Deposits surge 17% to Rs20.51t by September 2021

The banking deposits surged 17 per cent to Rs20.51 trillion by the quarter ended September 30, 2021, compared with Rs17.54 trillion in the same quarter of the last year, according to a report released by the State Bank of Pakistan (SBP) on Tuesday.

Similarly, the total assets of the banking system climbed up 21 per cent to Rs28.79 trillion by the end of September 2021 as against Rs23.81 trillion a year ago.

Likewise, the advances of the banking system grew 16.3 per cent to Rs9.173 trillion by the period under review, compared with Rs7.88 trillion a year ago.

The SBP published Quarterly Compendium: Statistics of the Banking System for July-September 2021 (third quarter of CY21). The central bank said the compendium offers a comprehensive data coverage on major financial statistics, as well as financial soundness indicators (FSIs) of the banking sector.

Besides the banks, the compendium also provides comprehensive statistics of Islamic banking institutions (IBIs), development finance institutions (DFIs) and microfinance banks (MFBs).

The data reveals the banking sector maintained its growth momentum during the third quarter of 2021. The assets of the sector rose 2.17 per cent during the period over last quarter (20.9 per cent growth on YoY basis), surpassing 0.44 per cent growth attained in the corresponding period of the last year.

This expansion has been particularly contributed by the domestic private sector advances, which increased 3.8 per cent during the third quarter of 2021 (16.6 per cent increase YoY) against a contraction of 0.5 per cent during the corresponding period of the last year.

On the funding side, deposits increased 0.36 per cent during the quarter, compared with 0.80 per cent growth in the same period of the previous year. On a YoY basis, the deposits attained an encouraging growth of 16.9 per cent.

The increase in advances remained broad-based, reflecting a general recovery in the economic activity, as well as the impact of higher input prices. The healthy growth in credit to the private sector is quite encouraging, as it will prop up the low credit incidence in Pakistan as measured by the domestic private credit to GDP ratio.

Moreover, the SBP’s refinance schemes announced in the wake of the Covid-19, particularly the Temporary Economic Refinance Facility (TERF), has been supporting the private sector credit growth in the last few quarters.

However, the banks have increased the credit disbursements from their own sources during July-September 2021 quarter and the trend continues post-quarter.

The construction and housing finance also emerged as notable sectors, which are witnessing healthy increase in the credit off-take. Importantly, the SBP assigned targets for housing finance to the banks in July 2020 and the government of Pakistan markup subsidy programme for Housing Finance (aka Mera Pakistan Mera Ghar Scheme (MPMG) announced in October 2020, played a key role in enhancing the overall credit to the housing sector.

The banks are actively participating in these initiatives for increasing the mortgage finance that will help a greater portion of the population in the construction and purchase of houses.

The trends in key financial soundness indicators remained encouraging. The banking sector’s credit risk indicators improved further as the gross non-performing loans (NPLs) to total loans ratio decreased to 8.8 per cent at the end of September, 2021 from 9.9 per cent a year ago. This improvement came on the back of a rise in loans and lower fresh delinquencies.

Due to an increase in the provisioning against NPLs, the provisions coverage ratio improved to 88.9 per cent by the end of the third quarter of CY21, compared with 84.6 per cent a year ago.

Accordingly, the net NPLs ratio declined to 1.1 per cent as of the third quarter of CY21 from 1.7 per cent in the same period of CY20, indicating lower residual risk to solvency from delinquent loans.

The earning indicators of the banking sector witnessed some moderation during the third quarter of CY21 as the Return on Assets (ROA) stood at 0.95 per cent, compared with 1.13 per cent in the third quarter of CY20. The solvency of the sector remained strong, as the Capital Adequacy Ratio (CAR) at 17.9 per cent stayed well above the minimum domestic regulatory benchmark of 11.5 per cent and the global standard of 10.5 per cent.

The quarterly stress test results also reveal that the banking sector is likely to remain resilient even under reasonably severe economic shocks over a protracted period of time.

Also Read

SBP extends banking relaxations to mitigate Covid till June 30

KARACHI: The State Bank of Pakistan (SBP) has decided to continue banking...