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7/21/2015

Pakistanbankingsectorremainssound:IMFreport

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Pakistanbankingsectorremainssound:
IMFreport
KARACHI:BankingsectorofPakistanremainssound,withrobustearnings
andhighsolvencyratios,accordingtoInternationalMonetaryFund(IMF)staff

StaffReport
April11,2015

report.
http://www.dailytimes.com.pk/business/11Apr2015/pakistanbankingsectorremainssoundimfreport

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7/21/2015

report.

Pakistanbankingsectorremainssound:IMFreport

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Thebankingindustrypretaxprofitsurgedby49percentyearonyear(yoy)
throughDecember,mainlyattributedtoincreasednetinterestincome,lower
provisionchargesandhighernoninterestincome.

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Thecapitaladequacyratio(CAR)increasednoticeablyto17.1percentduetoaccumulationofprofitsandfresh
equityinjectionbysomebanks(includingpreviouslyCARnoncompliantbanks).

Tofurtherimprovemarketdisciplineandenhanceassessmentofsoundnessoffinancialsector,StateBankof
Pakistan(SBP)hasevaluatedandidentifiedtheencouragedsetoffinancialservicesinstitutes(FSIs).

AsofendDecember2014,assetqualityhasslightlyimprovedwithadeclineinnonperformingloan(NPL)ratio
to12.3percentandnetNPLstonetloansratiofallingto2.7percent.

Therisktobankingsystemseemstobenegligible,astheyencompassonly1.39percentofbankingsystemassets.
Oftworemainingbanks,oneincreaseditsCARto9.41percentviaaninjectionofadvancesharedepositmoney
inDecember2014.

Thebankisexpectedtocompletearightsissuesoon,whichwillenableittobecomeCARcompliant.

SBPismakingprogressinbolsteringbanksbelowtheminimumcapitalrequirement.ThenumberofCAR
noncompliantbankshasfallenfromthreetotwoduetocapitalinjections.ThecombinedCARshortfallfortwo
noncompliantprivatebankshasdecreasedbyRs3.3billionoverquartertoRs7.96billion(lessthan0.03percent
ofgrossdomesticproducts)asofendDecember2014.

FederalgovernmentatrequestofSBPhasplacedsecondbankunderamoratoriumforaperiodofsixmonths,
effectiveNovember14,2014.Aschemeforreconstructionoramalgamationisunderconsideration.Fourbanks
haveexpressedinterestinacquiringthebankandarecurrentlyconductingduediligence.

IMFexpresseditsreadinginLetterofIntent(LoT)said,Weremaindedicatedtoprotectingfinancialstabilityby
reinforcingregulatoryandsupervisoryframework.

FuturesTradingBillisbeingfinalisedandwouldbeplacedbeforeParliamentbyendJune2015.Aworkinggroup
http://www.dailytimes.com.pk/business/11Apr2015/pakistanbankingsectorremainssoundimfreport

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7/21/2015

Pakistanbankingsectorremainssound:IMFreport

FuturesTradingBillisbeingfinalisedandwouldbeplacedbeforeParliamentbyendJune2015.Aworkinggroup
ofSBPSecuritiesandExchangeCommissionofPakistanjointtaskforcewasfinalisingguidelinesonanearly
warningsystemforeffectivemonitoringoffinancialconglomerates.

Theseguidelinesoncefinalisedandintegratedintoexistingframework,wouldfacilitatesupervisionoffinancial
conglomerates.

Thetechnicalassistance(TA)onconsolidatedsupervisionfromIMFhasstarted.Thetwosidesarecoordinating
forearlycompletionofTAthatwillassisttheSBPinestablishingaframeworkforconsolidatedsupervisionof
bankinggroups.

SBPisexpectedtoengagewithIMFfordisseminationofsomeadditionalFSIsfortransparencypurposesbymid
2015.

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