Banks Recorded 42.92% Increase in Profits in 2020 Despite Pandemic

Business

The banking sector has posted an increase of 42.92 percent in its profits during the calendar year 2020 (CY20) despite the downward pressures of the pandemic, as observed from the data released by the State Bank of Pakistan (SBP) on Wednesday.

The SBP’s report ‘Financial Stability Review CY20’ shows that a notable slashing down of the policy rate during March 2020 to June 2020 had translated into lower funding costs on deposits as it had led to the immediate re-pricing of the saving deposits.


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Simultaneously, the interest earnings were also supported by the increase in the volume of the banks’ investments in government securities. These investments had increased by 33.51 percent to Rs. 12 trillion during CY20. During CY19, the recorded increase had been 12.96 percent.

The report detailed that weak financing demand, abundant liquidity, and high government budgetary borrowing needs had accelerated banks’ investments, and that “despite pandemic driven stress, banking sector’s assets grew by 14.24 percent during CY20 — higher than 11.73 percent growth observed in the previous year”.

The performance of the Islamic banking institutions (IBIs) had been notable as their asset base had expanded by 30 percent during CY20.


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The report revealed that although the credit growth had decelerated across some economic sectors, the textile sector had availed of the highest financing during the year under concern.

The stock of banks’ non-performing loans (NPLs) had increased by 8.91 percent to Rs. 829 billion during CY20, and more than half of this increase in bad debts had come from the agribusiness, energy, and sugar sectors.

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