The bank deposits grew by a notable 17 percent over the past one year to Rs.22.1 trillion in July as compared to Rs.18.8 trillion in the same month of last year, according to the data shared by Arif Habib Limited.
Advances, Deposits and Investment of Scheduled Banks: Jul’22
Advances: PKR 10.9trn, +22% YoY
Deposits: PKR 22.1n, +17% YoY
Investments: PKR 17.6trn, +25% YoYADR: 49.1%, +200bps YoY
IDR: 79.7%, +482bps YoY @StateBank_Pak#SBP #Banks #Pakistan #Economy #AHL pic.twitter.com/UI1uusoNwl— Arif Habib Limited (@ArifHabibLtd) August 18, 2022
The deposits have maintained growth momentum mainly due to increased inflow of workers’ remittances sent home by overseas Pakistanis and massive rupee depreciation against the US dollar.
Remittances sent by overseas Pakistanis rose to a record $31.2 billion in FY22, 6 percent higher as compared to FY21. Since 2020, highest monthly average of workers’ remittances has been received in FY22 which is of $2603.1 million, as per the SBP.
Read more: Remittances rose to a record $31.2 billion in FY22: SBP
However, on month-on-month (MoM) basis, deposits showed a decline of 3.1 percent as they were recorded at Rs. 22.8 trillion in June.
This decline can also be attributed to the 8.6 percent decline in remittances in July on MoM basis recorded at $2.5 billion. SBP clarified that this was due to considerably fewer working days because of Eid holidays as there were only 17 working days in comparison to 22 in June.
Bankers found it very attractive as increased deposits have a direct relationship with banks’ earnings.
Similarly, demand for advances posted positive growth of 22 percent YoY during the month of July to Rs.10.9 tillion. While, on MoM basis, it posted a negative growth of 0.3 percent.
Investments jumped to Rs17.6 trillion in July 2022, showing a growth of 25 percent on a yearly basis. On a sequential basis, the total investments by commercial banks grew by 1.1 percent from 17.4 trillion in the previous month.
Consequently, banks’ investment to deposit ratio (IDR)- deposits lent to the government through acquiring government papers- surged by 79.7 482bps to 79.7 percent by end of July 2022 compared to 74.9 percent in the same month last year, whereas on MoM basis, it has moved up by 330bps.
The growth in IDR suggests that government is heavily relying on the domestic institutional financing as it can no longer borrow from central bank under the IMF conditions and after amendments in SBP independence act’s rules.