State Bank of Pakistan (SBP) recently updated the figures of banking sector deposits, investments and advances for month of November’15. A point was evident that banks are still keen in investing in risk-free government securities rather than extending advances.
Deposits soared to Rs9.2 trillion, up by 12% on YoY and 1% on MoM basis. The deposits growth has translated into increase in investments and advances which ascended by 37% and 6% respectively on yearly basis.
On monthly basis, deposits increased slightly from their previous month level, showing a 1%MoM rise, while advances also increased by 1%MoM. However, investment showed an increase of 2%MoM exhibiting a continued liking for risk-free government securities.
Investment to deposit ratio (IDR) increased by significant 1,303bps while advance to deposit ratio (ADR) decreased by 285bps on yearly basis and ticked at 51.12% and 72.32% respectively. As compared to October’15, ADR increased due to positive movements in advances and deposits figures while IDR surged by 90bps. The rise in IDR is explained by banks’ preference for risk free assets.
Despite low interest rates, the consumer demand for credits is still slow. Analysts forecast a surge in investments of banks, rather than advances. Banks are still reluctant to make headways into advances and are still interested in risk free government papers.
However, with banks trying to meet their yearend targets, there might be a surge in advances number in coming months. Furthermore upcoming materialization of CPEC and other government backed mega projects will help in increasing credit off-take in coming months.