Economy Survey of Pakistan FY2021-22, the banking sector performed consistently in 202, with all important metrics, including assets, deposits, financing, and earnings, reaching all-time highs.
The banking sector’s asset base increased by 19.6 percent in CY21 (14.2 percent in CY20) to Rs.30 trillion. Growth in innovations and investments were the main drivers of the expansion.
In CY21, advances (net) climbed by 22.1 percent (YoY) to Rs.10.1 trillion, compared to a COVID-induced growth of 0.5 percent in CY20. The increase in advances was broad-based, but the textile industry received the most funding in CY21.
By the end of December 2021, bank investments had increased by 22.0 percent year on year to Rs.14.5 trillion. Government securities accounted for nearly all of the increase in overall investments, showing the government’s growing need for bank credit.
By the end of CY21, bank deposits had risen 17.3 percent year on year to Rs.21.7 trillion (16.1 percent increase in CY20). Total deposits increased by 70.9 percent in CY21, thanks to a combination of current and savings accounts.
The lending portfolio’s asset quality indicators improved as a result of slower increase in nonperforming loans and better provisioning. Over the course of CY21, both the gross and net infection ratios decreased. The net NPLs to net loans ratio fell to 0.7 percent by the end of December 2021 from 1.2 percent at the end of December 2020, thanks to a strong provision coverage (provisions to NPLs) of 91.2 percent.
Solvency measures such as the Capital Adequacy Ratio (CAR) decreased to 16.7% at the end of December 2021 (18.6% at the end of December 2020), owing to solid advances growth. However, the current CAR level is significantly above the 11.5 percent and 10.5 percent minimum thresholds set by the local and international governments, respectively.
During CY21, the banking industry did admirably. In 2021, the company’s earnings increased by 9.7% to Rs.451 billion, or Rs.40 billion.
The SBP continued to play its role within its regulatory and supervisory ambit to establish a conducive and prospering environment for the banking industry in FY2022, according to the study.