JS Securities Limited – JS Research (15-01-2021)

Karachi, January 15, 2021 (PPI-OT): Banks: CY20 Sector deposit growth touches 15-year high

As per latest SBP data, banking sector deposits for CY20 clocked in at Rs17.88trn, marking a 15-year peak growth of 22% YoY. We believe the high growth was driven by relatively lower consumer spending and expenditure by deposit holders during some months of the pandemic, topped up by a massive jump on MoM basis in Dec-2020.

Personal deposits, which make for more than half of the sector’s deposits, have already reported 21% YoY increase up to Nov-2020. We expect a higher growth in the same during Dec-2020, which may be led by mid-tier banks.

The sector’s total loan portfolio remained broadly unchanged almost throughout the calendar year, while witnessed 4% MoM jump during the last month of the year, taking YoY increase to 4% YoY as well. For CY20, ADR clocked in at 48% (-8ppt YoY).

While private sector credit offtake remained flattish during 11MCY20, sectors such as loans to textiles, construction and wholesale trade segments were outperformers of the year. Moreover, the consumer loan segment also rebounded during 2HCY20, amid lower interest rates, led by higher growth in auto and personal loans segment.

On the other hand, banks deployed fresh deposits in Investments, taking the asset class growth up by 31% YoY. The sector’s IDR increased to 65%, versus 60% as at CY19.

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