May 04, 2020 (MLN): The Banking sector spread for March 2020 shrunk by 18 basis points (bps) over the month which brings its latest value to 5.19% as compared to prior month's spread of 5.37%. Similarly, the spread has narrowed down by 48 bps as compared to the same period last year.
JS Research noted “The sequential fall was led by trimmed lending rates as declining trend in KIBOR continued in Mar-2020 as well.”
According to the State Bank of Pakistan's monthly data released on Weighted Average Lending & Deposit Rates, the lending rate for all banks (inclusive of zero markup) shrunk by 27 bps as it stood at 12.1%. Meanwhile, the deposit rate decreased by 9 bps over month, thus bringing the latest rate to 6.91%.
“Going forward, the impact of 425bps decline in Policy Rate during Mar-Apr 2020 will be immediately reflected in lower deposit costs of the coming months, with a lag impact on lending rates; temporarily resulting in higher banking spreads for the short-term” the note from JS added.
