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The Pakistan banking industry constitutes a total of around 31 banks, of which five are public-
sector and four are foreign, while there are 22 local private banks. Most the banking business is
concentrated in a select few in the industrysix banks are the largest competitors in the economy
and hold a major stake of the banking assets in Pakistan. To be more specific, these banks
collectively make up more than 57 percent of deposits and 53 percent of advance in the economy.
They are:

Habib Bank Limited (HBL),

National Bank Limited (NBL),
United Bank Limited (UBL),
MCB Bank Limited,
Allied Bank Limited (ABL) and
Bank Alfalah Limited.

The industry is regulated by the State Bank of Pakistan (SBP), which governs local banks under
the ambit of its prudential regulations. Moreover, the banks also must comply with the
international Basel III standards.

Overall, the potential in this sector is huge. The number of bank accounts amounts to 43 million
in a total population of 195 million. The reasons behind this large difference can be credited to the
limited access to technology in the country, the aversion to banks due to religious reasons and the
great size of the unbanked rural population. With that being said, the potential for growth is huge
primarily because of the introduction of high-speed, mobile Internet; the advent of Islamic
banking; and the increased awareness of the benefits of banking in the country.


In terms of overall performance, the past decade has been good to the baking industry, with the
numbers presenting a positive picture in terms of balance-sheet growth for banks. To quote a few,
from 2009 to September 2016:

Total assets increased from PKR 6,516 billion to PKR 15,134 billion;
Deposits rose from PKR 4,786 billion to PKR 11,092 billion;
Lending increased from PKR 3,240 billion to PKR 5,025 billion; and
Investments exponentially jumped to PKR 7,625 billion from PKR 1,737 billion back in


The asset base of the banking sector has expanded by 2 percent during Q1CY17; faster than the
corresponding period of last year. Both the growth in advances and investments has contributed in
achieving this growth.
A marked growth of 1.8 percent in gross loans was observed. Investments saw a significant growth
of 7.1 percent, after declining consecutively during the last two quarters of 2016.
Gross advances (domestic private) have surged by a higher rate of 2.4 percent during Q1CY17 as
against 0.78 percent during Q1CY16.Interestingly, most of the growth is resulted from Islamic
Banking Institutions (IBIs).The major thrust has come from the sugar, automobile/transportation,
electronic & electrical appliances sectors.

Deposits have increased by 0.1 percent in Q1CY17 in contrast to 0.6 percent contraction in
Q1CY16; while banks borrowing from SBP has grown by 23.5 percent owing to liquidity needs
to sustain asset growth.

After showing a downward trend in the last two quarters, has picked up again. Banks borrowing
from financial institutions has increased by 12 percent during Q1CY17. The primary reason behind
this growth has been banks enhanced borrowing from SBP (under repo arrangements) to match
the increase in government borrowing from commercial banks in Q1CY17.

The profitability of the banking sector has moderated as the profits (before taxation) experienced
a decrease of PKR 6.4 billion during Q1CY17 compared to an increase of PKR 1.7 billion in the
same quarter of previous year.
The prevailing low interest rate environment is weighing on the interest earnings of the sector as
the net interest income has shown a marginal improvement of PKR 0.12 billion during the
reviewed quarter. The recent increase in volume of advances has led to this nominal increase,
though return on advances remains on the downhill.
Non-interest income, however, has declined by PKR 2.2 billion mainly on account of low income
from gain on sale of securities and dividend income.
Banking Sector Outlook For Q2CY17
The advances of the banking sector are expected to grow in line with historical trend during
Q2CY17. The growth momentum is likely to be supplemented by favorable macroeconomic
conditions (i.e. low interest rates, strengthening aggregate demand and uptick of industrial
activity), increase in wheat procurement operations and positive outlook (CPEC related projects
gain steam).
The profitability of the banking sector is expected to see some recovery given anticipated increase
in both advances and investments. However, it may remain modest given the shift of banks from
long maturity high yielding bonds towards short maturity low-yielding ones