KARACHI: According to a research report released on Tuesday, commercial banks had an amazing 83 percent gain in earnings in 2023, with nearly all of them setting records for profits in the same year.
Unprecedented interest rates increased bank profits, but the government’s expensive borrowing hurt the economy.
“In CY23, the listed banking sector saw significant profits (83pc) driven primarily by policy rate hikes of 600bps accompanied by volumetric growth in deposits (24pc), supported by 16pc higher non-interest income and 21pc lower provisioning during the year,” the Arif Habib Research report stated.
The only lucrative industry that turned a profit in FY23 despite having a negative growth rate was banking. There was little progress in the new fiscal year FY24 because the projected 2 percent growth rate is still uncertain. Despite record revenue creation, the government cannot function without borrowing from banks, thus bank profits would still climb.
The government’s incessant borrowing from the banking industry enabled the banks to experience unanticipated expansion. The banks will be able to record higher earnings in the current fiscal year than in CY23. By the end of July, the government had already borrowed Rs4.2 trillion from banks for the first half of FY24.
The State Bank of Pakistan maintained the interest rate at 22 percent in February, defying the expectations of most analysts who were expecting it to drop.
Bankers and analysts predict that if the IMF guarantees Pakistan will get the next $1.2 billion installment under the Stand-By Agreement, the monetary policy in March may differ.
Still, the State Bank has refrained from raising interest rates due to the inflationary bull market.
