Bank deposits reach record high at Rs16.23 trillion

Bank deposits reach record high at Rs16.23 trillion

KARACHI: The deposits of banking systems have reached record high at Rs16.23 trillion by end of June 30, 2020, according to data released by State Bank of Pakistan (SBP) on Tuesday.

The deposits of baking system registered 12.24 percent growth by end of June 2020 as compared with Rs14.46 trillion by end of same month last year.

Analysts at Topline Securities explained that during second quarter of 2020, the deposits have increased by higher-than-largely-expected 7 percent, as Net Domestic Assets (NDA) of the Banking System increased by 6 percent during this period, on the back of 11 percent increase in the government borrowings for budgetary support.

Investments have grown by 40 percent YoY and 3 percent MoM to Rs10.68 trillion by end June 2020. The same is up 21 percent YTD (vs. 6 percent YTD growth by end March 2020).

As a result, IDR has increased to 66 percent in June 2020 from 53 percent in June 2019 and 61 percent in March 2020.

On the other hand, Advances have grown by just 1 percent YoY, and have actually declined by 2 percent MoM in June 2020 despite the aggressive cuts in interest rates by the Pakistan Central Bank since March 2020.

This is due to the impact of the pandemic COVID-19, which has caused the overall slowdown in the economic activity. In YTD 2020, advances are up 1 percent.

As a result, ADR has dropped to 51 percent in Jun-2020 from 56 percent in Jun-2019 and 55 percent in March 2020.

The Currency in Circulation (CIC) has increased by 17 percent in YTD 2020 to Rs6.19 trillion, with CIC as a percentage of M2 clocking in at 31 percent, above past 5-year average of 27 percent.

Going forward, the analysts expect deposit growth in the range of 10-11 percent during 2020 (vs. historical 3-year average growth of 11 percent), while they expect advances to grow by around 5 percent during the year (vs. historical average 3-year growth of 14 percent).