20 listed Pakistani banks during the period of July-September earned up to Rs46.6 billion collectively, which is 19% up from the same three-month period of the last year.
In the light of the date fetched by Topline securities, all listed commercial banks, leaving BankIslami, earned growth of 13% in Jul-Sep over its prior quarter. The increase in earnings is just fetched by a betterment in banks’ net interest income, which also shot up by 19% to Rs112.8 billion in Jul-Sept year by year.
The growth in banks’ earnings in the previous nine months – up 20% on a yearly basis – is rather unexpected due to prolonging decrease in interest rate.
The benchmark interest rate lingers at a surprising low of 6% after the central bank lessened it consistently since 2014 to lower inflation. This also caused in smallest banking smearing recorded during the last 10 days.
Research analysts Umair Naseer stated that banks have invested massively in long-term Pakistan Investment Bonds (PIBs), which given them a protection against falling interest rates. Investments in the banking sector, were the same as 71% of their total deposit at the conclusion of the third quarter of 2015. On the contrary, the investments-to-deposits ratio (IDR) stood at 56% comparing to period of the preceding year.
Naseer stated that the quarterly increase of 13% in after-tax profitability of these 20 banks was in the wake of a substantial fall in the effective tax rate during the third quarter. The effective tax rate during Jul-Sept was 35% as opposed to 52% in the preceding quarter when banks must pay a one-off super tax of 4% on their outcome.