Money and banking drive economic activity by facilitating transactions, savings, and investments. Banks manage financial resources, offer credit, and regulate money supply, ensuring stability and growth in Pakistan’s financial sector.
KARACHI – The Pakistani rupee remained stable against the US dollar on Thursday, closing unchanged in a session marked by subdued trading activity in the interbank market.
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KARACHI: State Bank of Pakistan (SBP) on Wednesday directed banks to implement International Financial Reporting Standard on Financial Instruments i.e. IFRS 9 from January 01, 2021.
The International Accounting Standards Board (IASB) issued International Financial Reporting Standard on Financial Instruments i.e. IFRS 9 effective from January 1, 2018.
IFRS 9 has introduced an expected credit loss approach, which bring major changes in the way the financial institutions (FIs) will assess the impairments of financial instruments.
The banking industry has been representing to the State Bank of Pakistan(SBP) about the difficulties being faced in the implementation of this Standard and has been requesting to defer its implementation till December 31, 2020.
Keeping in view of the importance of the Standard, the SBP advised the banking industry to carry out a quantitative impact assessment of IFRS 9 on their financials along with the assessment of their readiness of its implementation.
In view of the impact assessment and stakeholders’ representation, it has been decided that the effective date of IFRS 9 implementation is January 1, 2021 for banks/DFIs/MFBs.
Meanwhile, they are advised to ensure meticulous compliance of the following instructions:
(a) Prepare separate pro forma Statement of Financial Position, Profit and Loss Account, Statement of Comprehensive Income and Statement of Changes in Equity based on the requirements of IFRS 9 along with the detailed notes on Advances, Investments, Provisions, Write offs and any other notes which may have material impact. The FIs are required to prepare aforesaid financials for the year-end 2019 and submit the same to BPRD-SBP within the time mentioned in the below table. These financial statements should also comply with the requirements stated in the Annexure-I of the Circular.
(b) Perform parallel run of IFRS 9 implementation starting from Jan 1, 2020 to test the IFRS 9 outcomes. The FIs shall submit quarterly reports on the status of IFRS 9 implementation to the SBP, after review by the Board Committee responsible for oversight of the IFRS 9 implementation. Such reports should be submitted to the SBP within 14 working days of the Board of Directors (BOD) meeting at which the financial statements are approved.
(c) Review internal systems and procedures and put in place required governance structures, processes and systems for implementation of the Standard before the effective date of IFRS 9 implementation.
(d) The BOD of FIs are required to play an active role in the oversight of the implementation process of IFRS 9 either by establishing a separate subcommittee for this purpose or assigning the same to an existing subcommittee. The BOD are required to discuss the progress of IFRS 9 implementation in their periodic meetings. The specific responsibilities of the BOD for the implementation of IFRS 9 are mentioned in Annexure-II of the Circular.
(e) Form a management level IFRS 9 Project Steering Committee, which will be responsible for managing the implementation process of IFRS 9, as mentioned in Annexure-II of the Circular. The Project Steering Committee should at least include the members from the Risk Management, Finance and IT departments.
(f) The process of implementing IFRS 9 is required to be completed within the following time period:
| Sr# | Particulars | Timeline |
| 1. | Forming of a Board Committee and a Project Steering Committee | Jan 31, 2020 |
| 2. | Preparation of IFRS 9 compatible pro forma Financial Statements for year-ended 2019 | Apr 30, 2020 |
| 3. | Parallel Run of IFRS 9 | Periods beginning Jan 1, 2020 |
| 4. | Directors Review Reports for Parallel Run Periods | Within 14 working days from BOD meeting |
| 5. | Effective Date of IFRS 9 implementation | Jan 1, 2021 |
All banks/DFIs/MFBs are advised to ensure that the transition to IFRS 9 will be achieved in a planned manner and within the timeline stipulated above. Any violation of these instructions may attract punitive actions under the relevant provisions of the Banking Companies Ordinance 1962.
KARACHI: The Pak Rupee ended flat against dollar on Wednesday in range bound trading activity.
The rupee ended Rs155.89 to the dollar from previous day’s closing of Rs155.88 in interbank foreign exchange market.
The foreign currency market was initiated in the range of Rs155.88 and Rs155.90. The market recorded day high of Rs155.93 and low of Rs155.89 and closed at Rs155.89.
Currency experts said that flat demand for import and corporate payments helped the rupee to maintain the levels.
The exchange rate in open market witnessed stable rupee value. The buying and selling of dollar was recorded at Rs155.50/Rs156.00, the same previous day’s level, in cash ready market.
The Pakistani Rupee experienced a modest gain of three paisas against the US Dollar on Tuesday, reflecting demand pressures for import and corporate payments in the local market.
(more…)KARACHI: State Bank of Pakistan (SBP) on Monday said that the asset quality of banking sector weakened owing to Rs88.3 billion or 13 percent increase in Non-Performing Loans (NPLs).
In its Mid-Year Performance Review of the Banking Sector (January – June 2019), the SBP said that the asset quality of the banking sector weakened during first half (January – June) 2019 H1CY19, breaking away from the declining trend in recent past.
“The infection ratio (NPLs to Total Gross Loans) increased to 8.8 percent by the end of H1CY19 (8.0 percent by end H2CY18).”
This was mainly due to an increase of Rs88.3 billion (or 13.0 percent) in NPLs during H1CY19.
As a result, the NPLs stood at Rs768 billion by end June 2019. The fresh rise in domestic NPLs was mostly concentrated in few local private banks as well as in a specialized bank, the SBP said.
Consequently, the infection ratio for local private banks and specialized banks increased to 7.0 percent (6.2 percent by end of H2CY18) and 43.2 percent (32.9 percent by end of H2CY18).
With the tightening of macroeconomic conditions in CY18 and later, inflow of fresh NPLs have been on the rise.
However, in terms of economic sectors, the higher defaults during H1CY19 were restricted to the energy and agribusiness sectors.
Energy sector contributed 52.8 percent to the total increase in NPLs during H1CY19, while agribusiness contributed 18.6 percent. Most of the NPLs in the energy sector (96.8 percent) pertained to the public sector entities associated with electricity generation and transmission that faced constrained cash flows (due to circular debt/low recoveries).
In case of Agribusiness, however, an element of seasonality exists in the classified loans as they peak around second quarter of each calendar year but then recede in subsequent quarters.
Besides this seasonal phenomenon, other factors responsible for the rise in NPLs included late start of sugar crushing season, water shortage and drought conditions affecting crop yields, and delay in sale of the newly harvested kharif crops by farmers hindering their repayment capacity (Rice, Cotton and others) etc.
Furthermore, 20.8 percent contribution to the growth in NPLs came from banks’ overseas operations, largely related to operations in the Middle East.
In addition to Pak Rupee depreciation, the economic slowdown in some of these countries could be the reason for the higher NPLs.
The surge in NPLs was mainly driven by the NPLs of public entities in the energy sector, which do not require provisions.
Resultantly, the provision coverage ratio (78.4 percent in H1CY19 against 83.8 percent in H2CY18) declined.
As a result, the net NPLs increased and net NPLs to capital ratio jumped to 11.5 percent as of end H1CY19 against 7.8 percent as of end H2CY18.
However, it may be kept in perspective that in the aftermath of growing NPLs banks made net provisions to the tune of Rs26.40 billion during H1CY19 compared to Rs36.2 billion during CY18.
The fund-based liquidity of the banking sector remained comfortable, despite continued moderation in liquidity ratios.
Liquid assets to total assets ratio moderated to 48.0 percent by end June 2019 (48.7 percent by Dec- 18).
Similarly, liquid assets to total deposits (excluding customer fixed deposits) also moderated to 81.8 percent in H1CY19 (85.0 percent in Dec-18) mainly due to higher proportionate rise in deposits.
However, due to improved growth in fixed deposits, liquid assets to short term liabilities ratio improved to 95.6 percent (94.9 percent in Dec-18) percent over the comparable period of last year.
Islamic Banking Institutions (IBIs) continued to augment the overall profitability of the banking sector as it contributed 26.5 percent to the overall after-tax profits during H1CY19, despite 14.4 percent share in total banking sector assets.
The earnings ratios, which were on downtrend for last few years, improved during the half year under review Return on Equity after-tax inched up to 11.4 percent in Jun-19 from 10.7 percent in Dec- 18, while ROA improved to 0.84 percent from 0.81 percent The turnaround in profitability indicators, after three consecutive years of downturn, was primarily enabled by rising interest rates over the last year or so.
KARACHI: State Bank of Pakistan (SBP) on Monday directed banks to ensure compliance related to employment quota for persons with disabilities.
In a notification, the SBP directed all banks, Microfinance banks and Development Finance Institutions to ensure compliance with the relevant law as amended from time to time.
The SBP said that the Disable Persons’ (Employment and Rehabilitation) Ordinance, 1981 was promulgated to provide for the employment, rehabilitation and welfare of the persons with disabilities.
Similar legislation on Provincial level is also in force. Accordingly, Federal and Provincial Government establishments as well as commercial and industrial establishments are inter-alia required to maintain quota for employment of the persons with disabilities.
KARACHI: The Pak Rupee ended stable against dollar on Monday despite higher demand for import and corporate payments.
The rupee ended Rs155.91 to the dollar, the same level of last closing on last Friday’s, in interbank foreign exchange market.
Currency dealers said that earlier in the day the demand for import and corporate payment was high and rupee was under pressure.
However, sufficient supply of the greenback helped the local unit to gain earlier day’s losses.
The foreign currency market was initiated in the range of Rs1556.95 and Rs156.02. The market recorded day high of Rs155.99 and low of Rs155.90 and closed at Rs155.91.
The exchange rate in open market also witnessed stable rupee value. The buying and selling of dollar was recorded at Rs155.70/Rs156.20, the same closing level on last Friday, in cash ready market.
KARACHI: Bank Alfalah Limited has declared net profit of Rs9.24 billion for the period ended September 30, 2019 as compared with Rs8.63 billion in the same period of last year, depicting an increase of 7.1 percent.
The Board of Directors of Bank Alfalah Limited in its meeting held on October 18, 2019, in Abu Dhabi, approved the Bank’s unaudited interim financial statements for the period ended September 30, 2019, said a statement on Saturday.
The bank’s pre-tax profits grew by 16 percent from a year ago, amidst challenging operating environment.
The bank earned post-tax profit of Rs 9.242 billion or Rs. 5.20 per share, up from a profit of Rs 8.629 billion or Rs. 4.87 per share despite super tax charge levied for 2017 through the mini budget in 2019, the statement said.
Revenue was up by 29 percent from a year earlier. Higher spreads along with improved average deposits, rising average advances and effective balance sheet management have contributed to a strong rise in net interest income. Fee and commission income stood 12 percent higher than same period last year. Gain realized on government securities last year and bearish stock market sentiments during the first half of 2019 are the reasons behind lower capital gains and impairment charge.
Administrative expenses increased by 21 percent against the corresponding reporting period. Main factors behind this are technology, marketing, deposit protection insurance which is a new levy, new initiatives like branch openings along with overall impact of inflationary adjustments and PKR devaluation. The cost to income ratio of the Bank has improved to 53 percent from 56 percent for the same period last year, as a testament to Bank’s focus on cost control.
The Bank continued its focus on increasing no cost deposits with CASA mix improved to 80 percent as at Sep 30, 2019 compared to 77 percent as at Dec 31, 2018.
Credit performance remained strong across businesses. The bank’s gross advances were reported at Rs. 490.664 billion, down by 5 percent being seasonal impact. Alongside, we continue to optimize our usage of capital and liquidity across the Bank.
At September end, the bank remains adequately capitalized with CAR at 16.87 percent.
Commenting on the Bank’s performance over the quarter, Nauman Ansari, CEO, Bank Alfalah said, “Although, the importance of the branch in attracting and retaining customers would remain, however, the retail banking industry is fast embracing a mobile-centric customer experience. Bank Alfalah’s investment in both, branches and digital technologies, has increased meaningfully due to consumers’ constantly evolving demands.”
KARACHI: The Pak Rupee ended down by two paisas against dollar on Friday due to high demand for import payments.
The rupee ended Rs155.91 to the dollar from previous day’s closing of Rs155.89 in interbank foreign exchange market.
The foreign currency market was initiated in the range of Rs155.93 and Rs155.95. The market recorded day high of Rs155.97 and low of Rs155.90 and closed at Rs155.91.
The exchange rate in open market was remained unchanged.
The buying and selling of dollar was recorded at Rs155.70/Rs156.20, the same previous day’s level in cash ready market.
KARACHI: The Pak Rupee gained 13 paisas against dollar on Thursday owing to guidelines issued by the central bank to prevent trade based money laundering.
The rupee ended at Rs155.89 to the dollar from previous day’s closing of Rs156.02 in interbank foreign exchange market.
The SBP on October 15, 2019 issued framework to create deterrence against money laundering and terror financing through trade related transactions.
The central bank made it mandatory for banks to ensure customers due diligence while approving export or import forms for issuance of amount.
On the other hand the government also launched crackdown against hoarding of the US dollar. In this connection a day earlier the Federal Board of Revenue (FBR) issued notices to foreign exchange companies to provide information of those persons who purchased dollars during recent past.
The government believed that many persons had purchased dollars but kept the foreign currency on hope of further depreciation of the local currency.
The market sources said that falling import bill was another component for rupee appreciation.
The foreign exchange market was initiated in the range of Rs155.95 and Rs156.00. The market recorded day high of Rs155.98 and low of Rs155.85 and closed at Rs155.89.
The exchange rate in open market witnessed no change in rupee value. The buying and selling of dollar was recorded at Rs155.70/Rs156.20, the same previous day’s level, in cash ready market.