Banking Sector Spread Records a 9bps MoM Decrease in November

In a recent report, the State Bank of Pakistan reveals a 9 basis points (bps) month-on-month decline in the banking sector spread for November 2023, settling at 7.63%, compared to 7.72% in October 2023. This shift is indicative of noteworthy changes in the lending and deposit rates within the country's banking sector.

According to the weighted average lending and deposit rates released by the State Bank of Pakistan, there is a contrasting 1.3% year-on-year increase in the banking sector spread, up from 6.33% in November 2022.

On a monthly basis, lending rates across all banks witnessed a 7bps decrease, standing at 19.27% in November 2023. However, on a yearly scale, there is a notable 5.15% increase.

Simultaneously, deposit rates experienced a 3bps uptick, reaching 11.65%, reflecting a 3.85% rise compared to the same period last year.

Fresh Lending and Deposit Rates:

Breaking down further, fresh lending rates surged to 21.21% in the month under review, marking a substantial 1.28% monthly increase and a significant 5.29% annual growth.

In contrast, fresh deposit rates decreased by 7bps month-on-month, settling at 10.77%. Despite this, there is a 3.17% year-on-year increase in fresh deposit rates when compared to November 2022.

As a consequence of these dynamics, the banking sector spread on fresh deposits witnessed a notable 1.35% month-on-month increase, reaching 10.44% in November. This shift reflects the complex interplay between lending and deposit rates, which has broader implications for the economic landscape of Pakistan.