Karachi: The banking sector spreads have registered at 7.37 percent in January 2012, down 21bpsMoM/23bpsYoY due to a decline in lending yields and constant deposit costs since Dec 2011.
The January spreads figure is the lowest in 2yrs, it is still fairly high. Going forward, it is estimated that further attrition in spreads as the monetary easing cycle appears to be over for now and banks are likely to start charging a higher spread over KIBOR. In this regard, banks have adjusted to shifting interest rate dynamics where exceptionally low pickup in the recent T-bill auction (PkR4.7bn vs. target of PkR75bn) likely points to bids at higher yields, in our view, particularly in the 12 month tenor.
The four big listed private banks in Pakistan have posted above average growth of 27 percent in 2011 despite lackluster trading at the Karachi Stock Exchange in the bank scrips. The big four banks – Habib Bank Limited (HBL), United Bank Limited (UBL), MCB Bank Limited and Allied Bank Limited (ABL) cumulative earnings reached Rs 66 billion in 2011, up 27 percent from 2010.
Among the listed private banks, these banks contributed 70 percent of the market capitalization. Net interest income (NII) upto 17 percent, non-interest income upto 21 percent. These banks based on deposits and branches contribute more than 50 percent share of the listed private banks’ deposits and represent approximately 60 percent of the total branch network.
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