Islamic Banking Industry: Assets and deposits show highest YoY growth since 2015

Pakistan’s Islamic Banking Industry (IBI) maintained its upwards trajectory as its overall assets and deposits increased by 32% and 29.7%, respectively, in the quarter ended June 30, 2021, the highest year-on-year growth since June 2015, said the State Bank of Pakistan (SBP).

In its 'Islamic Banking Bulletin' for the April-June period, the SBP said that the IBI's assets increased by Rs408 billion during the quarter, and stood at Rs4,797 billion at June-end. Deposits also witnessed a quarterly growth of Rs365 billion and were recorded at Rs3,822 billion.

The growth in assets comes on the back of financing (net) of IBI, which observed a quarterly rise of Rs165 billion during the period under review. On the other hand, investment (net) of IBI, exhibited a surge of Rs17.6 billion. Market share of IBI’s assets in overall banking industry’s assets was recorded at 17% by end June, 2021. IBI's deposits in the overall banking industry stood at 18.7%.

The share of net financing and investments in total assets (net) of IBI was recorded at 44.2% and 28.4%, respectively by end June, 2021, added the report.

2Q2021: Despite drop in net interest income, Pakistan's banking sector posts Rs70bn profit

During the period under review, key assets' quality indicators including non-performing finances (NPFs) to financing (gross) and net NPFs to net financing were registered at 3.3% and 0.5%, respectively by end June, 2022. It may be mentioned that these ratios were significantly better than those of overall banking industry averages, which stood at 8.9% and 1.1%, respectively.

On the profitability side, the profit before tax of IBI was recorded at Rs42.6 billion by the end of June 2021 compared to Rs49 billion in the same quarter last year. Operating expense to gross income of IBI slightly increased and was recorded at 52.3% by end June, 2021 compared to 51.5% in the previous quarter.

Meanwhile, earnings ratios like ‘Return on Assets (ROA)’ and ‘Return on Equity (ROE)’ (before tax) were recorded at 1.9% and 31.1%, respectively, by end June, 2021.

During the quarter under review, 79 branches were added to the network of IBI. As a result, it increased to 3,583 branches (spread across 124 districts of the country) by end June, 2021.