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Profit in Islamic banking industry grows in June 2019

According to the statistics published by the State Bank of Pakistan (SBP), the Profit Before Tax (PBT) of Islamic banking industry was registered at Rs. 32 billion by end June, 2019 as against to Rs. 15 billion in the same quarter last year. Profitability ratios like return on assets (ROA) and return on equity (ROE) before tax were registered at 2.3 percent and 35.3 percent, respectively by close June, 2019. Statistics also showed that during the period under review, operating expense to gross income ratio recorded more improvement and was registered at 52.6 percent, as against to 54.7 percent in the last quarter. Assets of Islamic banking industry increased by 7.3 percent (Rs. 202 billion) during the quarter April to June, 2019 and reached at Rs. 2,992 billion by June 30, 2019. Similarly, deposits of Islamic banking industry recorded growth of 9.8 percent (Rs. 216 billion) and stood to Rs. 2,415 billion by end June, 2019.

According to SBP the market share of Islamic banking assets and deposits in the overall banking industry was registered at 14.4 percent and 15.9 percent, respectively by end June, 2019. PBT of Islamic banking industry was also registered at Rs. 32 billion by end June, 2019. It is also said that the network of Islamic banking industry comprised of 22 Islamic banking institutions; 5 full-fledged Islamic banks (IBs) and 17 conventional banks having standalone Islamic banking branches (IBBs) by end June, 2019. Branch network of Islamic banking industry was registered at 2,913 (spread across 113 districts) by end June, 2019. Greater than 77 percent of the branches were concentrated in Punjab and Sindh.

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The number of Islamic banking windows was operated by conventional banks having standalone Islamic banking branches reached at 1,348. Assets of Islamic banking industry recorded a quarterly growth of 7.3 percent during the quarter April to June, 2019 and were registered at Rs. 2,992 billion, as against to Rs. 2,790 billion in the last quarter. Market share of Islamic banking industry’s assets in overall banking industry’s assets was registered at 14.4 percent by end June, 2019. The share of net financing and investments in total assets of Islamic banking industry reached at 51.6 percent and 20.3 percent, respectively by end June, 2019. On the other hand, investments (net) of Islamic banking industry were registered at Rs. 606 billion by close June, 2019 as against to Rs. 617 billion in the last quarter. During the period under review, investments (net) of both IBs and IBBs registered slight attrition of 0.8 percent and 3.3 percent, respectively.

 

Official also revealed that this can be largely attributed to non-issuance of sovereign Sukuk during the period. Financing and related assets (net) of Islamic banking industry grew by Rs. 20 billion to stand Rs. 1,544 billion by end June, 2019 as against to Rs. 1,525 billion in the last quarter. Review of client wise financing reveals that corporate sector accounted for 73.5 percent share in overall financing of Islamic banking industry, followed by commodity financing with a share of 10.6 percent and consumer financing 10.4 percent. The share of small and medium enterprises (SMEs) financing and agriculture financing in overall financing of Islamic banking industry were registered at 3.7 percent and 0.5 percent, respectively. Asset quality indicators of Islamic banking industry counting non-performing finances (NPFs) to financing (gross) and net NPFs to net financing were registered at 2.4 percent and 0.3 percent, respectively by end June, 2019; these ratios were relatively better than those of overall banking industry averages.

Statistics also identified that deposits of Islamic banking industry explained a quarterly growth of Rs. 216 billion during the period under review and were registered at Rs. 2,415 billion by end June, 2019 as against to Rs. 2,199 billion in the last quarter. The market share of Islamic banking industry’s deposits in overall banking industry’s deposits were increased to 15.9 percent by end June, 2019 as against to 15.6 percent in the last quarter. The category wise breakup of deposits reveals that current (non-remunerative) and saving deposits grew by 11.4 percent and 4.7 percent, respectively; while, fixed deposits registered a rise of 9.7 percent by end June, 2019.

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Current (remunerative) deposits on the other hand experienced a slight fall of 0.3 percent during the period under review. Breakup of deposits among IBs and IBBs reveals that deposits of full-fledged Islamic banks increased by 9 percent during the period under review and were registered at Rs. 1,455 billion by end June, 2019. Similarly, deposits of Islamic banking branches of conventional banks registered a growth of 11 percent and stood to Rs. 959 billion by end June, 2019. The share of IBs and IBBs in overall deposits of Islamic banking industry reached at 60.3 percent and 39.7 percent, respectively by end June, 2019. On the other hand, liquid assets to total assets and liquid assets to total deposits of Islamic banking industry grew as against to the last quarter and reached at 23.2 percent and 28.7 percent, respectively by end June, 2019. Financing to deposits ratio (net) of Islamic banking industry was registered at 63.9 percent by end June, 2019 as against to 53.2 percent of overall banking industry. The ratios of capital to total assets and capital minus net non-performing assets to total assets of Islamic banking industry were registered at 6.3 percent and 6 percent, respectively by end June, 2019. Both the ratios were lower than those of overall banking industry averages.

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