Bank deposits hit record high at Rs15.13 trillion

KARACHI: Bank deposits hit record high at Rs15.13 trillion by end of March 2020, according to data released by State Bank of Pakistan (SBP).

The deposits of the banking sector grew by 12.4 percent YoY and 2.1 percent MoM in March 2020 to Rs15.13 trillion. The deposits are also up 3.4 percent in YTD 2020.

Analysts at Topline Securities said that banks’ focus for deposit mobilization remained more towards Investments compared to Advances during the period given the high yields on govt. papers.

As a result, Investments grew by 61.7 percent YoY and 6.6 percent MoM to Rs9.30 trillion in March 2020, with Investment to Deposit Ratio (IDR) increasing to 61.5 percent in March 2020 from 42.7 percent in March 2019 and 58.9 percent in Feb-2019. The Investments are also up 5.6 percent in YTD 2020.

On the other hand, Advances grew by just 4.7 percent YoY and 0.6 percent MoM in March 2020 hindered by high interest rates and slowdown in overall economic activity.

The Advances are up only 1.2 percent during YTD 2020. As a result, ADR dropped to 54.6 percent in March 2020 from 58.6 percent in March 2019 and 55.4 percent in Feb-2020.

As per the available 2M2020 numbers, Advances to the textile and consumer sectors increased by 9 percent YoY each.

The Currency in Circulation (CIC) in YTD 2020 has registered an increase of 6.5 percent to Rs5.6 trillion. Additionally, CIC as a percentage of M2 clocked in at 29 percent above the historic 5-year average of 27 percent.

Going forward, we see limited Deposit growth in the range of 6-7 percent during 2020 (vs. historical average 3-year growth of 11 percent), in line with the nominal GDP growth amidst slowdown in economic activity because of the outbreak of Covid-19. We expect Advances to grow by around 5 percent during the year (vs. historical average 3-year growth of 14 percent).

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