Wednesday, 26 November 2014
At a time when the economy of the country is beset with a host of problems, there is at least one sector, which is working efficiently and performing its role with used aplomb. This is the sort of impression one gets after going through the quarterly Compendium of the banking sector released by the State Bank on 20th November, 2014. The aggregate profit (before tax) of the banking sector reached a historic high level of Rs 176 billion during end-September, 2014 quarter, showing a hefty increase of 44 percent over the same quarter last year. Consequently, the return on assets (ROA) and return on equity (ROE) went up to 1.4 percent and 15.9 percent respectively, up from 1.1 percent and 12.3 percent a year earlier. Capital Adequacy Ratio (CAR) of the banking system improved to 15.5 percent in September, 2013 as compared to 15.1 percent a quarter earlier, largely on the back of healthy profits. However, it did not denote any change compared to the same quarter of the previous year. It may, however, be noted that CAR in Pakistan is well above the minimum ratio of 10 percent set by the SBP to implement strict Basel-III capital standard. Encouragingly, stress test results also show that capital base of the banking system is strong enough to withstand unusual shocks on account of credit, market and liquidity risks. Indicators of asset quality, with marginal changes, also reflected stability. Non-performing loans (NPLs) to loan ratio (net of provisions) at 3.2 percent in September, 2014 was far below its peak of 6.4 percent in September, 2011.