- Gloomy economic conditions would likely put a strain on credit growth, which is projected to grow between 9 - 10% YoY in 2023. The growth of third-party funds is also expected to align with credit, with a likelihood of it growing slightly faster due to a high rates.
- The continued recovery of the banking sector throughout 2021 and 2022 could help them handle the upcoming economic challenges. Bank’s profitability has improved along with its capital buffer, in line with better earnings. However, the performance gap between large and small-mid banks appears to be growing due to the pandemic.
- Certain sectors, which have relatively low levels of leverage and are showing improvements in NPL levels, still show potential for credit growth in 2023. The end of the government’s original restructuring plan in March 2023 will cause NPL to rise in all sectors, except for SMEs and companies in the textile, footwear, accommodation, and food and beverage industries, which received a one-year extension. Due to the more tertiary nature of owning homes and vehicles, demand for mortgages and automotive loans would also likely be more limited in a high interest rate environment.
- A downturn in the global liquidity cycle would likely pose challenges to the progress of new financial services products, such as CBDCs and BNPL. This slowdown could be a silver lining for traditional banks, as it provides them with an additional time buffer to adjust to evolving trends. At the same time, recent exponential advancements in AI could pose both direct and indirect threat that banks need to assess immediately.
