Listed banks have shown a strong profit growth in the first half of the current year, but growth in credit off-take is substantially low. Combined profits of listed banks which cover over 90 per cent of the banking sector, reached Rs49.7 billion. This was a 42 per cent growth in the profit of banks.

However, other analysts of the banking sector said that technically the profit was 22 per cent instead of 42 per cent and the reason was inclusion of Habib Bank’s ‘one-time profit’ of Rs10.5 billion.

Banking in the country remained an attractive business for the last five years and banks kept their profits high.

The 42 per cent profit growth was higher than 33 per cent of the previous half year.

Banks have been under sever criticism regarding high banking spread, and the State Bank also made efforts to bring down the banking spread to pass on profits partially to depositors, but at the end banks kept profiteering without passing on benefit to depositors.

The five-month average banking spread was 7.39 per cent, showing that banks were still keeping most of the profits and depositors were getting negative return in the wake of high inflation, like eight per cent.

The other significant aspect of the banking was the poor growth of advances reflecting the declining capacity of the economy to absorb liquidity as well as lower economic activity.

Net interest income of the listed banks was Rs88.5 billion, a growth of 20 per cent. The previous half year income was Rs73.3bn.

“The lower net interest income growth was because of high base effect but the low growth of advances was also a major factor,” said Mohammad Imran, head of research at the First Capital Equities.

Advances of banks grew at the rate of three per cent in six months despite a very high liquidity presence in the banking system.

However, lower growth of advances was in accordance with State Bank’s tight monetary policy which has been struggling to bring the high inflation under control.

Banks have also shown skills while their earning of non-interest income dominated in overall profit growth of the sector.

“Growth in earnings was mainly driven by non-interest income which went up by 32pc to Rs31.2bn,” said Atif Malik, a researcher at the JS Research.

HBL’s Rs10.5bn one-time earning is not included in non-interest income, and if it is included, the non-interest income would reach Rs42 billion.

Banks’ fee income, commission and brokerage income also depicted a healthy growth of 27pc to Rs16.8bn.

Good growth in non-interest income of the banking sector was primarily due to increase in fee income and capital gains booked by banks in first half of the current year.

In this period, the fee income, having 48pc share in total non-interest income, grew by 26pc to Rs15bn while capital gains booked stood at Rs4.3bn, up 74pc. Dividend income, on the other hand, went up by 19pc as it maintained its growth trend