ID :
190499
Wed, 06/22/2011 - 16:41
Auther :
Shortlink :
http://m.oananews.org//node/190499
The shortlink copeid
AKD Quotidian about - Banks: Status quo on Credit flows
With another fiscal year almost out, SBP data indicates that banks have continued to focus on tending to the government at the expense of private sector credit.
According to AKD Securities, continued blockading of the private sector has negative implications for the tong-term health of the economy which is already in a sluggish growth phase. That said, credit to selected blue- eyed sectors has depicted double-digit growth. These sectors include Food, Utilities and Textiles where credit flow affirms the undercurrents of 1) strong rural incomes, 2) a severe energy deficit/circular debt and 3) robust textile exports (high cotton prices). In this regard, IOMFYII LSM data indicates that while textile production is up a contained O.6%YoY, food production has surged by 1O.2%YoY. Going forward, even as some sovereign-backed loans have come under distress of late, AKD Securities believes banks are unlikely to materially alter their asset mix in the near to medium term. As a result, any credit flow to the private sector is likely to remain highly selective, as was the case in FY11.
Focused lending: Scheduled banks' outstanding credit to the government stood at FkR1.65tn on May 30'11, up 43%Y0Y and 12%QTD. Crowding out has continued where share of private sector credit in total credit has contracted to 64% (peak of 89% in Sep'08). In this regard, credit to the private sector was up just 6%YoY to PkR2.93tn at May'11 end where growth has failed to breach double-digits since Dec'08. However, credit flow to the Food, Utilities and Textiles sectors - up 27%Y0Y, 17%YoY and 11%YoY, respectively - has been strong. Unsurprisingly, 1OMFY11 LSM data indicates growth in production of the Food and Textile segments. Food production, in particular, is up 10.2%YoYvs. overall LSM growth of 1.7%YoY.
Personal loans on the comeback: Consumer financing (including loans to banks' own employees) was down 7%YoY/1%QTD to FkR3Olbn on May 30'll. Accordingly, share of consumer financing in private sector credit has contracted to 10.3% vs. peak of 18.3% in Sep'06. That said, while attrition continues in credit cards, mortgages and auto financing, there are emergent signs that banks are refocusing on personal loans. Outstanding credit in the latter is up an encouraging 7%CYTD to FkR96.4bn. Despite recent signs of a turnaround of sorts, AKD Securities believes a sustainable revival in consumer financing will only occur in a substantially lower interest rate environment.
According to AKD Securities, continued blockading of the private sector has negative implications for the tong-term health of the economy which is already in a sluggish growth phase. That said, credit to selected blue- eyed sectors has depicted double-digit growth. These sectors include Food, Utilities and Textiles where credit flow affirms the undercurrents of 1) strong rural incomes, 2) a severe energy deficit/circular debt and 3) robust textile exports (high cotton prices). In this regard, IOMFYII LSM data indicates that while textile production is up a contained O.6%YoY, food production has surged by 1O.2%YoY. Going forward, even as some sovereign-backed loans have come under distress of late, AKD Securities believes banks are unlikely to materially alter their asset mix in the near to medium term. As a result, any credit flow to the private sector is likely to remain highly selective, as was the case in FY11.
Focused lending: Scheduled banks' outstanding credit to the government stood at FkR1.65tn on May 30'11, up 43%Y0Y and 12%QTD. Crowding out has continued where share of private sector credit in total credit has contracted to 64% (peak of 89% in Sep'08). In this regard, credit to the private sector was up just 6%YoY to PkR2.93tn at May'11 end where growth has failed to breach double-digits since Dec'08. However, credit flow to the Food, Utilities and Textiles sectors - up 27%Y0Y, 17%YoY and 11%YoY, respectively - has been strong. Unsurprisingly, 1OMFY11 LSM data indicates growth in production of the Food and Textile segments. Food production, in particular, is up 10.2%YoYvs. overall LSM growth of 1.7%YoY.
Personal loans on the comeback: Consumer financing (including loans to banks' own employees) was down 7%YoY/1%QTD to FkR3Olbn on May 30'll. Accordingly, share of consumer financing in private sector credit has contracted to 10.3% vs. peak of 18.3% in Sep'06. That said, while attrition continues in credit cards, mortgages and auto financing, there are emergent signs that banks are refocusing on personal loans. Outstanding credit in the latter is up an encouraging 7%CYTD to FkR96.4bn. Despite recent signs of a turnaround of sorts, AKD Securities believes a sustainable revival in consumer financing will only occur in a substantially lower interest rate environment.
