Pakistan Banks pre-tax profit was recorded at Rs329bn during the year.
The SBP in its quarterly review of banking performance for October-December 2015 said the profitability improved on the back of high net mark-up income, contributed not only by 21pc year-on-year growth in interest earned on government securities but also by 13pc saving on interest expense on deposits.
The 25pc growth in non-interest income primarily due to high gains on the sale of Pakistan Investment Bonds further improved the profitability of the banking sector.
The report said that all the profitability (before tax) indicators saw improvement; ROA (return on assets) rose to 2.5pc from 2.2pc and ROE (return on equity) to 25.8pc from 24.3pc.
Bank-wise statistics reveal a broad-based contribution in profits as 32 banks posted profits, whereas three witnessed losses compared to six a year earlier.
Concentration of earnings further reduced as the share of top five banks in total profits decreased to 62pc in 2015 from 66pc.
Segment-wise data shows 15.1pc rise in working capital financing followed by 5.1pc growth in fixed investment advances (year on year 26.6pc).
The SBP report said the financing to small and medium enterprises, which declined in the first nine months of the year, rose by 17pc quarter-on-quarter in October-December. However, consumer financing remained subdued except auto financing which grew by 2.2pc quarter-on-quarter (15.3pc year-on-year).
The overall growth in investments moderated due to deceleration in investments in government securities.
As against average quarterly growth of 8.6pc during the first three quarters of 2015, government securities grew by only 3pc in the fourth quarter.
Banks’ investments in equities remained almost unchanged during the quarter, probably due to subdued activity in the capital market. However, investment in the private sector debt instruments (Bonds and Term Finance Certificates) observed decline of 6.4pc year-on-year.
The report said the asset quality of the banking sector improved considerably. During 2015, nonperforming loans (NPLs) declined by Rs24bn (3.9pc) and NPLs-to-loans ratio reduced by 111 bps to reach 11.4pc.
The asset base of the banking sector has registered an increase of 4.6pc. A growth of 7.8pc in private-sector advances (both seasonal and for fixed investment) and moderate rise in banks’ investment in sovereign papers were the major contributors to this increase in assets, said the report.
“Banks are expected to maintain their profitability on account of sizeable mark-up income on high level of risk-free investments, rise in fixed investment advances, and lower interest expense on deposits relative to corresponding quarter of last year,” said the SBP.
However, in the wake of large long-term government bonds’ maturity, due in the first quarter of 2016, banks may face re-pricing/reinvestment risk, it added.