News Column

Banking sector aggregate deposits reach Rs7.6tr

June 16, 2014



The banking sector aggregate deposits in 2014 have registered a growth of 2 per cent, reaching Rs7.6 trillion as of May 23, 2014.

Latest figures state that banks maintained their prudent lending stance, where credit offtake remained low during the year and gross advances amounted Rs4.2 trillion (up 4 per cent since December 31, 2013).

Investments on the other hand grew significantly by 11 per cent to Rs4.5 trillion during the same period, reflecting banking sector’s heavy participation in high yielding PIBs. As a result, banking sectors’ ADR and IDR improved to 55 per cent (+1ppt) and 59 per cent (+5ppt) respectively. With credit offtake expected to remain subdued experts anticipate improvement in NIMs for banks will stem from their investments, which will bolster their earnings.

They said that with one month into 2Q2014, banking sector credit offtake remains weak, growing by only 1 per cent since March 31, 2014 to Rs4.2trn, with cumulative 2014 YTD growth at 4 per cent. That said, investments during the same period have grown by 11 per cent since the start of the year showing heavy participation of banks in PIB auctions.

Average spreads for banks remained almost flat at 6.06 per cent in April (+1bp MoM while -13bps YoY) where the same had hit a low of 5.98 per cent (lowest since April 2005) in January 2014. Meanwhile 4M2014 weighted average spreads stand at 6.04 per cent compared to 6.21 per cent in 4M2013. Going forward, on the back of expectation of the State Bank of Pakistan (SBP) cutting the discount rate by 50-100 bps in 2H2014, they believe a sharp revival in banking spreads is an unlikely outcome.

In fact cut in DR could prove beneficial for the banks, where banking NIMs would improve due to investments in the PIBs, which yield higher returns (+2 per cent from any other investment avenue). Similarly lower DR would mean low Minimum Profit Rate (MPR) on savings deposits that the banks have to pay to their consumers.

Banks have remained in the limelight during the past couple of months where the banking sector has outperformed the KSE-100 index by 4.9pc in 2014 YTD.

The rally has been mainly led due to banks opting for more unconventional methods to bolster earnings by investing heavily in the PIBs (with higher returns)


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Nation (Pakistan)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters