Banking growth may be dampened

KARACHI (Agencies): Growth rates, credit risk and earnings of the banking system are likely to remain under strain in future due to constrained economic environment both at home and global fronts. According to the State Bank of Pakistan's Quarterly Performance Review of the Banking System for the quarter ended December 31, 2008 released on Saturday. Pakistan's banking system effectively coped with several challenges emanated from economic slowdown, both at home and abroad, due to strong resilience built over the years and effective regulatory and supervisory regime.

The present tough economic environment will also heighten the credit risk and affect the earnings due to increased loan loss charges and constrained incomes. The system is expected to remain profitable in the coming quarters, though this phenomenon may not be widely shared across the market players. Though the concerns about the solvency of top banks of the world are weighing on the investor confidence across the globe, the banks in Pakistan are still maintaining their resilience, the report said. The strength of the banking system largely comes from the prudent regulatory and supervisory regime strengthened risk management and governance standards in banks as well as the improved solvency and earning capacity of banks, it added. The report pointed out that asset base of the banking system grew 2.6 percent over the quarter to reach Rs 5,653 billion, well supplemented by 3.6 percent and 7 percent growth in deposit and shareholders' equity, respectively.