KARACHI: The State Bank of Pakistan (SBP) has issued the Half-Yearly Performance Review (HPR) of the Banking Sector for the 1st half of the calendar year (CY) 2018. The HPR provides a comprehensive coverage of the performance and soundness of the banking sector and highlights the key issues facing the financial sector.
According to the report, the banking sector has performed reasonably well. The asset base of the banking sector has expanded by 4.7 per cent during H1CY18 (Year-on-Year (YoY): 9.7 per cent).
Encouragingly, advances to the private sector have been the key contributor in the asset growth with sugar, energy and cement sectors along with individuals (i.e. sole proprietorships) being the key borrowers. Deposits have observed slight deceleration but remained the mainstay of funds for the banks.
The overall risk profile of the banking sector has improved in H1CY18, mainly, due to strengthening capital adequacy and improving asset quality.
Capital Adequacy Ratio (CAR) has further strengthened to 15.9 per cent; well above the minimum regulatory required level of 11.275 per cent.
Non-Performing Loans (NPL) to total loans ratio has receded to 7.9 per cent—the lowest level since H1CY08. Banks’ after-tax earnings (Year to Date), however, have declined by 14.7 per cent due to reduced non-interest income, one-off provision expenses, and higher administrative cost.
The report also highlights expectations about macro-financial conditions in H2CY18. The results of the 2nd wave of SBP’s Systemic Risk Survey suggest that external sector pressures, fiscal sector vulnerabilities, growing domestic inflation and volatile commodity markets could potentially impact financial stability over the coming six months.
