On back of textile and cement’s demand, gross advances improve

Private sector credit increases 7.3% quarter-on-quarter

KARACHI: Promising demand from textile and cement sectors have improved gross advances (domestic) to private sector (by 7.3% quarter-on-quarter and 16.4% year-on-year), despite retirements in chemical and pharmaceuticals, according to the latest data released by the State Bank of Pakistan (SBP) on Wednesday.

Banks have mostly invested in short-term Market Treasury Bills (MTBs) while investments in Pakistan International Bonds (PIBs) and Sukuk have declined. Moderate growth in deposits and higher inter-bank borrowings has supported the funding needs of the banks, according to the SBP’s Quarterly Performance Review (QPR) of the banking sector for the quarter ended on December 31, 2017.

As highlighted in the report, improving asset quality, stable liquidity, robust solvency and slow pick-up in private sector advances are the key developments during the fourth quarter (Oct-Dec) of calendar year 2017 (4QCY17). As per trend, asset base of the banking sector has expanded by 4.5% in Q4CY17.

Besides steady performance, the risk profile of the banking sector has remained satisfactory amid moderation in profitability. Asset quality has improved as the non-performing loans (NPLs) to gross loans (infection) ratio, recorded at 8.4% as of end December 2017, has touched the lowest level in a decade.

The banking sector has earned profits (before tax) of Rs266.8 billion during Oct-Dec of 2017 (Return On Assets (ROA) of 1.6% and Return On Equity (ROE) of 19.5%). Encouragingly, Net Interest Income (NII) has improved; thanks to high growth in advances for the last few years.

The Capital Adequacy Ratio (CAR) of the banking sector has improved to 15.8%, which is well above the minimum required CAR of 11.27%.

Published in The Express Tribune, March 22^nd, 2018.

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