The improvement in external account amid strong inflows of remittances and improving exports helped commercial banks’ deposits grow by 9% to reach Rs5.6 trillion during January to June 2011.
“This growth has been seen after a gap of three years and is slightly higher than the last three-year average growth of 8% during the same period,” said Topline Securities analyst Farhan Mahmood in a research note.
Deposit mobilisation generally remains higher in the first half of the year than the second half.
Banks skewing more towards government papers and lenders shying away due to high interest rates remained the core story of bank operations.
Private sector backing off from operations has increased the investment-to-deposit-ratio to an all-time high of 45% against the previous year’s 39% as most of the deposits are being placed in government papers, says the note.
Major concerns for the banks profitability in the last few years has been the provisioning issues against their assets.
However, commendable performance was witnessed during the first half of 2011 as overall provisioning fell 45 per cent to around Rs26 billion against Rs47 billion posted in the same period last year.
Higher spreads: key to profits
Controlled provisioning and higher exposure in government assets supported bank earnings, despite flat growth in advances, as major banks posted attractive earnings of 20 per cent, says the note.
Similar performance is expected in the second quarter as well.
Moreover, banks with low cost deposit are expected to benefit the most as their margins are likely to improve further as average six-month Kibor during the first half of 2011 stood at 13.62 per cent, the highest six-monthly average in the last two and a half years, adds the note.
Published in The Express Tribune, July 13th, 2011.
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