Banking – In-depth – [NEUTRAL] – The bumpy road to recovery

In 2025F, improving business conditions and consumption could continue and drive the credit demand. 2025F credit growth could be higher than the 2024 rate. Other integrated banking services could also warm up, but activities from bancassurance, and investment could remain less active. Whereas some pressures on 2025F NIM could stem from 1) slower recovery of asset yields for supporting lending packages and price competitions among banks while witnessing slower recoveries of mid- and long-term loans and 2) higher cost of funds amid a slight increase in deposit rates. Non-performing ratios remained high in 2024 and could cool down in 2025. Small banks with weak risk management, high bad debts, and low provision buffers could suffer in profit growth. We forecast that the banking industry’s profits could grow at a single-digit rate in 2025.