Bank deposits jump 16pc to Rs22.4 trillion in October

KARACHI: Banking sector deposits increased by 16 percent year-on-year to Rs22.4 trillion in October, a local brokerage house reported on Friday, citing figures from the State Bank of Pakistan.

However, deposits at banks fell by 1.8 percent on month-on-month in October.

Increase in banks’ deposits is due to their efforts to expand branch networks and mobilise current accounts to protect net interest margins as interest rates remain on the higher side.

Bank advances also rose 18 percent YoY to Rs11.1 trillion in October from Rs9.4 trillion a year earlier, according to Arif Habib Limited.

Investments jumped by 33 percent to Rs18.3 trillion.

The advance to deposit ratio (ADR) ratio stood at 49.3 percent in October up by 75 basis points YoY. The investment-to-deposit ratio (IDR) increased by 1,027 bps to clock in at 81.6 percent in October.

The rise in ADR is fueled by private sector loan growth over the period, especially due to the SBP-backed loans such as Temporary Economic Refinance Facility (TERF), housing finance, etc. Analysts expect deposit growth to remain strong, reaching 15 percent this calendar year.

Analysts said the growth in advances came despite economic slowdown in the country.

The government’s resolve to charge from banks an additional tax if they fail to increase the ADR to 50 percent or more forced banks to find avenues to increase lending to the private sector.

The IDR rose as the government continued to borrow from commercial banks to meet its funding requirements. The government plans to borrow Rs7.025 trillion through treasury bills and bonds in October-December 2022.

Due to the economic repercussions of the country's catastrophic floods, government borrowing requirements from external and local sources have risen. This may result in a higher budget deficit in the coming months.

Pakistan listed banks' profitability increased by 21 percent year-on-year to Rs84 billion in the third quarter of 2022 led by strong net interest income and balance sheet growth, according to to report from Topline Securities.