KARACHI: The rising long term advances and declining share of fixed deposits is widening the assets-liabilities mismatch against which the banks need to remain vigilant, State Bank of Pakistan (SBP) said in its Third Quarterly (July – September) Review on Banking system issued on Wednesday.
The SBP said that banking sector’s asset base has expanded marginally during Q3CY17, though, on YoY basis, the growth has been quite robust (16.0 percent).
Financing has observed a minor dip over the quarter in line with the seasonal pattern of the credit cycle. Encouragingly, share of fixed investment (long-term) loans in total loans continues to rise indicating improved business confidence. Funding needs of the system are met by a nominal growth in deposits and interbank borrowings.
“The rising long term advances and declining share of fixed deposits is widening the assets-liabilities mismatch against which the banks need to remain vigilant,” the SBP said.
The overall risk profile of the banking sector remains within tolerable bounds in Q3CY17 characterized by high capital adequacy ratio, improving asset quality and favorable liquidity conditions.
Earnings of the banking sector, however, have moderated due to low interest rates and increased administrative expenses, in addition to one-off settlement payment made by a large bank. Nevertheless, Capital Adequacy Ratio (CAR) at 15.4 percent remains well above the minimum regulatory required level of 10.65 percent.
In order to deliver better performance, banks need to calibrate the changing macroeconomic environment in their business models to capitalize the emerging opportunities as arising from, generally, growth in the economy and, particularly, from the China Pakistan Economic Corridor (CPEC).
