Banking sector deposits underwent a healthy 16.8% YoY increase in Jan-22 to close at PKR 19.9Trn. However, on a sequential basis, there was a decline to the tune of 4.9% (PKR 1.0Trn) as we saw the year-end phenomena playing out and sizable flows entering the banking system. For the third month running, advances growth surpassed deposit growth having shot up by 17.4% YoY to settle at PKR 10.0Trn whereas on a MoM basis the decline was recorded at 2.0%, according a report of BMA Capital.

Resultantly, ADR largely maintained last year’s level of around 50% against 48.4% witnessed in Dec-21. Investments continued to trend strong as largely expected given the attractive yields on offer. In Jan-22, total investments surged to PKR 14.4Trn, ↑26.3% YoY pulling ADR to 72.3% from 66.8% in the SPLY. Going forward, we expect robust double digit growth in deposits to continue while IDR levels are expected to remain in excess of 70% in the near term. However, we can expect lending growth to ease off as TERF related disbursements decline.