Earnings up 29 percent
KARACHI: Islamic banks in Pakistan posted 29.22 percent growth in profit in the third quarter of their current financial year, as widely expected, with rising assert and bigger than ever market share boosting their bottom lines. Islamic banks earned profit of Rs6.5 billion during the same quarter of 2015.
State Bank’s Islamic banking bulletin for July-September quarter said the profit of the Islamic banks continued to increase due to improvement in their core banking activities reflected by higher growth in financing to various sectors of economy and frequent investments in the government’s papers. “In line with general trend, operating expense to gross income of Shariah-complaint lenders remained higher than that of overall banking industry due to expansionary phase of industry,” the central bank said on Monday.
Assets of the Islamic banking industry grew by 18.3 percent to Rs1.788 trillion during the July-September period compared with Rs1.511trillion in the corresponding quarter of the last year.
The market share of Islamic banking assets in overall banking industry increased to 11.8 percent during the quarter from 11.2 percent a year earlier. The deposits of the Islamic banks witnesses an increase of 16.1 percent, amounting to Rs1.476 trillion against Rs1.271 trillion at the quarter ending September 2015.
The market share of Islamic deposits inched up 13.3 percent in Jul-Sept quarter of the current financial year compared with 13.1 percent in the same period of last year. Amongst other indicators, return on equity (ROE) and return on assets (ROA) were recorded at 10.4 percent and 0.7 percent, respectively during the quarter under review. The return on assets and equity of the conventional banks stood at 1.3 percent and 14.2 percent. The operating expense to gross income of the Islamic banks was 76.6 percent, higher than 52.2 percent witnessed by conventional banks.
The share of net financing and investments in total assets (net) of Islamic lenders stood at 38.2 percent and 37.0 percent respectively at the end of the quarter under review.
Investments of Islamic banking industry were recorded at Rs663 billion by September 2016 compared to Rs642 billion in the previous quarter. Break up of investments among Islamic banks and their branches showed that investments declined by Rs5 billion during the review quarter while investments of Islamic banking branches increased by Rs26 billion. Financing and related assets of Islamic banks stood at Rs683 billion by the third quarter 2016.
Financing to deposits ratio (FDR) of Islamic banking institutions was recorded at 46.3 percent compared to overall banking industry’s advances to deposits ratio (ADR) of 45.5 percent. A further analysis of FDR shows that FDR of Islamic banks remained higher (52.8 percent) compared to FDR of IBBs (36.1 percent). —Erum Zaidi