LAHORE - The banking sector profit declined by 2 percent while net Interest Income (NII) of the sector was up 5 percent to Rs113 billion due to 14 percent growth in the sector’s deposits. Margins of the sector have likely come down due to maturity of high yielding Pakistan Investment Bonds (PIBs).

According to data, the sector continued to see provision reversals clocking in at Rs2.1 billion in 3Q2017 vs total reversals of Rs1.7 billion in 3Q2016. This is on the back of higher loan recoveries and reversals in provisions against certain fixed income investments.

Non-interest income of the sector was up 6 percent YoY to Rs45 billion driven by higher fee, commission and brokerage income. Capital gains which are also part of non-interest income was down 37 percent YoY to Rs7.9 billion due to lower capital gains on account of PIBs and equities.

“We believe capital gains number could come down further going ahead as interest rates are expected to increase from 2018 and surplus on revaluation of fixed investments may subside.” Furthermore, losses from equity market can further reduce this number.

Non-interest expense of the sector was up 13 percent to Rs93 billion which kept profitability under pressure. Bank wise data indicates that MCB and HBL contributed the most to the non-interest expense.