Bank deposits increase by 20pc in 2016

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KARACHI: The banking sector has witnessed significant deposit growth in 2016 which increased by 20 percent year on year (YoY) to Rs11.2 trillion.
This is significantly higher than historical average growth of 12 percent during last 3-years, analysts at Topline Securities said.
As per latest data issued by State bank of Pakistan (SBP) deposits have also jumped 7 percent surprisingly on month on month basis in December 2016.
Advances of the sector have also risen by 17 percent YoY / 6 percent MoM to Rs5.6 trillion in December 2016 whereas investments are up 8 percent YoY / 3 percent MoM to Rs7.2 trillion.
The analysts believe that this abnormal jump in MoM basis and higher than historical growth could be due to year end phenomenon and this could adjust in upcoming weeks. It is to be noted that sector deposits as of December 23, 2016 stood at Rs10.6 trillion which is up 15 percent YoY whereas advances were up 12 percent YoY Rs5.3 trillion.
The analysts said that even if we assume ‘December 23, 2016’ numbers to sustain going forward, 15 percent deposit growth will be better than expected and higher than historical average.
Similarly, advances growth of 12 percent will also be higher than last 3-year average growth of 7 percent.
Strong deposit growth bodes well for the sector as volumetric deposits growth remain the key earnings driver in a low interest rate scenario.
Improvement in advances growth also indicates increased credit demand, initiation of CPEC projects and improved macros. Banks are also focusing on high yielding consumer growth to support their margins and profitability.

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