KARACHI: Banking sector deposits grew 10 per cent to Rs9.1 trillion in the first half of 2015 compared to last five years’ average annual growth of 8pc.

Topline Securities issued a detailed report on performance of banks in the first half of this calendar year.

It said the situation indicates that increased deposits were mobilised by banks in the wake of shrinking margin outlook.

In June, deposits grew by 13pc year-on-year as against 10pc last year.

Advances of the banking sector grew by 3pc during the first half as against the average growth of 2pc during the last five years (2010-14), signalling a slight improvement.

Advances growth during the month of June remained on lower side increasing by 7pc as against 11pc last year due to retirement of power sector debt and aggressive de-leveraging by companies.

Consequently, advance to deposit ratio (ADR) reached multi year low of 50pc as banks preferred investing in risk-free government securities.

“We anticipate this trend to reverse due to multi-decade low level of interest rate, China-Pakistan Economic Corridor (CPEC) projects and improving macro indicators will lead to the growth in credit off-take by 14pc in 2015-17,” said the report.

High yielding consumer lending (6pc of total credit) specifically car financing is anticipated to pick up due to multi-decade low interest rates.

As against a single-digit growth in overall advances, car financing increased by 11pc in first four months of 2015 which is the highest during the last eight years, according to data of State Bank of Pakistan (SBP).

Total investments on the other hand, rose by 14pc as investment to deposit ratio (IDR) surged to 64pc as against 54pc in June 2014.

The recent budgetary measures have been negative for banks “but we believe that the underperformance of banking sector in the first half of 2015 have improved sector valuations, with bank index down at 16pc.

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