Deposits in the banking industry have continued to rise, reaching PKR 20.97 trillion as of December 21, a 17 percent YoY increase and a 7 percent MoM increase, an all-time high. With SBP, you’ll be able to
With the CRR increasing by 1% in November and the policy rate increasing by 275 basis points, banks were expected to focus on boosting their low-cost deposit holdings.
Broad Money (M2) has grown in lockstep with Currency in Circulation (CiC), with M2 increasing 12% YoY in December and CiC growing 14.7 percent YoY. In particular, as compared to SPLY, CiC/M2 has stayed practically unchanged at 29%.
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Meanwhile credit demand across the country has picked up. Dec’21 showed a 19% YoY jump in Gross Advances to settle at PKR 10.2trn, a YoY growth last witnessed in Feb’19. This uptick can be attributable to measures taken by SBP/gov’t to encourage credit offtake, such as housing and construction finance targets (Mera Pakistan Mera Ghar) and additional tax rate ranging between
2.5-5% in case of ADR below 50%. Private sector credit as of Dec’21 stood at PKR 8.3trn, posting a 16% YoY jump.
Investments continued to grow at 22% YoY to clock in at PKR 14.1trn amid demand for gov’t securities. With interest rates hikes witnessed in last quarter of CY21 and expected to slightly increase further in 1HCY22 (although the quantum of hike will be less than previous ones), banks have aggressively built positions towards the shorter end of the yield curve.
Gross ADR ratio has settled at 48.4% as at Dec’21 against 47.5% SPLY and 49.0% last month, while IDR stands at 67.4% as at Dec’21 against 64.6% SPLY and 68.9% last month. Banks have favoured risk-free debt instruments to expand their asset base.
Moreover, banking sector spreads clocked in at 4.18% in Nov’21 on outstanding deposits (4.83% on fresh deposits).