Banking industry’s profit drop by 9% in 2015

KARACHI: Heavy taxation on banks and its customers have declined their profit by 9.2% in the period of January to September 2015, standing at Rs 148 billion as compared to Rs 163 billion last year.

According to the State Bank of Pakistan’s (SBP’s) Quarterly Performance Review (QPR) of the banking sector, return on assets (ROA) before tax has increased to 2.6% in Sep-15 from 2.2% in Sep-14. However, the likely adjustment on account of provisions against infected portfolio by the yearend may keep a check on further growth in profits.

The outgoing quarter observed a marginal rise of 2.1% in the asset base of the banking sector. Public sector demand for credit remained strong due to fiscal needs while private sector advances witnessed nominal seasonal decline of 0.4%. Well aligned with the domestic credit cycle, deposits also declined by 2.6%. The banks, therefore, relied more on borrowings, which grew by 38% during the quarter.

On the soundness of banking sector, the report added that the asset quality remained stable as non-performing loan (NPLs) almost stayed unchanged at Rs 630 billion. However, the NPLs to loans ratio (infection ratio) marginally increased from 12.4% in Jun-14 to 12.5% in Sep-15 on account of seasonal fall in advances.

Net NPLs to net loans ratio, however, declined to 2.5% from 2.7% in June 2015 due to rise in accumulated provisioning against infected loans. The solvency profile of the banking system further strengthened with Capital Adequacy Ratio (CAR) rising to 18.2% (17.2% as of Jun-15). Importantly, the banking system is cushioned with high level of capital that may be utilised in any exigency.

The banking industry profit after tax of the banking sector recorded at Rs 148 billion, as against Rs 163 billion during FY14.


NEO Web Desk

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