Pak banking sector’s earning to remain flat

With earnings rising by 24 per cent in the Q1 of Pakistan, the banking sector experts view a similar trend is likely to prevail for the remaining part of the year.High interest rate environment is likely to keep spreads steady at current levels of 7.5 per cent. Further, many of the banks continue to work on generating a higher fee income via increased share of export and remittance business, with large banks streamlining international operations for this purpose.Although NPLs have been on the rise since 2H2010, managements remain of the view the dampening provisioning affect on the earnings is likely to decline over the next 12 months due to already high loan coverage.With average loan coverage of the big-5 banks at 74 per cent (ABL highest at 81 per cent, NBP lowest at 62 per cent) a slowdown in new accretions is likely to provide significant boost to earnings.Banks have been utilising bulk of their deposits collected over the past 18-24 month in treasury securities as the government continues to raise funds at relatively attractively yields.More so, this continues to be a suitable option for the banks given their stringent risk policy structure post increasing NPLs. From / Gulf today