Bank­ing sec­tor spreads sta­ble at 5.14pc in Feb ‘16

The Pak Banker - - COMPANIES/BOSS -

The bank­ing sec­tor spreads re­mained steady at 5.14% in Fe­bru­ary as com­pared with 5.12% recorded in Jan­uary 2016, as per the lat­est num­bers re­leased by the State Bank of Pak­istan (SBP), hence di­rect­ing yields to­wards down­ward tra­jec­tory since Au­gust 2015.

The lend­ing yield on fresh dis­burse­ment im­proved by 13bps MoM to 7.28% and the re­cent at­tri­tion in PIB yield as the mar­ket de­vel­oped an ex­pec­ta­tion of a rate cut have re­sulted in the spread be­tween the av­er­age yield of 5-yr Pak­istan In­vest­ment Bond (PIB) and lend­ing rate to con­tract to 7bps as against 85bps in Jan­uary 2016. The cost of fresh de­posits (COD) fol­lowed the same path thereby in­creas­ing by 15bps and hence, fresh spreads re­mained at 3.04%.

The banks charged slightly higher credit spread (Fresh Lend­ing Yield - KIBOR) of 81bps com­pared to 75bps as pri­vate sec­tor credit off­takes picked-up by Rs 34 bil­lion.It is still sig­nif­i­cantly lower than 140bps charged in June 2015 re­flect­ing the sec­tor's fo­cus on lend­ing to bor­row­ers with strong re­pay­ment ca­pac­ity. In fu­ture the bank­ing in­dus­try may wit­ness a mar­ginal re­duc­tion in lend­ing yield as the banks may re­duce their credit spreads to par­tic­i­pate in CPEC re­lated fi­nanc­ing.

Pak­istan bank­ing in­dus­try de­posits con­tracted by Rs 22.5 bil­lion in Fe­bru­ary to stand at Rs 9.38 tril­lion as against of Rs9.408 tril­lion of Jan­uary due to de­mand of the money in the open mar­ket.

Ac­cord­ing to the State Bank of Pak­istan (SBP), the de­posits of all banks de­clined to Rs 9.38 tril­lion from Rs 9.408 tril­lion in Jan­uary 2016 and Rs 8.49 tril­lion reg­is­tered in Fe­bru­ary 2015.

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