The banking sector spreads have averaged at 7.46 percent for the year 2010 as compared to 7.47 percent in 2009, a mere decline of 1bps. The average lending rates for the year stood at 13.39 percent in 2010, compared to 13.98 percent in 2009; while average deposit rates stood at 5.93 percent in 2010, as against 6.51 percent in 2009.
"Although spreads in 2010 have remained flat, an uptick in month wise data has been witnessed each month since June 2010, as lending rates treaded upwards to adjust for rising KIBOR and Discount rate, while deposit rates eased off", Mustufa Bilwani an analyst at JS Global Capital said. In December, spreads on outstanding loans averaged 7.61 percent, up 26bps from last year. Lending rates were up 3bps, while deposits rates were down 23bps to 5.91 percent.
On a MoM basis, spreads rose 7bps from 7.54 percent in November 2010. "The uptick in spreads, especially in the latter part of the year, is likely to aid Net Interest Margins (NIM) of banks, especially the big five", he said adding "With industry advances and investments up 6.9 percent and 9.7 percent in the fourth quarter, we may see banks reporting strong earnings in their final quarter".
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