Banks’ deposit surges by 10.8 percent in 2014

KARACHI: The deposit base of the country’s scheduled banks has increased to Rs8.342 trillion as of end December 2014, up 10.8 percent from Rs7.529 trillion on December 31, 2013, the central bank said on Friday.
“Rate of return on saving deposits is above the headline inflation, which means that savers are protected from the effects of inflation. Savers’ interest in banks is intact,” a banker said.
“Although the overall deposit base of scheduled banks has risen, but only big banks are the beneficiary. After the imposition of moratorium on KASB Bank, deposits of smaller banks moved to the big banks; the quantum of this shift cannot be gauged at the moment,” the banker said.
Meanwhile, analysts are upbeat on the earning outlook of the banking sector. Amreen Soorani at JS Global said that earnings of top six banks were likely to grow by 21 percent for the quarter ended December 31, 2014.
“Key drivers for robust growth are likely to be recovery in net interest income despite cut in discount rate recently, lower provisioning expenses and higher non-core income,” she said.
Commercial banks have already earned a net profit of Rs115.4 billion in January-September 2014, which is higher than their combined net profits of Rs112.4 billion for the entire 2013. The trend is expected to continue in 2015 regardless of a drastic cut in the policy rate.
Based on their performance in the first three quarters of the last calendar year, the analysts expect growth in banks’ earnings will clock up at 20 percent for 2014. They expect another cut in the key interest rate in 2015 after the State Bank of Pakistan (SBP) reduced it by 50 basis points to 9.5 percent in November 2014.
Banks tend to lock in their investments in long-term government papers when they expect a downward revision of the discount rate. They have accumulated PIBs at an average yield of 12.6 percent, as their portfolios increased by Rs1.8 trillion to Rs2.5 trillion by November 2014.
The banking sector’s investments in the PIBs are so heavy that they have resulted in a shortage of liquidity, prompting the central bank to inject Rs2.1 trillion into the banking system through six open market operations in December 2014.
Analysts believe banks’ assets will continue their upward trend in 2015. Banking assets have been increasing at an annualised rate of 13 percent for the last four years.
The rise in assets was accompanied with an average annual increase of 11 percent in banks’ deposit base, which was mainly a consequence of growing monetary base, analysts noted.