Banking spreads inch up

Banking sector spreads showed a slight recovery to settle at 5.51% in August as compared to 5.47% recorded in July, as per the latest numbers revealed by State Bank of Pakistan (SBP).

The banking spreads will further see variation to see the impact of policy rate cut in September by the central bank.

The lending rates in August lowered an average 6bps, on monthly basis, to stand at at 9.36%, falling for ten consecutive months, while deposit rates went down by 10bps MoM to 3.85%, taking weighted average banking spreads of Aug 2015 to 5.51 percent.

The lending yield on fresh disbursement continue to move southwards as it touched 7.78%, below what has been offered on a 5-yr Pakistan Investment Bond (PIB). Cost of fresh deposits followed the same suit, decreasing marginally to 4.97% reducing fresh spread to multi-year low of 2.81%.

Total industry deposits remained flat MoM at Rs 8.94 trillion in August due to the sluggish growth to the recently introduced withholding tax where business community preferred informal channels over formal channels for transactions.

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