Banking sector spread plunges to 7.33pc in Nov

KARACHI - The spread of the banking sector fell by 30 basis points (bps) to 7.33 per cent during November 2009 from the level of 7.63 per cent recorded in the similar month of last year.
However, average spread for the period Jan-Nov 2009 still showed high growth and reached at 7.49 per cent as against 7.25 per cent during the same period of last calendar year.
The slowdown in the growth of spread is attributed to decline in the lending rates of the banking sector, which was caused by soft monetary policy stance of the central bank.
The State Bank of Pakistan (SBP) released banking spread numbers for the month of November 2009. According to SBP statistics, after a consecutive rise during last two months, banking spread once again dropped by 8bps in the month of November 2009.
The pre-policy impact of monetary easing was clearly evident on the spread numbers. Sectoral analysis of spread showed that during November 2009, lending rates dropped slightly by 9bps on monthly basis to 13.58 per cent while cost of deposits remained almost flat at 6.25 per cent versus 6.26 per cent, a month earlier. This mainly ensued from falling KIBOR rates ahead of Monetary Policy (MP) announcement as 6-month KIBOR settled at 12.4 per cent on end-November 2009 (post MP) from a 12.8-12.85 per cent in the initial week of the month.
Analysis further revealed that as domestic economy is passing through a declining interest rate scenario after a tight monetary stance, lending rates have also come down to 13.58 per cent inline with KIBOR after posting a peak level of 14.66 per cent in January 2009.