KARACHI - The Quarterly Performance Review of the Banking System for the quarter ended 31st December, 2014, released by SBP, Thursday highlighted that the operating performance of banks showed marked improvement as profit before tax surged by 52 per cent (YoY) to reach Rs247 billion during 2014.

Accordingly, this is reflected in the profitability indicators; net interest margin (NIM) increased to 4.4 per cent in Dec-14 from 3.9 per cent in CY13 and ROA (before tax) inched up to 2.2 per cent in Dec-14, up from 1.6 per cent in CY13, the report added.

The report stated that high profitability, capital injections by some banks, and debt-equity swap of one bank has further improved the solvency of banking sector. With an increase of 1.6 percentage point, capital adequacy ratio (CAR) of the banking sector reached 17.1 per cent, which is well above the benchmark of minimum 10 per cent. The report concluded that banking system is safe with strong capital cushion that may be utilized in times of stress.

According to the report, asset base of the banking sector of Pakistan soared by 8.8 per cent or Rs.977 billion during October-December, 2014 to reach Rs 12.1 trillion. The report highlighted that improvement in economic activity and better energy supply to industrial sector supported the 9.4 per cent surge in advances during 2014, though the pace of advances somewhat slowed down during October to December 2014  over the corresponding period of last year. “Textile sector was the key user of advances followed by food products and beverages, production and transmission of energy, automobiles, and shoe & leather” the report said.

On the funding side, deposits growth of 5.6 per cent during October-December, 2014 over the previous quarter and 11 percent over the corresponding period of 2013 supported the overall growth in balance sheet.

According to the report, the asset quality continued to improve as infection ratio further receded by 70bps to reach 12.3 per cent and net NPLs to net loans declined by 50 bps to 2.7 per cent during October to December 2014. “The capital impairment ratio (Net NPLs to capital) also observed a substantial decrease by 350 bps to 10.1 per cent indicating declining risk to the future earnings and equity of the banking system” it added.

The State Bank of Pakistan commenced publishing Quarterly Performance Review (QPR) of the banking sector from December 2014.