Fitch Ratings says that its ratings for banks in developed markets remain under pressure, and upside momentum in the emerging markets is dissipating, amid a halting global economic recovery.

The rating agency began its series of global banking conferences Monday, setting out its view for the industry over the next year or so, indicating that it expects global GDP growth to strengthen from 2014, but that it will be uneven and fragile.

“In developed markets, reforms are vital if debt overhang and demographics are not to drag on long-term growth. Ratings in these markets remain under downward pressure,” notes Tony Stringer, managing director sovereigns at Fitch.

“In emerging markets, growth potential is declining and there is a need to rebalance to more sustainable growth models,” he adds. “These markets have seen strong upgrades in recent years, but momentum for positive rating actions may have stalled.”

In Europe, bank solvency profiles are improving and balance sheets are being de-risked, it notes, but this is likely to be tempered by generally moderate-to-weak profitability.

“U.S. banks are facing a new reality, but against a stable backdrop,” says Joo Yung Lee, head of North American financial institutions at Fitch. “Credit fundamentals are relatively strong, supported by sound capitalization, liquidity and improving asset quality. The remaining asset quality issues are in housing. Earnings are the big challenge — banks’ profits will not reach historic levels, particularly given the new realities of the challenging macro environment, low interest rates, relatively high, though improving, unemployment and sluggish loan growth.”

“Costs from regulation are a part of this new reality – both compliance, higher capital from Basel III and fines/litigation. Mitigation is largely from cost-cutting and ensuring that capital is used efficiently. On the positive side, regulation does provide creditors with the higher capital and greater liquidity,” she adds.

Additionally, in a new special report, Fitch says that it continues to expect a moderate deterioration in bank asset quality across many emerging markets as loan books season following recent credit growth. However, in most cases, Fitch believes still solid economic performance will help to limit increases in non-performing loans, and banks’ profits and capital should comfortably absorb impairment charges, it says.

Asset quality in China remains a concern, given the magnitude and pace of credit growth, it cautions. “Loss-absorption capacity is under pressure, and is likely to be more of an issue as loans season. Most banks can absorb a rise in delinquencies to mid-single digits, after which government support may be required,” it says.

And, a sharper-than-expected deceleration of the Brazilian economy, following recent rapid credit expansion, is causing somewhat higher impairment in retail and small business portfolios, it says. However, most banks still have comfortable capital and liquidity levels that mitigate these concerns, it adds. Outlooks are stable in Mexico, Chile, Peru and Colombia, but negative on Argentine and Venezuelan banks due to potential macro rebalancing/volatility.

In Russia, Fitch has concerns about rapid retail loan growth, legacy corporate asset quality problems, tighter capital and a slowing economy. “Solid performance and capital at some banks mitigate these risks, while others are more vulnerable,” it says.