KARACHI: Despite Covid-19, Non-Performing Financing (NPF) ratio of Islamic Banking Industry (IBI) is well below the overall banking industry ratio.
According to State Bank of Pakistan’s Islamic Banking Bulletin for the quarter ended September 2020, asset quality indicators of IBI are healthier than conventional banking. Non-performing financing ratio to financing (gross) and net NPFs to net financing marginally increased from 3.3 percent and 0.7 percent by end June 2020 to 3.7 and 0.9 percent, respectively by end September 2020.
However, despite a meager increase in NPFs of the IBI, the non-performing ratio of IBI (3.7 percent) is well below than the overall banking industry ratio, which stood at 9.9 percent end of September 2020. In addition, Islamic banking industry provisioning to NPFs stood at 77.5 percent compared to overall banking industry ratio of 84.7 percent in September 2020.
The report mentioned that deposit base of IBI also witnessed a quarterly increase of 3 percent or Rs 87.5 billion to Rs 3,033.5 billion by end September 2020, higher than the growth in deposit base of overall banking industry, which saw a rise of 0.8 percent during the period under review.
The category wise breakup of deposits showed that all categories of deposits witnessed growth on quarterly basis with the exception of ‘fixed deposits’ and ‘others’. Saving deposits improved by 7.1 percent or Rs 76.6 billion while ‘current deposits’ by 2 percent or Rs 20.2 billion.
The ratios of ‘capital to total assets’ and ‘capital minus net Non-Performing Assets to total assets’ of IBI were recorded at 6.8 percent and 6.3 percent, respectively by end September 2020, lower than the respective ratios of the overall banking industry, which were noted at 7.5 percent and 7 percent, respectively.
At the end of the quarter under review (July-September 2020), the asset base of Islamic banking industry (IBI) grew by 4.8 percent or Rs 175.8 billion and stood at Rs 3.809 trillion. Assets and deposits of IBI depicted YoY growth of 27.2 percent and 26 percent, respectively.
In terms of market share, IBI stands at 16.0 percent and 17.3 percent, respectively in assets and deposits of overall banking industry by end September 2020 while for ‘financing & investments (net)’of IBI the share is 14.2 percent for the said period. Moreover, at the end of the September 2020, profit before tax of IBI stood at Rs 69.9 billion.
Copyright Business Recorder, 2020