On Wednesday State Bank of Pakistan (SBP) released quarterly review of country’s banking sector for April-June 2015 period. The most remarkable point was that profit after tax of the banking sector surged by 52 percent YoY on the back of both interest and non-interest income. Accordingly, Return on Assets increased to 2.7 percent in June 2015 from 2.1 percent in June 2014. Capital Adequacy Ratio remained strong at 17.2 percent well above the local requirement of 10 percent and international benchmark of 8 percent.
During the quarter, asset base of the banking sector grew by 5.7 percent (YoY 19.2 percent) as compared to 3.4 percent in the corresponding period last year. Most of the increase in assets resulted from growth in public sector credit for matching the fiscal needs and financing commodity operations. The share of investments in total asset continued to increase due to growth in stock of government securities.
The asset quality observed some deterioration during June. 2015 as non-performing loans (NPLs) increased by 1.6 percent (YoY 5.8 percent) to Rs630 billion. However, with more than proportional increase in gross loans (4.7 percent), NPLs to gross loans ratio decreased by 39 bps to 12.4 percent and Net NPLs to Net Loans decreased by 18 bps to 2.7 percent during the quarter under review. On the funding side, steady growth in deposit base continued to provide the needed resources for financing asset growth. With a healthy increase of 7.9 percent over the quarter (YoY 13.6 percent), banks’ deposits reached Rs9.97 trillion at end June 2015. For details please click http://www.sbp.org.pk/publications/q_reviews/qpr.htm