SBP’s profit rises 4% to Rs238b, driven by lending to govt, banks

Interest earned on lending to govt increased by 14%, says central bank

KARACHI: The State Bank of Pakistan’s (SBP) consolidated profit edged up 4% to Rs238.06 billion in the fiscal year ended June 30, 2017 primarily in the wake of interest income on loans taken by the federal government and commercial banks as well as earnings from foreign exchange reserves.

“Lending to the federal government and commercial banks remained major sources of SBP’s profit followed by earnings on foreign exchange reserves,” the central bank said in its Annual Performance Review 2016-17.

“The interest earned on lending to the federal government increased by 14% due to a significant rise in government borrowings from the bank.”

In the prior fiscal year 2015-16, the central bank had recorded a profit of Rs229.35 billion.



Government borrowings from the SBP provided additional space to commercial banks to extend credit facilities to the private sector in FY17. It also substantially improved liquidity in the inter-bank market, leading to comparatively lower liquidity injections through reverse repos by the central bank, it said.

The SBP made net exchange gains of Rs24.56 billion in FY17 against Rs25.77 billion in FY16, a decline of 5%.

The rupee depreciated against the US dollar by Rs0.020 and appreciated against Special Drawing Rights (SDR) - supplementary foreign exchange reserve assets of the IMF - by Rs0.366.

Accordingly, “the depreciation against the US dollar resulted in an exchange gain of Rs8.05 billion and appreciation against the SDR resulted in an exchange gain of Rs2.72 billion. The remaining net exchange gain of Rs12.04 billion is due to appreciation and depreciation of the Pakistani rupee against other currencies,” the SBP said.

Interest earned on foreign assets stood at Rs5.36 billion. However, interest earned on the Export Finance Facility and other related refinance facilities dropped to Rs6.40 billion in FY17 from Rs7.20 billion in FY16 due to reduction in interest/mark-up rates.

Although average outstanding loans to banks under refinance schemes rose significantly to Rs287 billion in FY17 from Rs199 billion in FY16, “the average interest/mark-up rate fell from 3.5% in FY16 to 2.2% in FY17, causing a decline of over Rs2 billion in the interest/mark-up earned on refinance schemes,” it said.

The SBP earns commission income on the management of public debt, market treasury bills, prize bonds, national savings schemes and government securities as well as on the issuance of drafts and payment orders.



“The commission income increased by 36% year-on-year basis largely due to increase in the commission on market treasury bills,” it said.

Total expenditure during FY17 was Rs41.74 billion as opposed to Rs40.85 billion in FY16. “The increase was due to 18% and 8% rise in banknote printing charges and agency commission respectively, impact of which was partly offset by the reduction of Rs2.5 billion in salary cost and retirement benefits.”

Interest/mark-up expense fell Rs4.08 billion which was primarily due to reduction in expense on Sukuks purchased under the Bai Muajjal agreement. However, this was partly offset by increase of Rs3.04 billion in charges on the allocation of SDRs.

Assets stood at Rs6.86 trillion on June 30, 2017 compared to Rs6.45 trillion on June 30, 2016, registering an increase of Rs416 billion mainly due to increase in investments in market treasury bills.

Liabilities stood at Rs6.29 trillion on June 30, 2017 compared to Rs5.83 trillion on June 30, 2016, showing an increase of Rs466 billion.

Published in The Express Tribune, November 1^st, 2017.

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