Despite the challenges, bankers and analysts said not all is doom and gloom.
Despite these challenges, bankers and analysts said not all is doom and gloom as there are bright spots that would position the sector on a growth trajectory, noting that they expect a decent loan growth of between 4.5% and 5.5% for next year.
“We are of the view that credit impairments and incremental credit costs for 2023 will remain manageable with the support of moderate interest-rate hikes and continued economic recovery. The sector would benefit from the positive, albeit slower, growth projected for 2023. However, he said the overall macro outlook remains volatile as the country is closely tied to the world economy which is facing challenges.
NIM is a measure of the difference between the interest income generated by banks and interest paid out to depositors. A wider NIM indicates higher earnings for banks. “Narrower NIMs and slightly slower loan growth would be more than offset by lower impairment charges or writebacks as well as absence of the one-off Cukai Makmur,” she added.
“For 2023, we foresee banks recording modest loan impairment charges or even net writebacks for some, as excess management overlays may be reversed. Notwithstanding, we believe banks will be judicious in releasing these preemptive provisions,” Wong said. The banking sector, he said, is part of financial intermediaries which play a very significant role in the country’s financial system, as it helps to channel funds from the savers to the users of funds in the economy.
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