· Banking sector spread for Feb’22 stood at 4.61% – the highest in 16 months as interest rate hikes in the last quarter of the previous year began to affect loans portfolio. More interestingly, the spread on the fresh portfolio stood at 5.25% – the highest since Mar’20.

· Loan book buildup is undergoing visible change where RWA—Credit Risk of AKD Private Banking universe as a percentage of total assets stands at 30.2% in CY21, slightly higher than 29.8% in CY20. BAFL holds the largest exposure to riskier segments relative to its asset size. At the same time, HBL recorded the largest accretion in exposure to these segments (30.8% of total assets in CY21 vs 27.1% in the same period last year).

· The banking industry has performed in line with KSE-100—indicative of risk-averse behaviour of investors taking precedence over fundamentals of the sector, i.e. stronger dividend payouts and exposure to interest rate cycle.

· We believe the value will be unlocked in the sector where slower sales prospects for the manufacturing industry and macroeconomic uncertainty elicits a general shift in investor preference from growth stocks to value.

Courtesy – AKD Research