KARACHI: Islamic banking sector’s profit before tax for the third quarter of 2019 increased twofold year-on-year, primarily owing to a robust improvement in financing as well as deposits, a central bank report said on Friday.
Islamic banks’ pre-tax profits swelled to Rs46 billion in July-September this year, compared to Rs23 billion in the same period last year. The State Bank of Pakistan (SBP), in its Islamic banking bulletin for the period under review, said profitability ratios like return on assets and return on equity before tax were recorded at 2.1 percent and 33.2 percent, respectively.
During the period, operating expense to gross income ratio was recorded at 52.5 percent, compared to 52.6 percent in the previous quarter, which was lower than that of overall banking industry ratio.
Assets of Islamic banking industry increased to Rs2.995 trillion in the third quarter of 2019, compared to Rs2.458 trillion a year ago, while in the previous (April-June) quarter of 2019, the assets were recorded at Rs2.992 trillion.
“Market share of Islamic banking assets and deposits in the overall banking industry were 13.8 percent and 16.1 percent, respectively by end September, 2019,” the SBP said.
Deposits at Islamic banks increased 20.1 percent to Rs2.407 trillion.
The SBP’s report also stated that net investments of Shariah-complaint lenders stood at Rs595 billion in July-September 2019, compared with Rs606 billion in the previous quarter. “Lack of Shariah compliant investment avenues can be one of the major reasons for decline in investments of the Islamic banking industry during the period under review,” it mentioned.
Financing and related assets of Islamic banks industry increased Rs2 billion to reach Rs1.546 trillion. In terms of mode-wise financing, Diminishing Musharaka continued improving its share in overall financing of Islamic banking industry with its share recorded at 35 percent, followed by Musharaka (20 percent) and Murabaha (13 percent).
In terms of sector-wise financing, production and transmission of energy remained the leading sector with a share of 18.3 percent in overall financing of Islamic banking industry, followed by textiles (11.9 percent) and individuals (11.4 percent) by end September 2019.
Review of client-wise financing reveals that corporate sector accounted for 73.6 percent share in overall financing of Islamic banking industry, followed by commodity financing with a share of 11 percent and consumer financing 10.4 percent.
The share of small and medium enterprises financing and agriculture financing in overall financing of Islamic banking industry were recorded at 3.3 percent and 0.4 percent, respectively.