The Quarterly Performance Review (QPR) of the banking sector for the quarter ended 31st December, 2017 has been released by SBP Wednesday. As highlighted in the report, improving asset quality, stable liquidity, robust solvency and slow pick-up in private sector advances are the key developments during the 4th quarter of CY17.
As per the trend, asset base of the banking sector has expanded by 4.5 percent in Q4CY17. The promising demand from textile and cement sectors have improved gross advances (domestic) to private sector (by 7.3 percent on quarter-on-quarter basis and 16.4 percent on year-on-year basis), despite retirements in chemical and pharmaceuticals. Banks have mostly invested in short-term MTBs while investments in PIBs and Sukuk have declined. Moderate growth in deposits and higher inter-bank borrowings has supported the funding needs of the banks.
Besides steady performance, the risk profile of the banking sector has remained satisfactory amid moderation in profitability. Asset quality has improved as the Non Performing Loans (NPLs) to gross loans (infection) ratio, recorded at 8.4 percent as of end December 2017, has touched the lowest level in a decade. The banking sector has earned profits (before tax) of Rs 266.8 billion during October-December, 2017 (ROA of 1.6 percent and ROE of 19.5 percent).
Encouragingly, Net Interest Income (NII) has improved; thanks to high growth in advances since the last few years. The Capital Adequacy Ratio (CAR) of the banking sector has improved to 15.8 percent, which is, well above the minimum required CAR of 11.275 percent.
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