Banking advances grow by 9pc to Rs4.4tr in 2014

January 10, 2015

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KARACHI - Advances of the banking sector grew by 9pc in 2014 as compared to 6pc in the previous year, increasing to Rs4.4tr as compared to Rs4.0tr in 2013. The advances growth during the last 3 years has averaged 5pc due to conservative lending strategy of banks and low credit demand.
Analyst Umair Nasir at Topline anticipate credit growth to increase further in 2015 as lower borrowing by government will offer more liquidity to the banks. Additionally, lower interest rates on fixed income securities will force banks to adopt a more aggressive lending approach.
The total deposits of commercial banks increased by 11pc in 2014 to reach Rs8.3tr whereas, M2 growth during the period stood at 13pc. Deposits growth has been slower when compared to average growth rate of 13pc during the last 3 year but it is line with lower M2 growth. M2 growth has also been witnessing a declining trend recently due to contained government borrowings and higher foreign inflows. Total outstanding stock of Net Foreign Assets (NFA) increased by Rs562b in 2014 as against a contraction of Rs436b during the same period last year. On the other hand, Net Domestic Assets (NDA) increased by Rs396b as compared to an increase of Rs1.6tr in the corresponding period last year. Analyst expects this trend to continue in near term as government is focusing on fiscal consolidation. Total investments of scheduled banks surged by a sharp 26pc in 2014 as bank invested heavily in long term Pakistan Investment Bonds (PIBs). Law & order issues, energy crisis and risk of NPLs forced banks to park their investments in government securities.
Investment to Deposit Ratio (IDR) of banks increased to 61.2pc in 2014 as compared to 54.1pc during the last year. Investment in government securities is at an all time high as an IDR of 61pc has never been achieved previously.