Tag: bank deposits

KARACHI: The deposits of banking system have increased to all time high of Rs14.63 trillion by December 2019, according to data released by State Bank of Pakistan (SBP).

The deposits have increased by 9.58 percent to Rs14.63 trillion by December 2019 as compared with Rs13.35 trillion in the same month of the last year.

Analysts at Topline Securities on Friday said that the deposit growth came in better than last year’s growth of 8 percent, however remained lower than the 5-year average growth of 12 percent.

Banks’ focus for deposit mobilization remained more towards investments compared to advances during the year given the high yields on government papers. As a result, investments grew by 16 percent to Rs8.8 trillion in 2019, with IDR increasing to 60 percent in 2019 from 57 percent in 2018.

On the other hand, advances grew by just 3 percent in 2019 hindered by high interest rates and slowdown in overall economic activity. Over the past 3-years, advances have grown at an average of 19 percent.

Interestingly to note, advances growth remained more subdued in 9M2019 with growth of just 1 percent YTD, however somewhat picked up in the last quarter to close at Rs8.80 trillion, they said.

As a result, ADR dropped to 56 percent in 2019 from 59 percent in 2018.

Sector-wise, Textiles (12.5 percent), Energy (17 percent), Individuals (8.8 percent) and Agribusiness (8.1 percent) accounted for 46 percent of total advances.

As per the available 9M2019 numbers, advances to textile sector declined the most by 6.5 percent (Rs75 billion), while advances to the energy, individuals and agribusiness sectors increased by Rs34 billion, Rs19 billion and Rs4 billion, respectively.

The Currency in Circulation (CIC) in 2019 registered an increase of 19 percent to Rs5.39 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 deposit growth in the range of 10-12 percent and advances growth of 11-13 percent in 2020 at the behest of economic recovery and an expected decline in interest rates.

We are presently Market-Weight on the banking sector with Meezan Bank (MEBL) our top pick. We also like Habib Bank (HBL) and Bank Al Falah (BAFL).

KARACHI: The bank deposits by wholesale trade sharply increased by 240 percent in November 2019 owing to higher interest rate and abolishing withholding tax rate on cash withdrawal, market sources said on Wednesday.

According to data released by State Bank of Pakistan (SBP) on December 17, 2019, the bank deposits by wholesale trade increased to Rs511.45 billion by end of November 2019 as compared with Rs150.24 billion a month ago.

The market sources said that the sharp increase in deposits by wholesale trade was mainly due to prevailing higher interest rate.

The SBP in its monetary policy announcement on November 22, 2019 kept the policy rate unchanged at 13.25 percent.

The sources said that the improvement in economic indicators also helped the confidence building of investors.

This is also evident in the collection of withholding tax by Federal Board of Revenue (FBR) on profit on debt. The collection of tax from bank deposits registered increase by 204 percent to Rs21.6 billion during July – November 2019/2020 as compared with Rs7.1 billion in the corresponding period of the last fiscal year.

The market sources also attributed to rise in bank deposits by wholesale trade to abolishing withholding tax on cash withdrawal by the government.

The withholding tax at 0.3 percent which was applicable on the income tax return filers on withdrawal of cash above Rs50,000 in a day was abolished through Finance Supplementary (Second Amendment) Act, 2019.

The sources said that majority of people making financial transactions had filed their annual returns to avoid paying withholding taxes or avail reduced rate of withholding tax.

The filing of income tax returns has increased to record level of 2.71 million for tax year 2018.

According to the SBP data the bank deposits of retail trade however slightly fell to Rs234.6 billion by end of November 2019 as compared with Rs241.25 billion in October 2019.

The overall deposits under the head of wholesale and retail trade, repair of motor vehicles and motorcycles increased to Rs775.6 billion in November 2019 as compared with Rs419.6 billion in October 2019.

KARACHI: The State Bank of Pakistan (SBP) on Thursday directed banks to prepared a comprehensive depositor-wise database/ Management Information System.

A key element of the information system is its capacity to calculate, on any given date, total liability of a bank towards each of its depositors including any interest/ profit accrued on such deposits and generate a report referred as “Single Depositor View (SDV)”.

This would enable Deposit Protection Corporation (DPC) of the central bank to assess the amounts payable to protected depositors and making payout in case of a bank’s failure.

In order to achieve banking industry-wide standardization of SDV report, a standard format of the report has been developed by the DPC.

Furthermore, with a view to facilitate banks in understanding the fields of report and reporting requirements, a document titled “Explanatory Notes on Single Depositor View (SDV) Data” has also been prepared.

The explanatory notes provide explanation of various terms used for SDV data compilation together with clarity on classification of depositors, and balance calculations for protected depositors.

Considering the distinct nature of SDV concept, the banks have been accorded the extension in deadline for the development of information system/ database, as referred in para 10 of DPC Circular No. 01 of 2019, until January 31, 2020.

In this regard, banks are advised to provide a progress report on development of their information system by December 31, 2019.

Going forward, DPC shall assess the system’s readiness and efficacy through SBP-inspection teams or by its designated staff for the purpose.

The member banks are also required to submit first such report of the position of depositors, as per formats as of December 31, 2019 by February 15, 2020 and then onwards on quarterly basis.

DPC had issued Circular No. 01 of 2019 dated March 15, 2019 on ‘Information System for Protected Depositors of Member Banks’ where all member banks were required to appropriately install or update their systems including software(s)/ database(s) for maintaining a comprehensive depositor-wise database. Such a database is required to identify, on any given date, all accounts of any single depositor and calculate the total liability of a bank towards that depositor (including any interest/ profit accrued till the given date) referred as “Single Depositor View (SDV)”.

The SBP said that at present, multiple core banking systems are available across banks with each bank relying on a specific system having its own data structure and alignment of different information fields.

Therefore, it is felt necessary that instructions on development of aforesaid Information System should be supplemented with a standardized format having specific arrangement of data fields for compliance by banks to assess total liability of a bank towards a single depositor.

In absence of such a format and prescribed data fields, there is a possibility that the banks would end up producing SDV data on different non-comparable formats.

Hence, DPC has decided to issue a Standardized Report Format (SRF) to enable banks to compile SDV data as per requirements of reimbursement.

The SRF contains 44 data fields relevant to information on eligible depositors of a bank and available at Annexure A. All banks are required to follow the taxonomy of SRF to maintain consistency in SDV data reporting across banks.

The document also explains various terms used in SDV data compilation along with classification guidelines, reporting timelines, medium of reporting and examples on balance calculations.

KARACHI: The State Bank of Pakistan (SBP) has said that the deposits of banks registered 9.55 percent growth in 2018, which is the lowest since year 2008.

The SBP in its Financial Stability Review (FSR) 2018 said that the steady growth in deposits is pivotal for the banks as it is the major source of funding.
Deposits constitute 77.99 percent of total liabilities and 72.42 percent of total assets, as of end CY18. The deposits have contributed 92.68 percent in the asset expansion during CY18.

“During CY18, deposits have risen by 9.55 percent (Yo-Y) versus 10.29 percent in CY17; the lowest since CY08,” the SBP said.

This slowdown may be attributed to a mix of factors including (a) cost cutting strategy of some banks to limit the growth of domestic remunerative deposits, (b) scaling back of operations by few banks in overseas market, (c) probable dampening effect of withholding tax on banking transactions, (d) depositors concern regarding enhanced KYC requirements to contain AML/CFT risks, and (e) additional liquidity available as a result of net-maturity of investment.

In terms of category, deceleration in saving and fixed deposits have overshadowed the rise in current deposits. The saving deposits have become costly due to Minimum Saving Rate (MSR) policy in vogue.

Moreover, the fixed deposits could not attract the attention of banks due to maturity re-profiling of their assets, both, in investments (from PIBs to MTBs) and advances (from fixed term loans to short-term working capital financing).

The size-wise distribution of deposits is also important from the stability perspective. Generally, retail (small) deposits are more stable and have longer retention periods than the large size institutional deposits.

Encouragingly, the reviewed year has witnessed growth in small sized retail deposits up to Rs1.0 million. On the other hand, growth in deposits over Rs10.0 million have been trending downwards.

This is due to declining flows of institutional deposits (NBFIs, PSEs etc.) as well as private business deposits, particularly, the manufacturing sector, the SBP said.

The deposits in Pakistan’s banking system witnessed a decline of 2.22 percent, totaling Rs13.057 trillion by the end of January 2019, as compared to Rs13.35 trillion recorded on December 31, 2018.

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