ISLAMABAD: Asset base of banking sector of the country registered a decline of 1.6 percent, reveals the State Bank of Pakistan (SBP)’s Quarterly Performance Review for Q3CY16 on Wednesday.
The SBP said that the banking sector, in terms of the QPR, remained in sound and stable state during the reviewed quarter.
It says that the solvency profile of the banking sector has strengthened, as capital adequacy ratio (CAR) improved to 16.8 percent, while profit after tax has stood at Rs 138.9 billion for the first nine months of calendar year 2016.
The reviewed quarter is marked with seasonal decline in gross advances by 2.3 percent on account of net retirement by private sector and commodity operation financing.
Textile, sugar, cement, agribusiness, and chemical and pharmaceutical sectors have observed net retirement while production and transmission of energy sector has revealed positive financing demand. Banks’ investments have fallen by 2.5 percent during Q3CY16.
Deposits of the banking sector, after observing some deceleration in the recent past, have inched up by 0.6 percent, which is in contrast to fall of deposits usually seen in the third quarter of a calendar year.
The rise in deposits is due to lower decline in current deposits and higher growth in saving and fixed deposits.
During the reviewed quarter, non-performing loans (NPLs) have observed a marginal decline, though, NPLs to gross advances ratio slightly increased.
The ratio has inched up by 20 bps to 11.3 percent as of September 30, 2016, but entirely on account of decline in seasonal financing activity.
The coverage ratio, provisions to NPLs, has, on the other hand, improved by 30 bps to reach 82.7 percent as of September 30, 2016.
The dip in interest margins and rising costs has narrowed the year-to-date profitability of the banking sector. Resultantly, return on assets declined to 2.1 percent as compared to 2.2 percent in Q2CY16 and 2.6 percent in Q3CY15. However, strong solvency remains intact, as CAR has strengthened by 70 bps to reach 16.8 percent as of September 30, 2016.
