LAHORE: The average banking spreads reached 38bps annually during first ten months of current calendar year 2015 at 5.62 percent as lending rates dropped by 126bps versus an 88bps fall in deposit rates.
On a monthly basis, lending rates in Oct 2015 broke the 9 percent mark for the first time after Aug 2005, as it averaged 22bps monthly lower at 8.96 percent. Deposit rates also went down by 18bps monthly to 3.62 percent, taking Oct 2015 weighted average banking spreads to 5.34 percent, down 4bps monthly and 47bps annually.
October 2015 witnessed second consecutive monthly uptick in fresh banking spreads, clocking in at 3.22 percent (+34bps MoM) as deposit rates slid more than lending rates during the month. Downtrend on a YoY basis continued as lending rates on gross disbursements declined by 291bps YoY to 7.57 percent, a spread of 99bps over the 6M KIBOR. Note that spread over the 6M KIBOR on gross disbursements is averaging at 109bps (vs. 39bps during the same period last year).
Recent yield uptick in the T-bills auction and reversal in fresh spreads indicates the end of monetary easing by the Central Bank. In the case of potential uptick in interest rates from mid-2016, experts believe Faysal Bank (FABL) will gain the most in coverage as the bank maintains the highest exposure to variable interest bearing assets to total assets.
Allied Bank Limited (ABL) reported nine-month earnings of Rs11.86 billion (EPS: Rs10.4), slightly higher than the consensus estimates on account of i) higher than expected NII after provisions (up 32 percent YoY) and ii) restrained growth in bank’s operating expenses (up 7 percent YoY). Bank’s profitability showed a limited growth of ~3 percent in 9MCY15 as against the profitability growth of 11 percent-26 percent witnessed in other members of Big-6 (ex-NBP) as the bank bucked the trend of realizing capital gains, foreseeing difficult CY16 and CY17.
