KARACHI: The banking sector spreads for March 2021 stood at 4.31 percent, recording a marginal dip over February 2021 of 4.38 percent, taking the first quarter of CY21 average spreads to 4.35 percent as against 5.42 percent in the same period last year and 4.50 percent in the previous quarter.

Fresh spreads continued to diminish for the fourth consecutive month with the latest reading exhibiting a dip of 10bps on month-on-month basis taking the first quarter of CY21 cumulative decline to 32bps from December 2020.

A similar trend has been witnessed in credit spreads which has recorded a downtick to 45bps in March 2021 compared to 105bps in December 2020.

“We attribute these trends to competitive pricing to push financing growth as well as subsidized financing schemes of the Central Bank,” Hamza Kamal, an analyst at AKD Securities said.

To highlight, advances have registered a growth of 1.2 percent on quarter-on-quarter basis in the first quarter of CY21 over 5.0 percent on QoQ already registered in the fourth quarter of CY20 (attributable to seasonal financing offtakes particularly by agriculture sector) - an indication of robust business outlook in the medium run which should also help the banking sector containing credit risks with the relief period expired in March 2021, he added.

Copyright Business Recorder, 2021