Banking sector spread narrows to 5.01 per cent amid falling lending rates

ISLAMABAD: The banking sector’s spread, in October, saw a big drop falling by 379 basis points to 5.01 percentage points, down from 8.80 percentage points in September. According to Mettis Global, this decline occured as lending rates decreased while deposit rates edged up.

The return on bank deposits rose by 74 basis points, reaching 10.27 per cent in October compared to 9.54 per cent the previous month. However, when compared to last year, the average rate paid for new deposits dropped by 54 basis points from 10.82 per cent.

On the lending side, the average rate for all scheduled banks stood at 15.28 per cent, down 305 basis points from September and a significant drop of 459 basis points compared to October last year.

Despite this, the real deposit rate—after accounting for inflation—remained negative at -6.39 per cent, though this is an improvement of 238 basis points from last month and a 1,278 basis point rise from a year earlier. However, depositors continue to lose money when adjusted for inflation, which remains one of the highest in Asia.

The real lending rate also saw a decline, standing at -1.39 per cent, 141 basis points lower than in September. However, compared to last year, it has improved by 874 basis points.

Read next: Honda Atlas Q3 profit shrinks to Rs257 million due to rising costs