KARACHI: Credit off-take has gathered pace in the last quarter of the calendar year 2010, showing 4.9 percent growth from October 1 to December 17, as compared to a flat base in the first nine months of 2010. From October 1 to December 17 the quantum of the credit amounted to Rs3.4 trillion ($40 billion).
The push in the final quarter is a seasonal factor, with rising demand emanating from commodity based financing. Private sector off-take has been on the rise too, rising by Rs123 billion since October.
The final two week data which is yet to be released by the State Bank of Pakistan, may further add to the already relatively decent growth witnessed in the fourth quarter, said a report from JS Research. Seasonal pick up in the final quarter, on account of a rise in borrowing from the agricultural sector as well as renewed demand from the private sector has led to the recent surge in off-take.
Deposits have continued to rise, up 4.4 percent so far in the final quarter, owing to a growing Net Foreign Assets (NFA) base. Investments too remained an attractive avenue, with increased interest witnessed in both T-bills and equity markets, leading them to rise by 6 percent in the final quarter. This data set is encouraging for the sector and along with enhanced yields, will culminate into decent 4Q results.
Cumulative growth for the calendar year has gone up to 12.7 percent and the base widening to Rs 4.9 trillion ($57 billion). The increased growth is down to rising NFA, which is up 13 percent (Rs71.2 billion) in FY11 to date; while net domestic assets (NDA) too have grown by 5.5 percent (Rs289 billion) in the same period.
Investments too continue to generate increased interest, especially amid better yields, post the discount rate hikes and enhanced returns at the local equity markets. The six percent rise in 4Q investments has taken the calendar year growth to 17.3 percent, compared to an average growth of 27.8 percent in 2006-09. Moreover, the aggregate provisioning expense is up by Rs12.9 billion in the 4Q so far, compared to a rise of Rs11 billion and Rs10 billion in 3Q2010 and 2Q2010, respectively.
With the final two week data yet to be published, we could see this number creeping up further. The recent data for the sector has been encouraging, and with a sequential quarter on quarter rise in yields, analysts may expect earnings to remain strong. The sector has registered a return of 19 percent since October 1, 2010 compared to the broader market rise of 15.6 percent, and may see the strong performance continuing till the payout period.
Pakistan State Oil (PSO) is likely to receive Rs 35 billion from the Ministry of Finance to ease its financial woes arising from the circular debt issue. The payment is likely to be received in the coming few days. To recall, PSO receivables have escalated to Rs155 billion due to non-payments from the power sector.
