KARACHI: The Quarterly Performance Review (QPR) of the banking sector for the quarter ended 31st December 2017 was released by State Bank of Pakistan (SBP) Wednesday.
As highlighted in the report, improving asset quality, stable liquidity, robust solvency and slow pick-ups in the private sector advances are key developments during the fourth quarter of CY17.
As per trend, the asset base of the banking sector has expanded by 4.5 per cent in Q4CY17. Promising demand from textile and cement sectors have improved gross advances (domestic) to the private sector (by 7.3 per cent QoQ and 16.4 per cent YoY), despite retirements in chemical and pharmaceuticals. Banks have mostly invested in short-term MTBs while investments in PIBs and Sukuk have declined. Moderate growth in deposits and higher inter-bank borrowings has supported the funding needs of the banks.
Besides a steady performance, the risk profile of the banking sector has remained satisfactory amidst a moderation in profitability. Asset quality has improved as the Non-Performing Loans (NPLs) to gross loans (infection) ratio, recorded at 8.4 per cent 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, 2017 (ROA of 1.6 per cent and ROE of 19.5 per cent).
Encouragingly, Net Interest Income (NII) has improved; thanks to high growth in advances since the last few years. The Capital Adequacy Ratio (CAR) of the banking sector has improved to 15.8 per cent, which is, well above the minimum required CAR of 11.275 per cent.
