KARACHI: Banking spreads have averaged at 6.11 percent in May 2014 vs 6.05 percent in Apr 2014.

However, on year on year basis, according to State Bank of Pakistan (SBP) statistics, the spreads are 23 basis points (bps) lower than 6.34 percent witnessed in May 2013. During the first five months of CY14, monthly banking spreads have averaged 6.05 percent vs. 6.23 percent in the same period last year. According to Zeeshan Afzal of Topline monthly banking spreads are gradually increasing, after touching nine-year low of 5.97 percent in Jan 2014, due to falling cost of deposits despite stable policy rate. However, decline on year on year basis on the back of SBP tightening requirement to pay on PLS (Profit & Loss Sharing) saving account. During May 2014, cost of deposits remained stable at 5.05 percent vs 5.04 percent in April 2014 while return on advances increased to 11.15 percent in May 2014 from 11.1 percent in April 2014. On the other side, fresh banking spreads remained at 4.89 percent in May 2014 slightly lower than 5.03 percent witnessed in April 2014.

“Though we expect banks’ rising focus towards deposit cost rationalization, banking spreads may remain in the similar territory despite expected fall in policy rate,” he said.

However, Net Interest Margins of banks were likely to get support from higher yields on increasing PIB portfolio of banks and rising credit growth, he added.

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