KARACHI: The five big banks continued their dominance in the sector earning 52.1 per cent of the total profits as of June 30.

The latest issue of State Bank’s “Quarterly Compendium: Banking Statistics” revealed that the five big banks have over a 59.5pc holding in the total banking sectors’ investments of which 90pc are concentrated in government papers.

Despite a rise in advances due to low interest rates, banks continue to invest large sums into risk-free government securities to bolster their earnings.

Of the total advances to private sector, the five banks accounted for 42.2pc, whereas advances by those ranking 6th to 10th sharply decreased to 26.9pc. Amongst the smaller banks (from 21st-28th position) the share stood at 4.6pc, while foreign banks’ advances were just 1pc.

Following the top 5 banks, 2nd tier banks (6th-10th) raked in 26.3pc of the profits, with third tier (11th-20th) at 18.3pc and banks falling in the 21-28 spots making up for 0.8pc. Whereas foreign banks’ profit from the total pie was 5.5pc.

The interest income of the five big banks was 72.2pc while non-interest income amounted to 57.1pc.

Statistics for the deposits of the banking industry were also in favour of the five banks at 52.3pc. Small banks have been striving to improve their deposits offering much higher returns compared to the five big banks.

The total deposits’ share of banks from 6 to 10 was 23.9pc, banks from 11-20 was 19.19pc and deposits of banks from 21-28 was just 2.6pc.

The shrinking deposits at smaller banks are a cause of concern since under the Basel agreement they are required to either improve their balance sheets or merge with bigger banks in order to reduce the risks involved with poor performance.

The sectoral distribution of loans showed that the highest percentage of loans given to corporate sector by the big 5 banks was 45.7pc. Similarly, their loans to Small and Medium Enterprises reached 36.5pc, for agriculture 35pc and 39.7pc for consumer financing.

Advances to deposits ratio of smaller banks was much higher than large banks indicating a heightened exposure to risks involved in the advances.

The ratio of 5 big banks was 45.7pc, for 6-10 banks 60pc, for 11-20 banks ratio was 57.8pc, but the ratio for banks from 21 to 28 was 77.3pc.

Published in Dawn, September 2nd, 2018