The Islamic Banking Industry (IBI) continued to post a healthy growth, touching for the first time a share of 10 percent in the banking industry at the end of the Calendar Year 2012 (CY12). With a substantial growth of 35.5 percent or Rs 185 billion, IBI deposits surged to Rs 706 billion by the end of CY12 against Rs 521 billion at the end of CY11.
According to the State Bank of Pakistan, IBI posted a healthy growth as far as deposit base was concerned during the period under review. IBI''s share in the entire banking industry increased from 8.4 percent in CY11 to 9.7 percent by the end of CY12. IBI''s asset base also continued to expend, touching Rs 837 billion by the end of CY12, up from Rs 641 billion in CY11, depicting an increase of 30 percent or Rs 196 billion in a single year. Consequently, the market share of Islamic banking assets in the overall banking industry also increased to 8.6 percent by the end of December last year. Previously, it stood at 7.8 percent in December 2011.
During CY12, one new Islamic Banking Institution was added to the Islamic Banking Industry, bringing the total tally to 18 such institutions working across the country. SBP''s Islamic Banking Bulletin said that IBI barely managed to maintain the Rs 10 billion profit (pre-tax) level achieved in last year because of the significantly squeezed margins. The reduction of 2.5 percentage points in the policy rate translated into a significant decline in yields on financing and investments.
While financing and investment yields were under stress, depositors'' return remained relatively stable because of market competitiveness and regulatory directives to all banks, including IBI, to pay enhanced returns to smaller depositors (PLS). The squeezed margins translated into marginal reduction in profit before tax to Rs 10 billion in CY12 from Rs 10.6 billion in CY 2011 and significant reduction in ROA and ROE to 1.2 percent and 14.1 percent from 1.6 percent and 17.3 percent respectively in CY 2011. The ROA and ROE of Islamic banking also became lower than the overall banking system averages of 1.4 percent and 14.7 percent respectively.
The IBI network also continued to swell and the network (including sub-branches) crossed 1,000-branch mark by the end of CY12. With an increase of 211, the total number of IBI branches surged to 1,097 by the end of December last year against 886 branches in December 2011.
The number of new branches opened in CY 2012 was also higher than branches opened in CY 2011, in which 135 branches had been established by IBI. Out of news branches, as many as 120 additional branches were added to Islamic banking network during the last quarter (October-December) of last year. These additional branches were established across all provinces and three new districts Ghotki, Layyah and Shangla were added in the list of districts having Islamic banking branches. New branches were also set up in Balochistan and Azad Kashmir in the quarter under review.
On Quarter-on-Quarter (QoQ) basis, Islamic banking industry assets grew by 12.8 percent, touching Rs 837 billion by the end of December last year, up from Rs 742 billion in September last year. The current growth in the assets of Islamic banking industry was higher than the overall banking industry. The two major components of assets - investments and financing - registered positive growth during CY2012 and net financing and investment also registered a growth of 32 percent or Rs 151 billion to Rs 626 billion end of CY12 from Rs 475 billion in CY11.
Investments of Islamic banking industry grew by 43.8 percent during the previous calendar year, touching Rs 394.4 billion, up from Rs 274.2 billion in CY11. During the period under review, financing to private sector by Islamic banks registered a handsome increase of 14 percent or Rs 30.3 billion to Rs 242.1 billion by the end of December last year. All modes of financing except Musharaka witnessed an increase during the period under review. In terms of financing mix, Murabaha continued to have the highest share in overall financing followed by Diminishing Musharaka.
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