CHI - The spreads of the banking sector on outstanding loans for the calendar year 2010 declined by only 1 basis points (bps) to 7.46 per cent from 7.47 per cent in 2009. However, banking spreads had reported a surge of 26 bps to average at 7.61 per cent YoY during the month of December 2010.
According to the data released by the State Bank, average lending rates for the year stood at 13.39 per cent, compared to 13.98 per cent in 2009; while average deposit rates stood at 5.93 per cent, as against 6.51 per cent in 2009.
Although spreads in 2010 have remained flat, an uptick in month wise data has been witnessed each month since June 2010, as lending rates treaded upwards to adjust for rising KIBOR and discount rate, while deposit rates eased off, said a banking sector analyst at JS Global Research.
In December, lending rates were up 3bps YoY, while deposits rates were down 23bps to 5.91 per cent. On a MoM basis, spreads rose 7bps from 7.54 per cent in Nov 2010.
Increase in spreads, especially in the latter part of the year, is likely to aid net interest margins (NIM) of banks, especially the big 5. With industry advances and investments up 6.9 per cent and 9.7 per cent in 4Q, banks may post strong earnings in their final quarter, he added.