Karachi, July 14, 2021 (PPI-OT): Banks: Jun-2021 Deposit growth marks 14-year high

Total Deposits in Jun-2021 clocked in 22% YoY higher at Rs19.8tn, boosted by seasonal year-end targets. Excluding deposits raised in the last week of the month that amounted to Rs1.1trn, the YoY growth stood at 15%. We believe the growth is also driven by limited avenues of consumption spending in the ongoing pandemic situation.

Deposits for 2QCY21 expanded by 11% QoQ, the highest since 2011. Given the decline in fresh deposit rates in the last two months, we anticipate increase in the share of zero-cost deposits during 2QCY21 to continue, with mid-tier banks outperforming sector average growth. To note, the sector’s current account growth stood at 20-25% YoY in the past 2 quarters, much higher than the historical average growth of 15%.

Advances recorded a 10% YoY growth as at Jun-2021 end, with ADR further declining to 45%. The growth pace has remained relatively lower despite facilities such as TERF offered by SBP for economic growth on lower cost of borrowings. On the other hand, Investment growth remained robust, clocking in at 29% YoY, taking IDR up to 69%.

We maintain our year end Deposits growth assumption at 15% YoY from last year’s higher base, as we expect CIC (currently 29% of M2) to decline in 2HCY21 post implementation of withdrawal of taxes on banking transactions for non-filers.