Islamic banks’ profit rises to Rs21bln in Jan-March

KARACHI: Islamic banking industry posted a profit before tax of Rs21 billion in the first quarter of 2020, compared with Rs14 billion in the same period last year, owing to robust growth in financing and investment, central bank said on Monday.

The State Bank of Pakistan (SBP), in its Islamic banking bulletin for January-March this year, said profitability ratios like return on assets and return on equity before tax were recorded at 2.5 percent and 36.7 percent, respectively.

During the period under review, the Islamic banking sector’s operating expense to gross income ratio stood at 47.4 percent, compared to 51.5 percent in the previous quarter. This ratio was lower than that of overall banking industry ratio. The market share of Islamic banking deposits in the overall banking industry surged to 17 percent by end March.

Deposits of Islamic banking industry reached Rs2.692 trillion by end of the period under review, reflecting an increase of Rs40 billion. SBP’s Islamic banking bulletin showed fixed deposits increased 1.8 percent to Rs11 billion, while current (remunerative), and saving deposits by 31.8 percent to Rs4 billion and 6.4 percent to Rs61 billion, respectively. Current (non-remunerative) deposits experienced a decline of 2.6 percent (Rs22 billion) by end of first quarter.

Islamic banking industry’s assets increased by Rs76 billion during the period to Rs3.360 trillion, compared to Rs3.284 trillion in the previous quarter. Resultantly, the market share of Islamic bankings assets in overall banking industry’s assets increased from 14.9 percent for the year ended December 2019 to 15.2 percent by end March.

Asset quality indicators of Islamic banking industry including non-performing finances (NPFs) to financing (gross) and net NPFs to net financing increased 5 percent and 2.6 percent, respectively owing to increase in NPFs.

Investments (net) of Islamic banking industry, while experiencing growth of 3 percent, increased by Rs18 billion to around Rs615 billion by end March 2020 compared with Rs597 billion in the previous quarter. The share of financing and investments (net) in total assets of Islamic banking industry stood at 48.6 percent and 18.3 percent, respectively.

Bifurcation of assets among Islamic banks and Islamic banking branches (IBBs) reveals that assets of full-fledged Islamic banks increased 4.1 percent to Rs2.005 trillion while assets of IBBs declined by more than Rs2 billion to Rs1.354 trillion by end of first quarter. The network of Islamic banking industry consisted of 22 Islamic banking institutions; 5 full-fledged Islamic banks (IBs) and 17 conventional banks having standalone Islamic banking branches (IBBs) with 3,250 branches spread across 120 districts by end March 2020.