September 23, 2020 (MLN): The Banking sector spread for August 2020 depressed by 12 basis points (bps) over the month which brings its latest value to 4.88% as compared to prior month's spread of 5%. Similarly, the spread has contracted by 102 bps as compared to the same period last year.

The decrease in banking spread was led by relatively higher decline in lending rates as 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) depressed by 22 bps to stand at 8.72%. Meanwhile, the deposit rate contracted by 10 bps over month, thus bringing the latest rate to 3.84%.

As per the report by Sherman Securities, banking spread has room for slight decline of 15-20bps, as delayed impact of policy rate cut on lending rates is largely incorporated.

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