KARACHI: The operating performance of banks shows a marked improvement as the profit before tax has increased by 52 percent year-on-year to reach Rs 247 billion by the end of 2014.
The quarterly performance review of the banking system for the quarter ending December 31, 2014 released by State Bank of Pakistan (SBP) here on Thursday said that this is reflected in the profitability indicators: net interest margin (NIM) has increased to 4.4 percent in December 2014 from 3.9 percent in calender year 2013 and ROA (before tax) has inched up to 2.2 percent in December 2014, up from 1.6 percent in calender year 2013, the report adds.
The report states that high profitability, capital injections by some banks, and debt-equity swap of one bank have further improved the solvency of banking sector.
With an increase of 1.6 percentage point, capital adequacy ratio (CAR) of the banking sector has reached at 17.1 percent, which is well above the bench mark of minimum 10 percent.
The report concludes that banking system is safe with strong capital cushion that may be utilised in times of stress.
The asset base of the banking sector of Pakistan soared by 8.8 percent or Rs 977 billion during October-December 2014 to reach Rs 12.1 trillion.
The report highlights that improvement in economic activity and better energy supply to industrial sector supported the 9.4 percent surge in advances during 2014 though the pace of advances somewhat slowed down during October to December 2014 over the corresponding period of last year.
Textile sector was the key user of advances followed by food products and beverages, production and transmission of energy, automobiles, and shoe and leather, the report said.
On the funding side, deposits growth of 5.6 percent during October-December, 2014 over the previous quarter and 11 percent over the corresponding period of 2013 supported the overall growth in balance sheet.
According to the report, the asset quality continued to improve as infection ratio further receded by 70 basis points to reach 12.3 percent and net non-performing loans (NPLs) to net loans declined by 50 basis points (bps) to 2.7 percent during October to December 2014.
The capital impairment ratio (net NPLs to capital) also observed a substantial decrease by 350 bps to 10.1 percent indicating declining risk to the future earnings and equity of the banking system, it added.
The State Bank of Pakistan has commenced publishing quarterly performance review (QPR) of the banking sector from December 2014.
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