Earnings rise 48% due to growth in income of Islamic banking. CREATIVE COMMONS
The phenomenal rise in the profitability of the Islamic banking industry in January-March was mainly on the back of earnings growth of 95% recorded by Islamic banking divisions (IBDs) of conventional banks. In contrast, the combined profitability of Islamic banks increased 17.6% in January-March on an annual basis.
According to the Islamic banking bulletin released on Thursday by the State Bank of Pakistan (SBP), the contribution of IBDs to the overall profitability of the Islamic banking industry in January-March increased to 52% from 39% a year ago.
Assets of the Islamic banking industry grew by 28.2% in January-March on an annual basis to Rs1.3 trillion. Similarly, its deposits stood at Rs1.1 trillion at the end of March after recording a growth of 28.7% over the preceding 12 months.
In terms of market share, Islamic banking assets in the overall banking industry remained unchanged on a quarterly basis at 10.4%. Investments and financing, which are the two major components of assets, showed different trends in the January-March period. While investments of the Islamic banking industry grew, financing showed a decline during the quarter.
Net investments of the Islamic banking industry increased to Rs368.2 billion by the end of March, up 3.2% on a quarterly basis. Federal government securities remained the highest contributor to the overall investments (67.3%) in the quarter under review.
Gross financing of the Islamic banking industry declined during the first quarter of 2015, SBP data shows. It stood at Rs417.8 billion at the end of March, down 1% from the end of December. This is in line with the usual trend, as financing declines during the first quarter of every calendar year because of the retirement of financing by a majority of client industries given their nature of business, according to the SBP.
As for deposits, their market share in the overall banking industry increased from 11.6% at the end of December to 12.2% at the end of March.
The branch network of the Islamic banking industry showed a ‘moderate’ increase of 23 branches in the January-March quarter.
“This slow rate of branch expansion at the start of the year is in accordance with the usual expansion trend of the banking industry that picks up pace towards the end of the year,” according to the SBP.
The branch network of the Islamic banking industry remain concentrated in major cities, as 54% of the branches are in Karachi, Lahore, Quetta, Peshawar and Islamabad.
Published in The Express Tribune, July 10th, 2015.
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