Banking sector deposits increase 12% YoY to Rs31tr in January

KARACHI: Deposits at banks increased to Rs31.03 trillion as of January 2025, up 12.6 per cent from a year earlier, the central bank data showed on Thursday.

The deposits rose by 2.4 per cent month-on-month (MoM).At the end of January, total advances in the banking sector reached Rs14.728 trillion, marking a 21.8 per cent increase, compared with last year. However, there was an 8.0 per cent decline in advances on a month-to-month basis.

Awais Ashraf, director of research at AKD Securities Limited, noted, “Banks are returning to focus on attracting deposits and are becoming more cautious about providing advances following the removal of ADR-related taxation.”

The advance-to-deposit ratio (ADR) for the sector decreased to 47.5 per cent in January, down from 52.9 per cent in the previous month. Last year, the ADR was recorded at 43.9 per cent.Banks’ investments rose to Rs30.023 trillion in January, reflecting a 17.3 per cent increase year-on-year (YoY). MoM, investments increased by 3.1 per cent.

Global rating agency Moody’s recently upgraded Pakistan’s banking outlook from stable to positive due to enhanced financial performance. According to Moody’s report, the positive outlook for the banking sector reflects the improving outlook for the government (currently rated Caa2 positive). Pakistani banks have substantial exposure to the sovereign through their large holdings of government securities, which make up about half of total banking assets. Nevertheless, Pakistan’s long-term debt sustainability remains a significant risk, given its still weak fiscal position and high liquidity and external vulnerability risks.

The report stated that as of September 2024, government securities constituted 55 per cent of banks’ total assets. This substantial exposure links banks’ credit strength to that of the government, which is improving from very weak levels. Despite an increase in problem loans to 8.4 per cent of total loans as of September 2024, up from 7.6 per cent the previous year, overall loans account for only 23 per cent of banks’ total assets.