Non-Performing Financing (NPF) of Islamic Banking Industry (IBB) continued to decrease reaching Rs 18.8 billion at the end of first quarter of this calendar year (CY14). Industry sources told Business Recorder on Wednesday that among asset quality indicators, NPF of IBI decreased during the first quarter of CY14 resulting in an increase in both return on equity (RoE) and return on assets (RoA) compared to previous quarter.
The recent decline in NPF was mainly contributed by the "doubtful" category as the decline in the said category was more than the increase in other two categories, ie, "substandard" and "loss" during the quarter, they added. According to State Bank of Pakistan (SBP), NPF of IBB posted a negative growth of some 0.7 percent to Rs 18.8 billion during January-March 2014 compared to previous week (October-December 2013), in which NPF stood at Rs 18.9 billion.
Year-on-year basis, NPF registered a decline of some 4 percent to Rs 18.8 billion in March 2014, down from Rs 19.5 billion in March 2013. Provisions made by IBI also increased during the period resulting in increase in provisions to NPF ratio. Provisions to NPF inched up by 2.1 percent to Rs 14.4 billion in first quarter of CY14 compared to Rs 14.1 percent in the last quarter of CY13.
The detailed analysis of category-wise NPF revealed that during the period under review "Substandard" NPF reached Rs 1.4 billion up by 9.4 percent. "doubtful" NPF witnessed a decline of 50 percent and stood at Rs 0.9 billion in March 2014 compared to Rs 1.8 billion in December 2013. In addition, with an increase of four percent, "loss" category NPF surged to Rs 16.4 billion in first quarter of CY14 against Rs 15.8 billion in last quarter of CY13.
Industry sources said that Non Performing Assets (NPAs) of IBI witnessed a moderate increase of 0.6 percent to Rs 22.4 billion during the quarter under review. Among other asset quality indicators, Net NPAs to Capital and Net NPFs to Net Financing declined during the review quarter. However, all NPF performance indicators of IBI are still lower than overall industry ratios indicative of relatively better asset quality of Islamic banking industry, they said.
The NPF to Financing of IBB stood at 5.8 percent against 13.4 percent of entire banking industry. Net NPAs to net total capital declined to 7 percent compared to 14.5 percent of entire banking industry. The recovery against NPF improved and a small amount of Rs 100 million has been recovered during January-March of CY14, while overall recovery surged to Rs 22.4 billion at end of first quarter CY14.
In terms of market share, assets of IBI in overall banking industry declined to 9.4 percent during the review quarter from 9.6 percent in the previous quarter. On the other hand, market share of IBI deposits in overall banking industry increased during the quarter ending March 2014 to reach 10.7 percent. Profitability of the IBI, registered at Rs 3.2 billion by the end of March 2014, remained higher compared to Rs 2.2 billion profit by end March 2013.
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