Slower operating conditions to weaken profitability, liquidity to stabilize with mid-sized and small banks most at risk
Bank profitability reached peak levels in 2022, supported by robust economic backdrop. However, bank operating conditions will weaken in 2023, as persistent macro headwinds and tighter financing conditions dampen credit demand and increase operating costs. Profitability will moderate from rising credit costs, narrower net interest margins, and lower fee income growth. Liquidity will stabilize but remain tight, with mid-sized and small banks most at risk.
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