12-07-2008, 05:40 AM
(Note: Full report is available at http://www.sbp.org.pk/reports/annual/arFY08/index.htm and http://www.sbp.org.pk/reports/annual/arF.../index.htm)
Working capital, trade loans show increase while bank advances to equity market depict decline
KARACHI (December 07 2008): Review of the Economy: Both working capital and trade loans showed an increase while fixed investment loans and bank advances to the equity market demonstrated a decline in the last financial year, says the State Bank of Pakistan in its annual appraisal of the economy in financial year 2007-08. The document was issued Saturday, after a delay of five months.
The SBP said that a traditional feature of the credit cycle is a decline in net credit expansion during the second half of the fiscal year. But in FY-08, the trend was absent due to rising cost of inputs required for increasing exports on the back of a depreciating rupee.
The slowdown in advances under fixed investment loans in FY-08 was expected as expansion of cement plants, textile mills and construction expansion was materialising. However, swap of advances with locally issued debt instruments such as TFCs and sukuk further accentuated the sharp fall to 7.8 percent in FY-08 as against 25.6 percent growth in the previous year.
On the other hand, trade loans after recording a deceleration for two consecutive years depicted a growth of 29.7 percent during FY-08. On the import side, the growth was visible in manufacturing, commerce, trade and power sector. Trend in export finance suggests, says the report, that loans under EFS recorded a growth of 7-9 percent.
Growth in consumers loans for the second consecutive year, says SBP, decelerated and a modest growth of 3.1 percent in FY-08 was recorded. This deceleration in consumer loans together with a rise in gross NPLs in the category led to a sharp rise.
The slowdown was most visible in auto finance in absolute terms. Higher interest cost and increase in domestic prices of cars added to the pressure. Mortgage finance also slowed down significantly as outright purchases went up, said SBP. Monetary indicators: Rising inflationary pressure and growing competition from non-banks has led to a diminishing role of banks in financial intermediation in relative terms, says SBP.
Consequently, currency to deposit ratio increased in FY-08, after witnessing a falling trend since FY-03. Even though the overall growth in deposits decelerated, foreign currency deposits went up due to weakening of rupee against major currencies in FY-08, says SBP. Dollarisation of the economy is evident from the rising share of FCD in M2.
Due to slowdown in deposit growth and strong demand for credit to deposit ratio of banks - a crude indicator of liquidity comfort with the banks - increased from end January 2007 of 79.6 percent to 82.3 percent at end June, 2008.
SBP says bankwise analysis shows that out of 36 banks, 28 are well capitalised maintaining capital adequacy ratio (CAR) of over 10 percent. Two banks have seen their CAR fall below eight percent due to poor asset quality (advances) and low profits.
Banking spread: During FY-08, says SBP, the return on deposits improved by 120 basis points, whereas the rise in lending rates was limited by 63 bps. Consequently, banking spreads declined by 57 bps - the biggest cut in the preceding three years. The spread is more visible (102 bps) when non-remunerative deposits are included, the report adds. However, bank-wise analysis shows that while local private banks have posted the largest fall in spread, interest margin charged by foreign banks has actually increased. Twenty commercial banks experienced narrowing of spreads, 15 banks recorded a rise in their margins, the report concluded.
http://www.brecorder.com/index.php?id=848555
Working capital, trade loans show increase while bank advances to equity market depict decline
KARACHI (December 07 2008): Review of the Economy: Both working capital and trade loans showed an increase while fixed investment loans and bank advances to the equity market demonstrated a decline in the last financial year, says the State Bank of Pakistan in its annual appraisal of the economy in financial year 2007-08. The document was issued Saturday, after a delay of five months.
The SBP said that a traditional feature of the credit cycle is a decline in net credit expansion during the second half of the fiscal year. But in FY-08, the trend was absent due to rising cost of inputs required for increasing exports on the back of a depreciating rupee.
The slowdown in advances under fixed investment loans in FY-08 was expected as expansion of cement plants, textile mills and construction expansion was materialising. However, swap of advances with locally issued debt instruments such as TFCs and sukuk further accentuated the sharp fall to 7.8 percent in FY-08 as against 25.6 percent growth in the previous year.
On the other hand, trade loans after recording a deceleration for two consecutive years depicted a growth of 29.7 percent during FY-08. On the import side, the growth was visible in manufacturing, commerce, trade and power sector. Trend in export finance suggests, says the report, that loans under EFS recorded a growth of 7-9 percent.
Growth in consumers loans for the second consecutive year, says SBP, decelerated and a modest growth of 3.1 percent in FY-08 was recorded. This deceleration in consumer loans together with a rise in gross NPLs in the category led to a sharp rise.
The slowdown was most visible in auto finance in absolute terms. Higher interest cost and increase in domestic prices of cars added to the pressure. Mortgage finance also slowed down significantly as outright purchases went up, said SBP. Monetary indicators: Rising inflationary pressure and growing competition from non-banks has led to a diminishing role of banks in financial intermediation in relative terms, says SBP.
Consequently, currency to deposit ratio increased in FY-08, after witnessing a falling trend since FY-03. Even though the overall growth in deposits decelerated, foreign currency deposits went up due to weakening of rupee against major currencies in FY-08, says SBP. Dollarisation of the economy is evident from the rising share of FCD in M2.
Due to slowdown in deposit growth and strong demand for credit to deposit ratio of banks - a crude indicator of liquidity comfort with the banks - increased from end January 2007 of 79.6 percent to 82.3 percent at end June, 2008.
SBP says bankwise analysis shows that out of 36 banks, 28 are well capitalised maintaining capital adequacy ratio (CAR) of over 10 percent. Two banks have seen their CAR fall below eight percent due to poor asset quality (advances) and low profits.
Banking spread: During FY-08, says SBP, the return on deposits improved by 120 basis points, whereas the rise in lending rates was limited by 63 bps. Consequently, banking spreads declined by 57 bps - the biggest cut in the preceding three years. The spread is more visible (102 bps) when non-remunerative deposits are included, the report adds. However, bank-wise analysis shows that while local private banks have posted the largest fall in spread, interest margin charged by foreign banks has actually increased. Twenty commercial banks experienced narrowing of spreads, 15 banks recorded a rise in their margins, the report concluded.
http://www.brecorder.com/index.php?id=848555