Non Performing Financing (NPFs) of Islamic Banking Industry reached level of some Rs 16 billion for the first time, up by 15 percent, end of calendar year 2011 mainly due to slow economic activities. Sources told Business Recorder on Thursday that NPFs of Islamic Banking Industry (IBI) continued to grow during CY11 - the banking industry's financial year - and registered an increase of 15.21 percent.
With current surge, overall NPFs of IBIs have mounted to Rs 15.9 billion at the end of CY11 compared to Rs 13.8 billion at the end of CY10, depicting an increase of Rs 2.1 billion. Total NPFs include Rs 1.9 billion of substandard loans, Rs 3 billion of doubtful and Rs 11 billion of losses.
Major increase was witnessed in the July-September quarter, in which NPFs posted a rise of Rs 0.9 billion from Rs 14.9 billion to Rs 15.8 billion. While, a slight increase of Rs 100 million was registered in the last quarter (October-December) of CY11. The NPFs to total financing improved as it decelerated by 1 percentage point to 7.6 percent during the last quarter, which though encouraging, however, is largely attributable to the significant rise in the financing portfolio rather than decline in the NPFs.
NPFs to total financing of Islamic banking are much lower than other banking industry. At end of CY11, overall banking industry's (including conventional and Islamic) NPLs to financing stood at 16 percent. In terms of asset quality ratio, year on year basis NPFs to total financing surged by 0.3 percent from 7.3 percent in December-2010 to 7.6 percent in December-2011.
Further, the rise in the share of loss categorised NPFs during the quarter to 11 percent is indicative of limited success of IBIs in regularising NPFs, bankers said and added that overall asset quality of IBIs is however, significantly better than the banking industry as a whole with NPFs ratio of IBIs being less than half of that of the banking system.
With an increase of 22 percent or Rs 2 billion, loss category NPFs reached Rs 11 billion at end of December-2011 compared to Rs 9 billion in December-2010. Similarly, NPFs under the category of doubtful mounted to Rs 3 billion in CY11 from Rs 2.1 billion in CY10. While, substandard category NPFs fell by Rs 800 million to Rs 1.9 billion at end of CY11.
During last calendar year, deposits of Islamic banking industry reached Rs 521 billion by registering an yearly growth of 34 percent. Break-up of deposits indicate growth in all types of deposits, except Fixed Deposits that shows a drop in its quarterly growth rate from 7.5 percent by September 2011 end to 5.8 percent by the end of the quarter under study.
For the first time asset base of Islamic banking Industry reached Rs 641 billion indicating YOY growth in assets 34 percent and this growth in assets is mainly contributed by financing and investment. By the of the last quarter CY 2011, the network of Islamic Banking Industry consists of 886 branches, assets and liabilities both constitute 7.8 percent of the overall banking industry.
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