Banking sector performs satisfactorily: SBP
The performance and resilience of the banking sector of Pakistan remained satisfactory during the first half of 2020, said the Mid-Year Performance Review of the banking sector.
The State Bank of Pakistan (SBP) released the performance review on Wednesday covering the performance and soundness of the banking sector for the period January-June 2020 (1HCY20).
The review said that despite the elevated economic stress driven by the Covid-19 pandemic, assets of the banking sector registered a decent expansion of 7.8% during 1HCY20.
“A robust increase in investments, funded by a surge in deposits, explains this growth,” said a statement issued by the central bank.
“Advances, on the contrary, recorded a mild downtick owing to the economic slackness caused by the disruption in business activities after the outbreak.” The report, however, observed that in the absence of SBP’s supportive measures, the contraction in advances could have been much higher.
The review also highlighted that the policy measures rolled out by the central bank facilitated the banking sector in conserving capital, enhancing lending capacity and increasing loss absorption ability.
“As a result, despite some increase in credit risk, the banking sector demonstrated improved profitability and enhanced resilience,” it added.
The non-performing loan (NPL) ratio increased from 8.6% in December 2019 to 9.7% in June 2020. However, the net NPL-to-loan ratio, which is a better measure of credit risk, increased only marginally from 1.7% to 1.9%.
Earnings showed a visible improvement as profitability jumped by 52% on a year-on-year basis. The improvement came on the back of higher interest income, deceleration in interest expenses and rise in non-interest income.
Published in The Express Tribune, November 12th, 2020.
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