KARACHI: The infected portfolio of the corporate sector has been increasing for the last three quarters, according to the Statistical Bulletin for October 2016 released by the State Bank of Pakistan (SBP).

It rose 1.3 per cent year-on-year to Rs448.5 billion at the end of the second quarter of 2016, the SBP reported. In absolute terms, non-performing loans (NPLs) of the corporate sector are already the highest among all segments.

The corporate sector was followed by the small and medium enterprise (SME) sector whose infected portfolio amounted to Rs82.2bn at the end of June. Infected loans as a percentage of total loans of the SME sector are the highest among all segments.

The SBP report shows the infected loans of the corporate sector rose to Rs448.5bn at the end of June from Rs433.6bn at the end of December 2015. The percentage of default dropped to 11.8pc in June from 12.3pc in March, but that was largely due to a substantial increase in advances. Advances to the corporate sector increased Rs204bn or 5.6pc on a quarter-on-quarter basis at the end of June.

Within the corporate sector, textiles remained the top defaulter with NPLs of Rs196.9bn. The percentage of default was also the highest (26.3pc) in textiles.

Despite strong support from the government and the SBP, the performance of the SME sector failed to improve, as the percentage of infected loans remains the highest among all segments.

The Statistical Bulletin shows that in percentage terms the infected portfolio of SMEs was 26.5pc at the end of the second quarter as opposed to 28.1pc at the end of the first quarter. This drop in the infected ratio appears to be on the back of an increase in advances for the sector. Advances to the sector increased to Rs310bn in the second quarter from Rs294.5bn in the first quarter while the size of the infected loans remained almost flat.

A sector-wise breakdown shows individuals constitute the third biggest defaulter group, as their infected loans were Rs47.2bn. Advances to this sector were also the third highest. A big jump in advances to individuals was witnessed over the April-June quarter. Advances increased Rs59bn to Rs531.8bn in the three-month period.

The agribusiness was the second biggest defaulter with NPLs of Rs58bn while its advances also rose to Rs504bn from Rs417bn on a quarterly basis.

The overall infected portfolio of banks rose to Rs634.5bn at the end of June from Rs619bn at the end of the quarter ending on March 31.

Published in Dawn, October 9th, 2016