around 1.8 percent largely due to uptake in agribusiness, cement, chemical and pharmaceuticals sectors coupled with a 7.5 percent growth (PKR 22 billion) in consumer finance,” it added.
Increase in consumer financing was primarily contributed by personal loans and auto loans
Net retirement by various economic sectors, like textile, food and beverages and sugar partially offset the growth in private sector lending. “Textile sector, which is the largest borrower of the banking sector observed net retirement not only in quarter under review but also during FY15, primarily, due to restrained domestic and international demand,’ the report said.
The report said non-performing loans increased by 1.6 percent to Rs 630 billion during Jun-15, however non-performing loans to gross loans ratio still decreased by 39 bps to 12.4 percent and net NPLs to net loans decreased by 18 bps to 2.7 percent during April to June 2015.
On the funding side, steady growth in deposit base continued to provide the needed resources for financing asset growth. ‘With a healthy increase of 7.9 percent over the quarter, banks’ deposits reached 9.97 trillion in Jun-15,” the report said.
The report said the asset base of the banking sector is expected to remain subdued in line with seasonal slowdown in domestic credit in private sector driven by seasonal net retirements in textile and sugar sectors and recent dip in commodity prices.
“Some improvement in energy supplies and reduction in policy rate by 250 bps during this year is expected to provide some boost to overall lending activity,” it said.
The recent resurge in fixed investment credit may compel banks to focus on the collection of fixed deposits going forward while current and saving deposits are expected to follow the cyclical path.
“While solvency of the system is robust, banks need to make efforts for improving the capital base for enhancing their resilience and ensuring compliance with the regulatory requirements,” it said.