KARACHI: Islamic banking industry (IBI) invested 23% more than deposit growth between January and March 2021 (3QFY21), indicating the presence of significant liquidity, the State Bank of Pakistan said on Friday (SBP).

In its quarterly bulletin on Islamic banks, the SBP noted that IBI’s deposit base increased by 68 billion rupees during 3TFY21 while investments increased by 84 billion rupees. IBI’s (net) investments saw an increase of Rs 84 billion during the period and amounted to Rs 1.345 billion at the end of March 2021.

This increase in investments can be mainly attributed to the investments made by IBI in the national government Ijarah Sukuk. The government issued two domestic Ijarah Sukuk for Rs 75 billion during the period, the bulletin added.

IBI’s deposit base grew by 68 billion rupees during the period and stood at 3,457 billion rupees at the end of March 2021. IBI’s deposit market share in total deposits banks increased to 18.7 pc in 3TFY21, compared to 18.3 pc in the previous quarter of fiscal year 20. The share of Islamic banks and Islamic bank branches in all IBI deposits amounted to 58 , 9% and 41.1%, respectively, to 3QFY21.

The breakdown of deposits by category showed that savings deposits and current deposits increased by 44 billion rupees and 40 billion rupees respectively; while term deposits declined by 37 billion rupees during the period.

IBI’s pre-tax profit was recorded at Rs 21.3 billion in 3QFY21, compared to Rs 20.6 billion in the same period of fiscal year 20. Operating expenses on gross income of IBI were recorded at 51.5% at the end of March 2021 against 47.5% in the previous quarter

The SBP reported that IBI’s assets increased by 120 billion rupees during the quarter and were recorded at 4389 billion rupees, compared to 4269 billion rupees in the previous quarter. This growth in assets was mainly contributed by (net) investments which reflected quarterly growth of Rs84bn while IBI’s (net) funding, recorded an increase of Rs72bn during the period under review.

The market share of Islamic banking sector assets in total banking sector assets was recorded at 17% at the end of March 2021. The share of net funding and investments in total (net) assets of IBI amounted to 44.5% and 30.6%, respectively.

In terms of sector financing, the textile and power generation and transmission sectors were the leaders, with their individual share in IBI’s overall financing recorded at 14.8% and 13.8%, respectively.

An examination of the financing adapted to clients reveals that the corporate sector represented 69.7 pc of IBI’s overall financing, followed by the financing of raw materials and consumer finance with a share of 14.9 pc and 10, 5 pc, respectively. The share of SMEs and agricultural finance in overall IBI finance has remained low compared to overall banking sector averages.

The liquid assets / total assets and liquid assets / total deposits ratios were 27.8% and 35.3% respectively. IBI’s funding-to-deposit (net) ratio increased to 56.5% at the end of March 2021, from 55.5% in the previous quarter, mainly due to the increase in IBI’s funding portfolio.

Posted in Dawn, le 10 July 2021