The asset-base of the Islamic banks increased by 13.3 per cent in Oct-Dec 2009 compared to 7 per cent growth in total assets, posted by conventional banking system during the same period under review.
According to the SBP latest report, Islamic banking operations remain profitable and steady in Dec-09 quarter. Growth in assets of Islamic banking continued to surpass the growth of assets in conventional banking by expanding the share of Islamic Banking Institutions (IBIs) in the industry as a whole.
Report stated despite decline in the rate of infected portfolio during Dec-09, increasing Non-Performing Finance (NPFs) remains the key challenge facing IBIs since the first quarter of CY09.
The NPFs to financing ratio decreased by 20 bps to 6.3 per cent amid healthy growth in financing. Category-wise analysis shows continuous increase in NPFs in loss category which now constitutes almost half of the NPFs.
However, increase in NPFs has resulted in marginal change in provision largely due to enhancement of FSV benefit on classified loans. Resultantly, net NPFs to financing ratio increased and provision coverage ratio declined. Increasing net NPFs also deteriorated the capital impairment ratio by 1.5 percentage points during Oct-Dec 2009. Sector wise analysis depicts that textile, others and individuals have the major share in financing. However, infection ratio is quite high for the sectors of automobile & transportation equipment and textile. As per the report revelations, the balance sheet composition of Islamic banks remains stable during the quarter.
Nevertheless, in line with the historical quarterly trend, most components saw improvement during Dec-09. On the asset side, significant increase took place in financing and investments.
source : nation