Banking spread increases to 7.57% in January

Higher interest rates to blame.

KARACHI: The overall banking spread stood at 7.57 per cent in January 2011 compared with 7.25 per cent in January 2010, up 32 basis points due to higher interest rates, showed figures of the State Bank of Pakistan (SBP).

The increase in the banking spread – gap between lending and deposit rates - is evident from the fact that the lending rate stood higher at 13.59 per cent, compared with 13.35 per cent last year, up 24 basis points while deposit rate remained lower at 6.02 per cent, compared with 6.1 per cent last year.

“Banking spread are expected to remain on the higher side, particularly in the next six months, led by an expected increase in interest rates,” said Topline Securities analyst Farhan Mahmood.

However, the month-on-month spread remained marginally lower by four basis points but the lending rate continued to remain sticky and was nine basis points higher. The January spread was 11 basis points higher than average spread of 7.46 per cent in 2010.

Published in The Express Tribune, March 2^nd, 2011.