KARACHI: The profitability of the banking sector may come under
pressure in the next quarter as low interest rates, receding investments in
government securities and maturity of high-yielding Pakistan Investment Bonds
(PIBs) are already keeping banks’ earnings in check in Jan-March, said a report
by the State Bank of Pakistan (SBP) on Friday.
The Banking Performance Review for Oct-Dec 2016 showed profits
of the banking sector dropped to Rs190 billion for 2016 compared to Rs199bn a
year ago. “Low interest rates and reduced banks’ investment have impacted the
earnings of the banking sector in 2016. Consequently, the profit-after-tax of
Rs189.9bn is 4.6pc lesser than the level seen in the last calendar year,” said
the report.
However, net advances increased 14.2pc to Rs5,499bn in 2016, the
report said.
“The banking sector recorded a reasonable performance during the
quarter under review. The key highlight is the highest quarterly growth in
advances to the private sector in the last 10 years, which has contributed to
most of the increase in assets,” said the report.
The lagged effect of consistent easy monetary policy, ample
availability of liquidity owing to high deposit growth and maturing PIBs,
CPEC-related activities and positive economic outlook are the major driving
factors behind the impressive growth in advances, said the SBP report.
Bank-wise statistics reveal a broad-based contribution to
banking earnings. As many as 31 banks posted profits while loss-making banks
were just three in 2016. “The concentration of earnings has slightly increased
as the share of top five banks in total profits has increased to 63.3pc in 2016
from 61.5pc in 2015,” it said.
The deposit base increased 6.4pc during the fourth quarter of
2016 – against 6.9pc in the comparable quarter of 2015 – to reach Rs11.8
trillion on December 31, 2016. For the entire year, growth remained 13.6pc,
which is higher than the three-year average of 12pc (2013-15).
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