adapting business models to become more efficient and resilient to on-going structural challenges, including subdued securities trading volumes and competitive revenue pressures, particularly for retail brokers. 

Outlooks 2020

Strong Consumer Underpins Stable Outlook for N.A. Finance and Leasing Companies

The 2020 sector and Ratings Outlooks for North American finance and leasing companies (FLCs) are stable, according to Fitch Ratings. The solid, albeit slowing, macroeconomic environment is expected to result in consistent credit loss performance and manageable residual value declines.

Outlooks 2020

2020 Student Lending Sector Outlook Revised To Negative

The 2020 outlook for the education finance (student lending) sector has been revised to negative from stable, according to Fitch Ratings. The negative revision reflects margin pressure and higher leverage in the loan consolidation segment, as well as emerging political risk ahead of a presidential election year. 

2020 Outlook

Competition to Maintain Pressure on BDC Lending Terms in 2020; Negative Sector Outlook

Business development companies (BDCs) will face continued challenges heading into 2020, including competitive underwriting conditions, earnings pressure from lower interest rates and unsustainable asset quality metrics, according to Fitch Ratings' 2020 BDC outlook report. Fitch believes competition in the middle market will continue to pressure deal structures and terms in 2020 as low interest rates drive elevated demand for higher-yielding middle-market paper.

Special Report

Indian NBFCs Show Mixed Resilience to Testing Conditions

India's non-bank financial company sector is highly diverse, and many companies have business models and financial profiles that should continue to underpin resilience to the liquidity pressures that have tested the sector since the failure of IL&FS in Sept 2018. 

Related Content:

 

Webinar

Debt Purchasers: Evolving Business Models and Key Credit Trends

Webinar On-Demand

As European Debt Purchaser begin to consider their upcoming refinancing needs Fitch explores the industry’s different and evolving business models and some of the key credit themes facing the sector and ultimately driving credit ratings.

 

Listen Now for On-demand

Introducing our ESG Heat Map

Fitch Ratings has launched an ESG Heat Map covering 29 different sub-sectors for Financial Institutions to provide further insight into the relevance of ESG factors to credit ratings. The map is designed to help users understand how relevant individual ESG topics are to credit ratings across different sectors.

Woodford Fallout Shows Risks from Financial System Connectivity

Fallout from the suspension of redemptions (gating) from the Woodford Equity Income Fund is an example of how problems at one entity can quickly spread to related entities and other parts of the financial system. Problems can spread due to crossholdings in sister funds or reduced investor confidence in other funds with the same manager, affecting investors as well as banks and other counterparties providing leverage to funds.
 

Leveraged Loan, CLO Exposures Understate Risks for Financial Institutions

Financial institutions' leveraged loan and CLO exposures are manageable relative to sector capital but risks may rise sharply in a stress. Undrawn facilities may be called on leading up to or during a leveraged loan downturn. Banks extend a mixture of credit facilities to CLO managers, investment funds and other non-bank commercial lenders, which are collateralised by leveraged loans or CLOs. 

Rising Household Debt May Weigh on Medium-Term Chinese Growth

Chinese household debt has continued to rise rapidly, reaching 85% of disposable income at end-2018. Rising servicing costs will weigh on economic growth in the medium term and this is reflected in our latest GDP forecasts.

 

Related Press Release:
Rising Household Debt May Weigh on Medium-Term Chinese Growth

Webinar on Demand

European Leasing & Rental: Business Models and Key Credit Trends

European leasing and rental companies have become more prominent participants on both public and private debt markets. Business models, risk profiles and exposure to economic cycles differ widely between issuers. Topics include business models and key credit trends for:

  • Rolling stock lessors
  • Equipment rental companies
  • Fleet/car leasing companies

Speakers:
Mark Young - Managing Director, Head of EMEA and APAC NBFI
Christian Kuendig - Senior Director, Head of EMEA NBFI
Aslan Tavitov - Senior Director, NBFI David Pierce, Director, NBFI

Listen Now

Fitch Publishes Dubai Aerospace Enterprise's 'BBB-' Rating; Outlook Stable

Fitch Ratings has published Dubai Aerospace Enterprise (DAE) Ltd's Long-Term Issuer Default Rating (IDR) of'BBB-' with Stable Outlook, DAE Funding LLC's senior unsecured long-term rating of 'BBB-' and DAE's senior secured long-termerm rating of 'BBB'.

Credit Card Asset Quality Weaker in First Quarter

Credit performance amongst the largest U.S. credit card issuers weakened in first-quarter 2019 (1Q19), but remains below historical averages. Both net charge-offs (NCOs) and 30+ day delinquencies for general purpose credit card issuers rose eight basis points (bps) year over year, according to latest credit card asset quality report. 
 

2019 Global Banking Conference NY - Fireside Chat - Regulatory View of Financial Stability

Kevin Duignan, Global Head of Financial Institutions, joins Michael S. Piwowar of Milken Institute and Richard Berner of NYU Stern School of Business at Fitch’s Global Banking Conference in New York, for a fireside chat on the banking regulatory environment.

Fulcrum Fees Not a Panacea for Active US Investment Managers

A broader adoption of incentive-based or "fulcrum" fee structures for investment funds could be a credit negative for traditional investment managers. Incentive-based fee structures under which the investment manager's base fee rate is a function of the fund's absolute or relative performance could help stem asset outflows, at least temporarily. 

Global Shadow Banking Growth Increases Systemic Risks

Shadow banking’s ascension may signal growing systemic risks. How shadow banks perform through the next credit cycle will determine whether this more diffuse but less transparent and more lightly regulated construct is more beneficial for the overall financial system versus the prior, more bank-concentrated model.

 

Related Materials
Special Report:
 Shadow Banking Implications for Financial Stability
Video: 2019 Risks to Watch – Shadow Banking

Financial Crime Compliance/Conduct Risk Drive High Financial ESG Scores

Financial crime compliance and conduct issues drive the highest impact Environmental, Social & Governance (ESG) relevance scores for bank credit ratings in developed markets, according to a new report that looks at specific financial institutions that have high ESG relevance scores (i.e. '4's and '5's). 

Higher BDC Leverage Increases Focus on Senior Loans, Funding

Leverage has slowly increased for business development companies (BDCs) following passage of The Small Business Credit Availability Act (SBCAA) in March 2018, which directionally Fitch views as a credit negative. However, ratings have been largely stable for the sector as BDCs utilizing higher debt capacity have opted to alter portfolio risk composition by moving the capital structure into more first-lien positions. 

Tighter Regulation Challenges Chinese Peer-to-Peer Business Models

Fitch Ratings expects China’s peer-to-peer (P2P) lending industry continues to shrink and suggests watching out the impacts on business models, asset quality, liquidity and funding.

China's Peer-to-Peer Lending Shrinks as Regulation Tightens

China's peer-to-peer lending industry will continue to shrink and consolidate as tighter regulation and weak investor sentiment drive out operators conducting the riskiest activities.

 

Related Materials:
Dashboard
Tighter Regulation Challenges Chinese Peer-to-Peer Business Models (English video)
监管趋严使中国的P2P业务模式面临挑战 (中文视频)

 U.S. Auto Loan Credit Improves; Prime and Subprime Trends Diverge

The credit performance of U.S. auto loans strengthened in 2018 with net charge-offs for the largest auto lenders declining on a year-over-year basis in 4Q18, according to the latest U.S. Auto Asset Quality Review report.

Global Non-Bank Financial ESG Risk Mostly Governance

Governance tends to have a higher relevance for emerging market NBFIs versus developed market NBFIs, where it is often associated with the implementation and/or execution of corporate strategies and structures. Developed market considerations related to governance include complex group structures, key person risk and transparency.

Contacts

Nathan Flanders

Global

Nathan Flanders

Analytical Global Head

+1 212 908 0827

Jose Santos

Global

Jose Santos

Business Group Head

+34 93 323 9044

Javier Serrano

GLOBAL

Javier Serrano

Business

+1 212 908 9158

Mark Young

EMEA & APAC

Mark Young

Analytical Head of NBFI

+65 6796 7229

Jonathan Lee

APAC

Jonathan Lee

Analytical

+886 2 8175 7601

Sing Chan Ng

APAC

Sing Chan Ng

Business

+65 6796 7210

Christian Kuendig

EMEA

Christian Kuendig

Analytical

+44 20 3530 1399

Erwin van Lümich

EMEA

Erwin van Lümich

Business

+34 93 323 8403

Claire Dopson

UK & Northern Europe

Claire Dopson

Business

+44 20 3530 1405

Alejandro Garcia

LATAM

Alejandro Garcia

Analytical

+1 (212) 908 9137

Diego Alcazar

LATAM

Diego Alcazar

Business

+1 (212) 908-0396

Meghan Neenan

North America

Meghan Neenan

Analytical

+1 212-908-9121

John Bareiss

North America

John Bareiss

Business

+1 312 368 3162

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