Banks infectious ratio inches up at 12.5%

KARACHI: Infectious ratio the banks have inched up at 12.5% in the third quarter ending in September 2015 with increase of non-performing loans (NPLs) despite sustainable low-in-interest rates.

The rise in infectious ratio of the banking industry was mainly attributed to marginal fall in advances of banks to customers of various sectors but net NPLs of the bank increased in the said quarter whereas the recovery against NPLs dropped.

The State Bank of Pakistan’s data stated that overall NPLs of the banking industry increased to stand Rs 629.86 billion by the end of September out of total advances of the banks recorded a flat level of Rs 5.056 billion.

These NPLs are mainly constituted in the corporate sector with Rs 440 billion. It followed by SMEs sector with Rs 86.5 billon NPLs accumulated till September 2015 whereas NPLs registered in other sectors such as agriculture and consumer financing stand at Rs 48 billion and Rs 34 billion.

The net NPLs has reduced to Rs 114 billion in the period of July to September 2015 as compared to previous quarter in which it stood at Rs 120 billion, as per SBP data. Net NPLs to net Loans ratio, however, declined to 2.5% from 2.7% in Jun-15 due to rise in accumulated provisioning against infected loans, which stand at Rs 514 billion.

In overall NPLs, banks have declared a huge amount of Rs 520 billion as loss whereas Rs 35 billion were declared as doubtful and Rs 48 billion loans were considered as sub-standard by the commercial banks.

The banks drive to ensure recovery against NPLs has dropped by 12% or Rs 1.99 billion in the third quarter of 2105 compared to the second quarter standing at Rs 14.029 billion. The performance of the banking machinery was shown a lenient situation at times when the demand of credit is set to pick up against the low interest rates regime.

SBP statistics reflected that cash recovery of banks have declined whereas net NPLs have increased adversely in the period of the July and September to Rs 114 billion as against of Rs 95.4 billion recorded in the second quarter.

Interestingly, the performance of the public sector banks was reported comparatively improved in the period of July to September with recovery of Rs 1.427 billion from the previous year, however NPLs increased to Rs 51.5 billion in the same period.

The recovery against NPLs by public sector banks mainly National Bank of Pakistan (NBP) along with SME Bank and First Women Bank stood at Rs 1.378 billion in April to June as against NPLs of Rs 38.9 billion.

Local private banks including– Habib Bank Limited, United Bank Limited, Allied Bank Limited, MCB Bank, Bank Alfalah, Bank Al Habib-recovery of cash from their customers decreased to Rs 9.885 billion in Jul-Sept whereas their NPLs stand at RS 48.262 billion in the same period.

These banks recovery against NPLs were recorded at Rs 11.089 billion in April-June whereas NPLs stood at Rs 42.8 billion.

Foreign banks NPLs were squeezed in the period of Jul-September because of the fact the number of banks reduced significantly after merger with local banks such as HSBC Oman and Barclays Bank. Standard Chartered and Samba Bank are prominent among foreign banks but their NPLs stood at negative Rs 29 million whereas recovery of NPLs stood at Rs 67 million in the same period.

The foreign banks NPLS stood at 1.12 billion in the quarter of April-June whereas the recovery against NPLs stood at Rs 677 million in the same period. The performance of specialised banks was seen as worst with increase in NPLs and decline in the recovery of NPLs.

In Jul-September, the recovery of NPLs by specialised banks stood at Rs 2.65 million whereas NPLs stood at 15.13 billion in the same period. In April-June period, the recovery of NPLs stood at 3.27 billion whereas NPLs stood at Rs 38 billion.


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