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Bank spreads are down 48 basis points year over year in October 2021

KARACHI: Average banking spreads in October 2021 were 4.18 percent, down 48 basis points year over year, bringing the CY21 average spreads to 4.32 percent, down 87 basis points year over year.

Lending rates were 7.89 percent in October 2021, down 51 basis points year over year, while deposit rates were practically unchanged at 3.71 percent.

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Fresh spreads have once again averaged lower than the weighted average banking spreads for the month, according to Amreen Soorani of JS Global Capital. Fresh banking spreads decreased in October 2021, standing at 3.95 percent, down 109 basis points year on year, as a 22 basis point increase in lending rates was not enough to offset a 131 basis point increase in fresh deposit rates, she said.

For 10 months of CY21, fresh spreads also witnessed a similar trend, declining by 49bps on YoY. The recent cumulative hike of 175bps in Policy Rate is yet to be reflected in fresh lending rates.

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“With the KIBOR moving plus 200bps already, we believe adjustment of the hike in policy rate is soon to be reflected in the sector’s topline, hence we can expect sharp increase in spreads in the months to follow,” Amreen added.

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