Wednesday, November 16, 2016

Pakistani Banking Sector Delivers Strong Results

Pakistan's banks are showing strong performance with significant growth in deposits, assets and private sector credit.  All areas of banking, including commercial, mobile and Islamic banking, are contributing to it.

Karachi Financial District
Commercial Banking:

Pakistan's commercial banking industry grew by 16.1 percent during fiscal year 2015/16. Strong aggregate demand and improving business sentiments were seen in private sector credit growth of 12 percent, expanding by Rs. 461 billion in FY16 from Rs. 224 billion in the prior year, according to a World Bank report in the media.

Mobile Banking:

Mobile banking transactions in Pakistan grew to Rs. 1.5 trillion during 2015-16. The State Bank of Pakistan (SBP) has recorded Rs. 543.6 billion in branchless banking transactions in the latest quarter,  sequential growth of 6.8% over the previous quarter. It's a good sign of growing financial inclusion in the country.

Islamic Banking:

Islamic banking industry continued its double-digit growth during fiscal year 2015-16 (FY16) with 16.8% and 14.1% year-on-year (YoY) growth in assets and deposits respectively, according to the State Bank of Pakistan. Islamic banking share of banking in Pakistan has nearly doubled in the last 5 years. It now accounts for 13% of the overall banking industry, up from 7.8% five years ago.

Demand for Liquidity:

Pakistani banks have increased their deposits by over a trillion rupees since January 2016. However, strong demand for liquidity in a growing economy has forced the State Bank of Pakistan (SBP) to inject another Rs. 880 billion into the banking system just last week, according to news reports.

Summary:

Banks are a good barometer of a nation's economic health. Growth in banking in Pakistan is a good sign of accelerating economic growth in the country.

Related Links:

Haq's Musings

Mobile Banking in Pakistan

Financial Inclusion in Pakistan

Financial Services Industry in Pakistan

China Pakistan Economic Growth

ADB Raises Pakistan GDP Growth Forecast


15 comments:

Malik said...

For once I agree with you Riaz Haq sahib. Not like you to report anything positive about Pakistan in favour of a democratic leadership.

Prime Minister Nawaz Sharif is to be credited for this great turn around in Pakistan's history after a traumatic fall - he's managed this in just 3 years so far. Allahu Akbar.

PM Nawaz Sharif Zindabad
Pakistan Pa'indabad

Riaz Haq said...

Malik: "Prime Minister Nawaz Sharif is to be credited for this great turn around in Pakistan's history after a traumatic fall - he's managed this in just 3 years so far. Allahu Akbar."

Please thank the military for improving security and ensuring CPEC progress.

Army Chief General Raheel Sharif has made his institution's commitment loud and clear by frequent statements on the subject. He has said “We will do everything to make it a success". He is also record as warning that “terrorism is a global issue and warrants global response. The funding of all terrorist organizations has to be checked by all. We are against use of proxies and won’t allow it on our soil".

Pakistan Army is playing a crucial role in ensuring progress and completion of China Pakistan Economic Corridor (CPEC) related projects. The army leadership is using all its power and influence with all stakeholders, including politicians and civil servants, as part of this campaign to bring about development of infrastructure and energy to make Pakistan economically successful.


http://www.riazhaq.com/2016/11/pakistan-army-chief-backer-guarantor-of.html

Riaz Haq said...

#Pakistan saw 45% fewer #terror attacks & 38% fewer deaths this year, says ‘Global Terrorism Index (GTI) 2016’.

http://www.dawn.com/news/1297480/global-index-records-drop-in-terrorist-activities-in-pakistan-during-2015

Pakistan recor-ded a substantial decrease in terrorist activities last year, with 45 per cent fewer attacks and 38pc fewer deaths reported in the year than in the previous year, according to the report of the ‘Global Terrorism Index (GTI) 2016’.

This is the second consecutive year in which Pakistan has seen reduction in terrorist activities. Terrorism in the country is now at its lowest level since 2006, says the report released by the US-based Institute for Economics and Peace, an independent think-tank.

The GTI is based on data from the Global Terrorism Database which is collected and collated by the National Consortium for the Study of Terrorism and Responses to Terrorism, a department of the Homeland Security Centre of Excellence led by the University of Maryland.

Pakistan had the third largest decline in deaths. There were 677 fewer deaths in Pakistan. As a result, Pakistan had the lowest number of deaths from terrorism since 2008, said the report released on Thursday.

The reduction in deaths from terrorism is in part explained by Zarb-i-Azb military operation being carried out by Pakistan Army. The operation focused on removing militant safe havens in North Waziristan.

Pakistan continued to see decline in its levels of terrorism due to infighting within the largest active group, the Tehreek-i-Taliban Pakistan (TTP), as well as to the operations of the army in the Federally Administered Tribal Areas.

Although the TTP reduced the number of attacks in Pakistan, it was still responsible for the most attacks, according to the report. In 2015 the group was responsible for 36pc of the deaths, totalling 240 people. This was down from 59pc of the deaths, totalling 544, in 2014, representing a sharp year-on-year reduction.

Although the number of attacks declined, terrorist activities was spreading across the country. It moved from the border region with Afghanistan to many other parts of the country, especially the Punjab province in the east which is the most populated area of Pakistan. A total of 429 cities experienced terrorist attacks in 2015, up from 17 in 2000. This may create a much more difficult situation for the Pakistani government in the coming years.

Riaz Haq said...

Electronic banking in #Pakistan up 16% in 2016 from 2015, State Bank of Pakistan http://bit.ly/2h2cpF9 via @techjuicepk

Payment systems in Pakistan have shown significant growth in 2016 by using digital transaction channels, State Bank of Pakistan (SBP) has stated in a Press Release.

SBP listed the facts and figures of Financial Year 2016 in the latest press release. SBP also mentioned that Real-time Gross settlement (RTGS) has increased to 29% in value from Financial Year 2015. The use of electronic and digital technology in making transactions is in line with SBP’s mission of promoting digital payments in Pakistan.

The volume of paper-based transactions has decreased significantly and e-banking is slowly replacing it. E-banking transactions have increased by 16% in volume and 4% in value, as compared to FY15. E-banking is an electronic payment system in which customers can make transactions like withdrawals, transfer of funds, bill payments etc., using mobile and the internet.

The use of Alternate Delivery Channels (ADCs) like ATMs, Point of Sale (POS) terminals, internet and mobile banking also showed rising trends. The internet and mobile banking increased by 18% and 8% in value respectively, as compared to 2015. It states

“Payment System infrastructure also showed phenomenal growth during the period under review. The number of branches increased from 11,937 to 13,179 whereas total number of ATMs installed in the country increased from 9,597 to 11,381 during the year.”

SBP functions as the central bank of Pakistan and it regulates the monetary and credit system. It works on the expansion of financial infrastructure by incorporating digital technology like cards, wallets, ATMs, POS, gateways, mobile and internet. It also ensures the security of the payments and transactions.

Riaz Haq said...

#Pakistan #banks show strong growth. #Deposits up 20%, #loans rise 17% in 2016.

http://www.khaleejtimes.com/buzzon/jobs/banking-financial-services/strong-deposit-growth-bodes-well-for-pakistan-banks

Banks advanced Rs5.6 trillion to the private sector in 2016, which is 17 per cent more than 2015
Deposits at Pakistan's commercial banks reached Rs11.2 trillion as of December 30, 2016. At this level, it works out as a 20.4 per cent year-on-year growth in deposits compared to the last three years.

Add to it the good news that banks advanced Rs5.6 trillion to the private sector in 2016, which is 17 per cent more than 2015 when only Rs4.8 trillion was sanctioned.

Banking and equity sector analyst Umair Naseer of Topline Securities said this is significantly higher than the historical average growth of 12 per cent in the past three years. He added that the strong deposit growth bodes well for banks as it remains the key earning driver in a low interest rate environment.

This is a success story for the banking sector as it took place at a time when some sectors of the economy, including the biggest one such as textiles - are still struggling to match their good performance in the past. At the same time, exports, hit by the international crash of oil and commodity prices and lower domestic output, declined from $24 billion to $19 billion in 2016.

The easy money policy of the State Bank of Pakistan (SBP), the central bank, has brought down the interest rate to 5.75 per cent - the lowest in 42 years. The banks have also been slashing the profit rate payable to depositors. This, in turn, was holding up a major growth in deposits.

The government of Pakistan, financial institutions and economists firmly believe that commercial banks should redouble their efforts and undertake a major deposit mobilisation campaign so that they can lend more money to the credit-starved private sector, including key industries such as textiles and the stagnant export sector. The government has to share part of the blame for credit shortage in the private sector as it has been borrowing heavily to fill its budgetary gap.

The current year will need redoubling of the deposit mobilisation efforts for growth as there are already some economists who feel the rate may be reduced to the range of 13 to 15 per cent. This is because, in the recent past, the government deposited larger amounts of money in these banks to earn larger profits. But this practice is almost over.

The SBP recently reported that bank investments rose eight per cent to Rs7.2 trillion last year. This helped the economy to look up after years of slowdown. It also confirms the fact that the economy is looking up under pro-business Prime Minister Nawaz Sharif, whose party will face new parliamentary elections in the first half of 2018. Other key elements which can help him win these elections will be the fast-track implementation of the $61 billion Chinese investment in the China Pakistan Economic Corridor (CPEC).

Other positive factors are the recently announced FDI inflow from the UAE, Saudi Arabia and other countries, attracted by CPEC and the improved investment climate in Pakistan, and revival of the overall economy.

The Chinese investment in financial and equity sectors and energy is now very substantial. A consortium of three Chinese and two Pakistani companies have bought 40 per cent shares of the PSX - the Karachi Stock Exchange, for $80 million. Besides attracting more Chinese FDI, it is likely to encourage other foreign countries and companies to invest in Pakistani shares and the financial market.

Riaz Haq said...

#Mobile banking helps #Pakistan’s poor & women by social & financial inclusion. #BISP

http://www.cambridgenetwork.co.uk/news/how-mobile-banking-helps-pakistans-poor/

Research carried out in Pakistan indicates that mobile phone banking can help alleviate poverty, improve women’s rights through financial and social inclusion and reduce corruption in developing countries.


The study by Dr Atika Kemal of Anglia Ruskin University’s Lord Ashcroft International Business School, is the first to look at how mobile banking innovation can help with the disbursement of government-to-person payments in state welfare programmes.

Dr Kemal studied the Benazir Income Support Programme (BISP) in Pakistan, which was launched in 2008 and is one of the largest social protection programmes in Asia.

BISP provides over 5.3 million low-income households with 4,500 Pakistani Rupees (approximately £34.50) every quarter. The payments are disbursed digitally to women only, as heads of the household.

Pakistan has a population of over 180 million, but only 23 million bank accounts, 11,600 bank branches and 6,232 ATMs across the country (compared to 70,000 ATMs in the UK). The shortage of banking infrastructure is particularly severe in rural areas. Mobile banking has become popular for the poor by providing bank accounts to advance financial inclusion in underserved communities.

The BISP payments were initially distributed to households in cash or money orders via a network of local parliamentarians and postmen. In 2010, mainly to improve transparency, visibility, security and efficiency in the delivery of social cash, a shift to digital technologies, including mobile banking, took place in selected districts.

However, due to the high costs in funding mobile handsets to women, besides other security reasons, mobile banking was gradually phased out and eventually replaced by the Benazir Debit Card.

BISP is primarily funded by the Government of Pakistan, but also receives financial support from multilateral and bilateral donor agencies, including the World Bank and the Department for International Development (DfID) in the UK.

Dr Kemal, an Associate Lecturer at Anglia Ruskin University, said: “The transition from cash-based to digital payments was really due to pressure from international agencies which had invested in the programme. While some political actors resisted the shift to mobile banking, it led to increased accountability and governance, and a reduction in administrative and transaction costs. Financial inclusion was really only a secondary objective for BISP.

“However, from the perspective of women, mobile banking provided flexibility and convenience to cash the full amount of grants at various locations such as banking agents, ATMs and point-of-sale machines via a secure PIN known only to the beneficiary. This eliminated the practice of politicians or postmen demanding bribes for delivering the cash payments at home.

“BISP is also responsible for women’s empowerment through social and political inclusion. Women were issued with national identity cards that were mandatory to register with BISP and to eliminate identity theft when cashing payments. This not only boosted their social standing and authority in their households but also granted political freedoms through assisting their rights to exercise their vote in elections.

“However, my study also found that the majority of women were illiterate, so they encountered digital and financial hurdles. Also, other infrastructural constraints, such as weak mobile signals and power outages in their homes, affected mobile phone usage. Women were also dependent on more literate family members or friends for reading text messages to notify them of payments.”

Riaz Haq said...

#Sharia compliant #Islamic #banking available 2,322 branches in 112 districts across #Pakistan

http://www.khaleejtimes.com/business/banking-finance/why-pakistans-islamic-banking-industry-can-only-get-better


The growth and expansion of the Islamic banking is moving fast. This is the view of Islamic scholars who spoke at a seminar arranged by the Securities & Exchange Commission of Pakistan (SECP), the official regulator of Islamic banking in the country.

At the same time, the World Bank and the Islamic Development Bank, in their first global review of the fast-track movement of the Islamic banking system, have reported that Pakistan is among those countries in which the government and the central bank are "not taking Islamic banking lightly".

The SECP reports that "there is an even stronger growth of Islamic assets in the non-banking financial institutions. Their market share is now approaching 33 per cent, - up from 14 per cent in 2012".

What's behind this growth? One, the persistently strong demand from customers of the country of 200 million, largely Muslims, and two, the fact that the State Bank of Pakistan (SBP), the central bank, the government of Pakistan and the SECP "created the enabling regulations environment for this fast track growth".

These were the views made at a seminar held at the SECP in Islamabad. Hayat says "the priority and responsibility of the regulator like SECP is to develop [an] Islamic capital market."

The SECP on its part, recently had two sessions for consultation with banking sector participants to help investment in issuing sukuk and real estate investment trusts (Reits).

As of now, the SECP is analysing the proposals from the financial and banking sector to formulate necessary amendments into the regulations to further reduce the cost for such investment. The SECP is also considering the banking sector and investors' proposals regarding the existing tax problems relating to sukuk and Reits and to overcome such problems.

---

The bankers and Islamic scholars also debated at the SECP seminar as to which model is to be adopted, because in 2001 policy makers had decided to allow both Islamic and conventional banking in Pakistan. This policy continues as of now.

As at now, 21 banking institutions are providing Islamic banking services and products, through their 2,322 branches in 112 districts across Pakistan. Abbasi said: "The SBP has a holistic approach for the promotion of Islamic banking, and is providing the enabling policy environment for Shariah governance, risk management and capacity building." The Islamic Finance News, in 2015, adjudged the SBP as the "Best Central Bank for Promoting Islamic Finance".

Another Islamic scholar, Dr Shafiullah Jan, says: "The economic substance in Islamic banking may seem to be the same as that of the conventional banking, but the underling process is different."

Dr Jan said along with the growth of the Islamic banking industry, more attention should be given to ask as to why this industry was created, and whether it is delivering along the Islamic vision of development that it is associated with.

Now let us go back to the first-ever Islamic banking report issued last week by the World Bank and Islamic Development Bank. It says: "The fact that a strategic roadmap on a national level is in place in jurisdictions. These jurisdictions include Indonesia, Malaysia and Pakistan, [and] shows that the governments in those countries are no longer taking Islamic financing lightly."

It says, "Indonesia and Pakistan are, perhaps, the strongest proponents of incorporating financial inclusion as a policy objective."

As the banking sector expands as a result of financial inclusion, Islamic banking is projected to expand more.

Riaz Haq said...

#Pakistan #bank profits soar with rising deposits and increased lending
http://www.khaleejtimes.com/business/banking-finance/as-deposits-and-lending-rise-so-do-pakistan-banks-profits

Gains on bigger volumes, enlarging transactions and growing business rising
Commercial bank profits in Pakistan are going up on the back of rising deposits and growing lending.

The profits on bigger volumes, enlarging transactions and growing business are rising. This is so even though the spread is also down to around five per cent from its sunny days of seven per cent. The interest rate is down to 5.75 per cent.

Overall deposits of all commercial banks stood at Rs10,726.66 billion on March 3 according to the latest report by the State Bank of Pakistan (SBP), the central bank. Deposits and other accounts of specialised banks stood at Rs71.07 billion. Total assets of banks were at Rs14,941.67 billion.

Lending by banks rose, too, the SBP said. The gross advances of all scheduled banks stood at Rs5,502.81 billion in the first quarter of fiscal year 2017. Lending by banks in the same period was Rs4,835.19 billion, which was 13.8 per cent higher than the same period of fiscal year 2016.

Borrowing by all scheduled banks rose 2.8 per cent to Rs2,025.84 billion in fiscal year 2017, compared to Rs1,990.44 billion in fiscal year 2016.

The central bank reports a much-awaited rise to Rs7,525.10 billion in investments by banks in fiscal year 2017, up from Rs7,039.33 billion in the past year. It shows a rise of 6.9 per cent.

The approved foreign exchange reserves with banks were Rs996.45 billion in March, compared to Rs923.4 billion, a year ago, which is higher by 7.9 per cent.

All these statistics of the banking sector confirm a definite growth in all these sectors.

The banks' operations and profits are projected to rise, though at a slower pace than the last few years. But the economy is moving up. Bankers are not likely to gain seven per cent-plus spreads, as in the past several years when this rate was the highest in the world. Spreads and profits are low because the SBP-set soft monetary policy had reduced the interest to as low as 5.75 per cent - the lowest in the last 43 years. Fiscal year 2016 saw a reduction of 2.2 per cent in the mark-up income of banks. The average spread, as a consequence, is now around five per cent.

But all said and done, the economy is moving up at a good pace as stated by Finance Minister Ishaq Dar who insists: "We project the GDP growth of five per cent-plus even if it does not turn out to be the hoped-for 5.7 per cent." It will provide reasonably good profits to all sectors of the economy.

The Pakistan stock market index PSX-100, for instance, within a short span of time, has shot up and crossed 50,000 points in recent weeks. It faced a small downturn, and the PSX these days is moving in the range of 48,697.65 on March 20 - the opening day the week, which moved to 49,016.78 later in the week.

During three-and-a-half years of the government of pro-business Prime Minister Nawaz Sharif the index has moved from around 35,000 to the current level - nearly a whopping one-third up.

The improving health of the Pakistani economy is also testified by international rating agencies and global stock market operators who have described the Pakistan Stock Exchange as "one of the top 10 emerging markets worldwide".

Besides other big foreign businessmen and financiers flocking to buy PSX shares, there is a growing interest of the investors from the UAE and China - part of which is related to the ongoing implementation of the $56 billion China-Pakistan Economic Corridor (CPEC). The CPEC-related investment and other FDI indicators are leading up to larger banking transactions and growing bank profits. This is happening despite one or the other quarter of the financial year coming out with somewhat smaller bank profits.

Riaz Haq said...

#Pakistan to set up #infrastructure bank with $1 billion capital to finance private sector development. #IMF #IFC

https://tribune.com.pk/story/1394404/pakistan-set-1b-infrastructure-bank/

Finance Minister Ishaq Dar has announced that the government will set up Pakistan Infrastructure Bank with a paid-up capital of $1 billion, which will give financing to private investors for development projects.

Pakistan government and the International Monetary Fund (IMF) would have 20% shares each in the bank and the rest would be held by global organisations such as the International Finance Corporation, he said.

AJK plans tourism corridor along CPEC
He was speaking at a briefing held for the Pakistani media towards the end of his visit to Washington DC during which he attended spring meetings of the IMF and the World Bank.

Dar also revealed that the government would soon be launching Pakistan Development Fund (PDF) and its shares worth Rs100 billion would be offered to Pakistani diaspora in order to channelise their remittances effectively.

Later, these shares will be listed on the Pakistan Stock Exchange. “After the success of Sukuk (Islamic bonds), the PDF will be another attractive investment for overseas Pakistanis,” he remarked.

Giving a detailed round-up on the plenary sessions with the IMF and World Bank, the minister said there was positive sentiment about the tremendous economic rebound experienced by Pakistan over the last four years.

“Pakistan was on the verge of bankruptcy in 2014 and today it is likely to achieve approximately 5% growth during the current financial year,” he said. “Both IMF and World Bank are on the same page with the Pakistani government in these projections.”

Promotion of it: Work on innovation centres begins

Global credit rating agencies have upgraded the rating of Pakistan from negative to stable and from stable to positive in the last four years to an extent that the country is likely to be included in G-20 countries by 2030.

Riaz Haq said...

#Pakistan to launch #Exim, #infrastructure banks, development fund to boost its #exports-

http://www.khaleejtimes.com/buzzon/jobs/banking-financial-services/pakistan-to-launch-banks-fund-to-boost-its-exports

Pakistan will shortly launch two international banks and a development fund - Exim Bank, Pakistan Infrastructure Bank and Pakistan Development Fund - to boost foreign trade and step up funding for its mega projects.

Pakistan Development Fund (PDF) aims at encouraging overseas Pakistan to invest their earnings at good profit rates.

On instruction of Prime Minister Nawaz Sharif Finance Minister Ishaq Dar discussed the launching of the two international banks and the PDF with top leadership of US, World Bank and the Iternational Monetary Fund (IMF) during his just concluded talks in Washington.

Islamabad is happy that its timing of the announcement of the two banks and the PDF has been welcomed by the IMF, which in its latest report put Pakistan's GDP growth at 5 per cent in FY-17, and projected it at 5.2 per cent for FY-18, well above the 3-4 per cent in the last decade. At the same time, its good to see the stock market indicating high foreign and domestic interest in investment. The stock market this month shot up beyond its highest position of 50,000 plus points which led to the international rating agencies to place it as Asia's Top-10.

The Pakistan Stock Exchange (PSX) with such an attractive performance is now on its way to be ranked as "G-20" - at the global best 20 stock markets, rating agencies say.

At the same time, according to international credit rating agencies, Pakistan is moving up and have upgraded Pakistan from "negative" to "stable," and just now to "positive."

Dar said: "Pakistan has now emerged as a lucrative investment option for international investors."

"I advise the multinational giants to consider Pakistan for establishing labour-intensive projects and facilities in South Asia," he said while talking to the Khaleej Times in Islamabad.

"The Exim Bank will be fully operational by December this year. It will start with a Rs7 billion cash," said Shibli Fraz, chairman of the Senate Standing Committee on Commerce.

He said, this information was provided by the Ministry of Commerce. The Ministry of Commerce also informed the Senate that it has sent three names to Finance Minister Ishaq Dar for the appointment of the head of the Exim Bank.

The government has also decided to launch Pakistan Infrastructure Bank (PIB), with a paid up capital of $1 billion. "PIB will be providing funds to the private investors for developing big projects," Dar said.

"The International Monetary Fund and the government of Pakistan will each hold 20 per cent stake in the PIB, and World Bank affiliate and lender to the private sector - International Finance Corporation (IFC) - will have the remaining 60 per cent shares," Dar said.

The government will launch PDF in collaboration with the Manila-based Asian Development Bank (ADB). The PDF shares worth Rs10 billion will be offered for investment expected to be made by the Pakistani diaspora. The PDF shares will be enlisted on the PSX.

"After success of Pakistan's sukuk bonds, PDF will be another attractive investment for the overseas Pakistanis to receive good dividends," Dar said.

The government will offer $1.3 billion shares to the overseas Pakistanis. It will be non-convertible dollar shares and will be invested in commercially viable projects in the public sector, Dar said.

He also said: "Since rupee is stable, we hope a positive response from investors. The rupee only registered a 5 per cent devaluation over the last five years, so if you invest in a good development fund you can get a good return," Dar said.

The ADB is also bullish over Pakistan's economic prospects and has upgraded the its growth estimate to 5.2 per cent in FY-17.

Riaz Haq said...

SBP sees private credit off-take to boom in Q4

https://www.thenews.com.pk/print/255270-sbp-sees-private-credit-off-take-to-boom-in-q4

“The seasonal pattern along with robust growth in large scale manufacturing index observed during Jul-Sep 2017 suggests that advances to private sector will rise in Q4CY17,” the central bank said in the quarterly performance review of the banking sector on Tuesday.

“Less than normal seasonal fall in advances along with improved liquidity and strong solvency – well above the minimum benchmark – are the key highlights of the 3rd quarter of CY17.” Though gross advances to private sector decreased Rs5.4 billion in July-September 2017, they were significantly lower than the contraction of Rs112.2 billion during the same period of last year.

“Banking sector’s asset base has expanded marginally during third quarter, though, on year-on-year basis, the growth has been quite robust (16 percent),” the central bank said. “Encouragingly, share of fixed investment (long-term) loans in total loans continues to rise indicating improved business confidence.”

The central bank said low interest rates help credit flow into the real economy. “However, the banking sector’s review showed that corporate borrowing was a little bit disappointing during the third quarter.”

It further added that advance-to-deposit ratio inched down 48.3 percent in July-September 2017 from 48.7 percent in the previous quarter. The central bank suggested banks to boost their ability to maximise benefits from pickup in economic activity driven by China-Pakistan Economic Corridor.

“In order to deliver better performance, banks need to calibrate the changing macroeconomic environment in their business models to capitalise the emerging opportunities as arising from, generally, growth in the economy and, particularly, from the China Pakistan Economic Corridor (CPEC),” it said.

The SBP said the risks to the resilience of the banking sector are likely to remain muted in the last quarter of 2017 as capital adequacy ratio is expected to remain well above the minimum regulatory requirement despite narrowing return margins and anticipated rise in risk weighted assets.

Banks posted profit of Rs111.7 billion in the third quarter, as compared to Rs89.9 billion in a quarter ago. The central bank said earnings of the banking sector have moderated due to low interest rates and increased administrative expenses, in addition to one-off settlement payment made by a large bank.

Banking sector remains sound & stable in Q3CY17: SBP

https://www.brecorder.com/2017/12/12/386346/banking-sector-remains-sound-stable-in-q3cy17-sbp/

Advances demand from textile and other sectors (agriculture, automobiles, electronics etc.) have been promising. Noticeably, the share of fixed investment (long-term) advances in overall advances is persistently rising.

Banks have continued to invest in short term MTBs while investment in PIBs and Sukuk have declined. The deposit mobilization has remained on track, primarily, on the back of growth in saving and fixed deposits.

Asset quality has improved as Non Performing Loans (NPLs) to gross advances (infection) ratio has moved down to 9.2 percent as of end September 2017 from 9.3 percent as of end June 2017.

However, profitability has moderated further with the banking sector earning profit (before tax) of PKR 195.3 billion during Jan-Sep, 2017 (ROA of 1.6 percent and ROE of 19.1 percent).

Encouragingly, Net Interest Income (NII) has improved (Year-on-Year basis) on account of rising interest earned on advances. Capital Adequacy Ratio of the banking sector at 15.4 percent is well above the minimum required level of 10.65 percent and advocates that banks have enough buffers available to meet additional financing need of the market.

Riaz Haq said...

Solid performance by Pakistan’s banking sector in 2017, State Bank reports

http://www.arabnews.com/node/1271156/business-economy

Pakistan’s banking sector remained sound and stable in 2017, with total assets growing to Rs18.34 trillion ($159.5 billion) from Rs15.83 trillion the previous year.
However, in its latest Quarterly Performance Review of the Banking Sector — covering the final quarter of 2017 and published on March 21 — the State Bank of Pakistan (SBP) revealed the number of loss-making banks rose to five, from three in 2016.
“Two additional loss-making banks posted marginal profits in 2016 and they belong to the lowest quartile of the banking sector in terms of asset base,” said SBP. “Rising cost of operations has compelled these banks to incur losses in 2017.”
Equity increased by Rs36.7 billion (2.7 percent) during the quarter, compared with Rs28.4 billion (2.1 percent) during the same period in 2016.
“Banks have added 305 branches and 416 ATMs during the fourth quarter of calendar year 2017, while 304 additional branches have been linked to the online network,” SBP noted. “There has also been a rise in point of sales machines and plastic cards.”
In terms of assets, the sector performed as per trend during the quarter. They increased by 4.5 percent, compared with 4.6 percent quarterly growth recorded a year earlier. About 70 percent of the growth in total assets came from net advances and net investments.
On a year-on-year basis, assets grew by 15.9 percent in 2017 compared with 11.9 percent the previous year. Net advances grew by 18.4 percent, and net investments by 16.2 percent.
As for liabilities, growth in deposits was subpar, the central bank said. During the quarter, banks recorded a 3.2 percent increase in deposits, and an annual increase of 10.3 percent. These compare with 2016 figures of 6.4 percent in the fourth quarter, and 13.6 percent for the year. As a result, borrowing by banks substantially increased to Rs280.1 billion, compared with retirement of Rs69.4 billion during the same period last year.
Islamic banking institutions, which represent 12.4 percent of banking-sector assets, contributed 24.1 percent (Rs 188.6 billion) of asset growth during the quarter, compared with the same period a year earlier. Year on year, they accounted for 16.7 percent (Rs 418.8 billion) of total asset growth.
The seasonal pick up in private-sector advances stands at 7.3 percent for the quarter, down from 10.6 percent in the final quarter of 2016.
“This is on account of a decline in advances to the chemical and pharmaceuticals sector, and lower advances flows to sugar and energy sectors,” SBP noted. “Within the chemical and pharmaceuticals sector, fertilizer companies have retired their advances during [the quarter]. Higher cash flows resulting from release of the stocks accumulated since 2016, and lower fertilizer production in 2017 due to higher liquefied natural gas prices and its limited availability have led to the decline in advances by fertilizers.”

Riaz Haq said...

#Pakistan #FinancialServices #profits surged 48% to Rs. 45.5 billion in the third quarter (July-September 2019) over the same quarter of 2018. Cumulatively in the nine months (January-September 2019), #banking profit grew 20% to Rs127.7 billion. #economy https://tribune.com.pk/story/2144367/2-despite-tough-economic-reforms-pakistan-banks-profit-soars/

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On average, banks charged 13.84% from borrowers and paid 8.71% to depositors – resulting in a spread of 5.13% in December 2019.

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Commenting on the latest data issued by the State Bank of Pakistan, Topline Research analyst Fawad Basir said, “Deposits of the banking sector grew 10% to Rs14.6 trillion in 2019 compared to 8% in 2018. The growth, however, remained lower than the five-year average of 12%.”

Banks mostly invested the deposits in the government papers as they offer secure and higher rate of return during times of such crisis compared to the credit they offered to business in the year.

Accordingly, investment in government securities (T-bills and Pakistan Investment Bonds) increased 16% to Rs8.8 trillion in 2019. Investment to deposit ratio (IDR) increased to 60% in 2019 from 57% in 2018.

“On the other hand, advances (like credit to private sector) grew by just 3% in 2019 hindered by high interest rates and slowdown in the overall economic activity. Over the past three years, advances have grown at an average of 19%,” he said.
“Going forward, we see deposit growth in the range of 10-12% and advances growth of 11-13% in 2020 at the behest of economic recovery and an expected decline in interest rates,” he said.

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Riaz Haq said...

World's highest #ATM奴: #Pakistan's mountaintop bank machine at 4,693m elevation, the #Khunjerab pass is the world's highest paved border crossing. It has been serving the small number of residents, border staff & tourists – since 2016. #China #Pakistan https://www.bbc.com/travel/article/20221003-the-worlds-highest-atm-pakistans-mountaintop-bank-machine?ocid=ww.social.link.twitter

The Guinness World Record-holding machine works like any other; it can be used to withdraw cash, pay utility bills and make interbank fund transfers. But as my kids and I acclimated to the dip in oxygen, what struck me most was the unexpected festivity in the atmosphere: almost carnivalesque, with people FaceTiming relatives, posing for photos and orbiting the ATM to get the best selfie shot.

Karachi school teacher Atiya Saeed had brought 39 of her secondary-school students – all girls – here to the Pakistan-China border. "It's the first time in a long time that we've travelled in Pakistan," she said.

Although they didn't come for the ATM alone, the visit to the border was, she explained, an adventurous geography, history and economics lesson in the most hauntingly beautiful of "classrooms".

Constructed by the National Bank of Pakistan (NBP) in 2016, the solar- and wind-powered machine serves the small number of residents and staff at this border crossing – and the adventurous travellers who flock to it as a badge of honour, taking pictures while making a transaction that brings new meaning to the phrase "cold, hard cash".

"My account is frozen!" joked another visitor, South African retired principal Ayesha Bayat, who was on holiday with her husband. "We've come from a country where we do have mountain ranges… but not like this. I'm finding the panoramic views absolutely beautiful," she said.

"It's important to have landmarks… like the Eiffel Tower," said Bayat's husband, Farouk. "They become an excuse to discover the rest of the landscape."

But building this landmark was no small feat. And neither is maintaining it.

The project took around four months, said NBP ATM monitoring officer Shah Bibi. The closest NBP bank location is 87km away in Sost, and Sost branch manager Zahid Hussain regularly travels back and forth, braving extreme weather, treacherous mountain passes and frequent landslides to replenish the ATM. "On average, around 4 to 5 million rupees [£15,540–£19,427] is withdrawn within the span of 15 days," he said.

Riaz Haq said...

Banks’ income, assets flourish in 1HCY22

https://www.dawn.com/news/1723769

https://www.sbp.org.pk/press/2022/Pr-28-Nov-2022.pdf

Banking in Pakistan flourished during the first half of the calendar year 2022; both assets and income noted a strong increase while the balance sheet of banks expanded by 16 per cent over the same period of last year.

The State Bank issued a “mid-year performance review” (MYPR) of the banking sector for 2022 on Monday.

The review covers the performance and soundness of the banking sector for the January-June period (1HCY22).

It also covers the performance of financial markets and microfinance banks (MFBs), as well as the results of Systemic Risk Survey (SRS), which represents independent respondents’ views about key risks to financial stability.


The sustained economic activity during 1HCY22 supported the expansion of banking sector balance sheet by 16pc during 1HCY22, said the report.

A robust increase in the asset base was mai­nly driven by the flow of private sector advances and increases in investments, particu­larly government securities, said the report.

Investments rose by 22.5pc (Rs3.3 trillion) during 1HCY22. “These funds were almost entirely invested in government securities,” said the SBP report.

Investments in MTBs (market treasury bills) and PIBs (Pakistan Investment Bonds) observed a rise of Rs684 billion and Rs1.7tr, respectively.

Also, Ijara Sukuk attracted substantial bank funds of Rs838 billion in the first half of the present calendar year. Accordingly, the share of MTBs in banks’ total holding of federal government securities declined to 33.6pc by the end of June this year from 46.6pc a year ago. The share of PIBs shot up to 52.6pc from 46pc in June -2021.

“Increased share of long-term investments demonstrates the government’s strategy to improve its debt maturity profile,” said the SBP. The pace of growth in private sector advances during 1HCY22 was the highest in comparable periods of the previous three years. Improved manufacturing activity, as reflected in double-digit growth in the Large-Scale Manufacturing (LSM) index during 1HCY22, higher input prices and SBP’s refinance schemes augmented the overall flow of advances.

Individuals and the sugar sector availed a major chunk of financing, followed by the textile sector.

However, the monetary policy announced on Nov 24 had said that in line with the slowdown in economic activity, private sector credit continued to moderate, increasing only by Rs86.2 billion during Q1 FY23 (July 1 to Sept 30, 2022), compared to Rs226.4 billion during the same period last year.

This deceleration was mainly due to a significant decline in working capital loans to wholesale and retail trade services, as well as to the textile sector in the wake of lower domestic cotton output, and a slowdown in consumer finance, said the monetary policy.