The banking sector's aggregate deposits during FY13 registered a meagre growth of two percent, inching up to Rs 6.8 trillion by May 17 this year. According to JS Global Securities, banks maintained their prudent lending stance, keeping credit off-take low during the year. According to latest figures, gross advances remained at Rs 3.9 trillion, up by 1 percent since December 31 last year.
Surprisingly, investments remained flat at Rs 3.9 trillion during the same period, resulting in a shrinkage in the banking sector's ADR and IDR to 57 percent against 58 percent in December last year, said Bilal Qamar, an analyst at JS Global. "We anticipate the banking sector to continue its prudent lending policy in the near term, amid shrinking spreads and an overall gloomy domestic economic scenario," he maintained. After averaging at 7.02 percent in last year, banking spreads narrowed further in April this year, clocking at well below the 7-percent mark at 6.19 percent (down 5bps month-on-month and 94bps year-on-year basis).
SBP recently warned banks that they were mandated to pay 6 percent on average monthly savings deposit accounts instead of minimum balances, which shrunk spreads in April this year. "In our view," Bilal said, "this has given a clear signal to the banks that the central bank is adopting a more watchful eye on this sector." He said that with PML-N (with a pro-industry and pro-business mandate) coming into power, the market players "do not rule out a cut in the discount rate in the near term".
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