KARACHI: Banking sector’s profit-after-tax surged by 52 per cent year-on-year during the second quarter (April-June) of 2015, on the back of strong interest and non-interest income, the State Bank’s quarterly report showed on Wednesday.

The banking sector’s pre-tax profit stood at Rs171 billion during the period.

Factors that contributed to this substantial growth included a high mark-up income with major contribution from return on investments in government bonds, which grew by 28pc.

Higher non-interest income (49pc increase YoY), largely on the back of capital gains booked on sale of government securities and equity stocks, and higher dividend income.

“Concentration of earnings decreased further as share of top five banks reduced to 61pc in June 2015 from 66pc a year ago,” said the report.

During the quarter, asset base of the sector grew by 5.7pc (YoY 19.2pc) compared to 3.4pc in the first quarter of this year.

“Most of the increase in assets resulted from growth in public-sector credit for matching the fiscal needs and financing commodity operations,” said the report, adding that the share of investments in total asset continued to increase due to growing stock of government securities.

Banks’ deposits grew 7.9pc to Rs9.97 trillion (YoY 13.6pc). Steady growth in deposit base continued to provide the needed resources for financing asset growth.

Assets of the sector grew by 5.7pc (YoY 19.2pc) compared to 3.4pc in the preceding quarter.

Gross advances saw a reasonable increase of 4.7pc (Rs227bn) during the quarter (YoY 8.6pc growth); after declining in the first quarter of 2015.

Financing to private sector remained subdued despite the current environment of low interest rates. “During June 2015, private sector advances grew by around 1.8pc largely due to uptake in agri business, cement, chemical and pharmaceutical sectors coupled with a 7.5pc growth (Rs22bn) in consumer finance.”

Increase in consumer financing was primarily contributed by personal loans and auto finance.

With a quarter-on-quarter growth of 4.4pc (YoY 41.2pc), banks holding of government bonds surged to Rs5.66tr as of June 2015, representing more than 90pc share in total investments.

“Though the reduction in policy rate during 2015 will impact the interest income of banks, huge stock of long-term bonds accumulated prior to cut in policy rate and corresponding capital gain on such securities placed under AFS category are expected to shield the profitability of the banking system,” said the report.

Published in Dawn, September 24th , 2015

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