Islamabad. November 28 (APP): The State Bank on Monday released the half-yearly review of the performance of the banking sector for the year 2022. The review covers the performance and health of the banking sector during the period January to June 2022 (H1 2022). It includes the performance of financial markets and microfinance banks, as well as the results of the Systemic Risk Survey, which is based on the opinions of independent respondents about the main risks to financial stability. The review states that by 2022 Sustained economic activity contributed to a 16% expansion in the banking sector's balance sheet during the first half of 2018.
The main driver of the strong growth in the asset base was the increase in private sector credit flows and investments, particularly government bonds. In addition, banks' reliance on loans to finance their expanded balance sheets has increased significantly in addition to accumulating large deposits. The growth rate of private sector credit during the first half of 2022 compared to the previous three-year period. I was the tallest. An improvement in manufacturing activity during the first half of 2022;
Reflected by the double-digit growth in the mass goods manufacturing index, higher raw material prices and State Bank refinance schemes contributed to the increase in overall credit flows. Individuals and the sugar sector received the largest share of loans followed by the textile sector. Apart from the remarkable growth performance, the asset quality indicators of the banks have further improved. The gross non-performing loans (NPL) ratio declined to 7.5 percent at the end of June 2022, from 7.9 percent at the end of December 2021. However, the recent devastating floods in many parts of the country may affect the repayment capacity of agricultural borrowers and microfinance borrowers from banks. The review highlights that despite strong growth in incomes, profitability Basic expressions moderated, mainly due to a sharp rise in tax levies.
Banks' capital adequacy ratio (CAR) fell to 16.1 percent on account of rapid growth in assets and loans. However, regardless of this, the said rate remains significantly above the minimum regulatory requirement (ie 11.5 percent) and banks as a whole have adequate buffer and resilience to withstand severe pressures from the overall economic situation. and can hedge against the impact of key risk factors. The review also covers the results of the tenth phase of 'SRS' (July 2022) based on the sentiments of independent market participants.
Pollsters believe that most of the risks to the financial system are external in nature, ie global and macroeconomic risks. However, a majority of voters expressed confidence in the stability of the financial system. The devastating floods in many parts of the country could affect the repayment capacity of banks and microfinance agricultural borrowers, and so would the effects of the recession. As the ability of other borrowers to repay the loan may also be affected.
Therefore, the review states that banks as well as microfinance banks should carefully analyze the potential impact on the loan portfolio and take necessary steps to maintain the asset quality and financial stability of their institutions. The full report can be viewed at this link https://www.sbp.org.pk/publications/HPR/H1CY22.pdf.