3 percent 42 percent and 55 percent at end september

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reached to 5.3 percent, 4.2 percent and 5.5 percent at end September 2009. Branch network of six full-fledged Islamic banks and 13 conventional banks (with dedicated Islamic banking branches—IBBs) increased to 551 branches in September 2009 (see Table 1 ). 1 The financing portfolio has declined by 4.7 percent QoQ (see Table 2 ). This is in contrast to an increase in financing in the previous quarter. However, during quarter Jan-Mar 2009 there was a decline as well. Interestingly, the decline in financing in current quarter and quarter Jan-Mar 2009 is almost the same—in both these quarters financing seems to have shifted towards investment. More specifically, the current quarter decline in financing is Rs 6.6 billion while investment has increased by Rs 11.2 billion—implying that gain in investment has more than compensated for the fall in financing. Nonetheless, investment has shown a consistent rise in the previous few quarters, while the trend in financing has been 1 The sum figures, shares, and percentage in tables may not match because of separate rounding off. Table 2: Assets classifications Rupees in billion Jun 09 Sep 09 QoQ % Change Cash and balances with treasury banks 25.1 25.7 2.7 Balances with other banks 33.9 29.5 -12.8 Due from financial institutions 30.7 37.2 21.4 Net Investments 53.5 64.7 20.8 Net Financing 140.3 133.7 -4.7 Operating fixed assets 11.7 11.5 -1.6 Deferred tax assets 1 1.2 20.6 Other assets 16.8 19.7 16.7 Total Assets 313 323.3 3.3 Industry Progress and Market Share
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July-September 2009 6 volatile—increasing in one quarter and declining in the other. This behavior might be depicting seasonal fluctuations in financing and/or a greater reliance of banks on investments in wake of relatively uncertain economic and business environment. The financing mix has shown a decline of around 13 percent QoQ in the Murabaha portfolio (see Table 3 ) while there is an almost matching increase (in percentage terms) in Ijarah financing. This is an opposite trend compared to the previous quarter, where there was a rise in Murabaha and a corresponding decline in Ijarah. The increase in Ijarah financing may reflect resurgence in consumer market while the decline in Murabaha is probably a seasonal decline. Nevertheless, a decline in Murabaha is a welcome sign as this may reflect a move towards more diversification. However, the conception of diversification does not hold as there is a decline in financing through almost all other modes except for Istisna. Still, there is no financing through Qarz/Qarz-e-Hasna. Alarmingly, the non-performing financing (NPF) has further increased by 23.3 percent on top of an increase of 15.4 percent during the preceding quarter. Though, banks have increased provisioning by almost 25 percent, the net non-performing financing has still increased by an upsetting 22 percent (see Table 3 ). This high increase in non-performing
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3 percent 42 percent and 55 percent at end September 2009...

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