BCA – Banking outlook, 2023

The BCA's Banking Outlook for 2023 predicts a challenging economic environment, with credit growth expected to be around 9-10% YoY. Third-party funds are expected to grow slightly faster, helped by high interest rates. The central bank and government are taking steps to support banks' credit growth and liquidity. The banking sector has been recovering well in 2021 and 2022, with improved profitability and capital buffers. However, there is a growing performance gap between large and small-mid banks due to the pandemic. Certain sectors with low leverage and improving NPL levels show potential for credit growth in 2023. NPL levels are expected to rise in most sectors after the government's restructuring plan ends in March 2023, except for SMEs and specific industries given an extension. Demand for mortgages and automotive loans may be limited in a high interest rate environment. Global liquidity challenges may impact the introduction of new financial products like CBDCs and BNPL, giving traditional banks more time to adjust to changing trends. The rapid advancements in AI pose both opportunities and threats that banks must address promptly.