KARACHI: Banking profits declined substantially in July-September, according to the quarterly compendium issued by the State Bank of Pakistan (SBP) on Wednesday.

Experts said the decline was mainly due to a major cut in Habib Bank’s bottom line as it paid a heavy penalty to the US banking regulator.

Banks earned a total profit of Rs112 billion in January-September as opposed to Rs139bn a year ago. They earned just Rs22bn in July-September against earnings of Rs41bn in April-June, SBP data showed.

“Banking profits declined because Habib Bank had to pay about Rs22.5bn as penalty to the US regulator and this outflow has been adjusted in the third quarter,” said Samiullah Tariq, director of research at Arif Habib Ltd.

Habib Bank announced in the first week of September that it would pay $225 million to the US regulator and surrendered the licence to carry out banking business in the United States.

Total assets of the banking industry increased to 17.56 trillion at the end of September from Rs17.5tr on June 30.

Advances dropped in the third quarter to Rs6.09tr from Rs6.119tr at the end of June. However, outstanding advances were higher than Rs5.5tr recorded at the end of September 2016.

Advances at the end of the third quarter are always lower than those at the end of the preceding quarter due to seasonal loans, Mr Tariq said. “Advances will rise in the next three months,” he said, adding that the banking industry has been flourishing due to increased economic activities.

Some politicians are painting a gloomy picture of the economy due to uncertainty on the political front. But researchers and analysts foresee economic growth. The SBP predicted in a recent report that the country would witness a 6pc growth rate, highest since 2008.

Researchers said the private-sector credit off-take has increased at a much faster pace than a year ago. Banks would record higher profits next year as a result of enhanced lending to the private sector.

For the first time in 10 years, banks’ lending to the private sector jumped to Rs748bn in 2016-17. Higher economic activities are usually connected with the China-Pakistan Economic Corridor (CPEC). But data from many large-scale manufacturing segments indicates that non-CPEC sectors of the economy are also registering growth.

Published in Dawn, December 7th, 2017