KARACHI: Earnings of the banking industry grew by just one per cent in 2016, though analysts believe that even this much increase was higher than expectations.

According to a JS Research report released on Monday, the profitability of the JS Banking Universe, representing 83pc of the banking sector market capitalisation, came in slightly higher than in-house estimates as some banks booked reversals under “diminution in value of investments” (largely related to oil stocks) in the fourth quarter of 2016.

However, the net interest income (NII) fell 7pc on the back of declining benchmark rate and investment yields and hefty maturity of PIBs during 2016, nullifying the impact of double-digit asset growth.

The non-interest income dropped 3pc year-on-year on lower realised capital gains. Fee Income growth was recorded at 9pc, accounting for 50pc of total non-interest income compared to 44pc a year ago.

The report expects NII to improve by 9pc during 2017, where double-digit growth in fee income is also likely to support bottom-line growth.

The report anticipates lower accretion in non-performing loans to cut down provisioning expenses by one-third of its historic average of Rs33 billion a year.

Published in Dawn, February 28th, 2017