KARACHI: The share of Pakistaninfo-icon-based Islamic banks in global Shariah-compliant banking assets stands at a meagre 1%, according to the State Bank of Pakistan (SBP) on Monday.

Islamic banks in Pakistan own assets worth Rs2.48 trillion ($19.93 billion) as of June 2018, which comes close to 1% of the global Islamic banks' assets of $2.05 trillion by the end of 2017, the SBP said.

The central bank, however, reported that Pakistan's Islamic banking industry had continued to expand its marketinfo-icon share in the overall banking industry with its asset base and deposits growing significantly in the last one year.

Total assets of Shariah-compliant banks in the country increased 21.9% to Rs2.48 trillion in the year ended June 30, 2018. With this, the market share of Islamic banking assets surged to 12.9% in the overall banking industry compared to 11.6% in June last year.

Similarly, deposits at Islamic banks grew 18.2% to Rs2.03 trillion, showing the market share of their deposits in the overall banking industry surged to 14.8% in June 2018 compared to 13.7% in June 2017.

The network of Islamic banking industry consisted of 21 Islamic banking institutions - five full-fledged Islamic banks and 16 conventional banks, having standalone Islamic banking branches by end-June 2018.

The network of Islamic banking industry increased by 96 branches. "This addition was mainly due to demerger of 90 branches of MCB Bank Limited and their merger into MCB Islamic Bank Limited," it said.

Branch network of the Islamic banking industry was recorded at 2,685 spread across 111 districts by the end of June 2018. The number of Islamic banking windows, operated by conventional banks having standalone Islamic banking branches, stood at 1,284.

Profitability

Profit before taxation of the Islamic banking industry stood at Rs15 billion for the quarter ended June 2018 compared to Rs12 billion in the same quarter last year.

Profitability ratios like return on assets and return on equity (before tax) were recorded at 1.3% and 20.9% respectively by the end of June 2018.

During the period under review, operating expenses-to-gross income ratio declined 3% and stood at 64.5% by end-June 2018, it said.

Investments

Net investments of the Islamic banking industry reflected an increase of 4.8% (Rs26 billion) during the period under review and were recorded at Rs555 billion by the end of June 2018 compared to Rs529 billion in the previous quarter.

Client-wise financing shows that the corporate sector accounted for a 74.5% share in overall financing of the Islamic banking industry, followed by consumer financing with a share of 10.5% by the end of June 2018.

The share of small and medium enterprises' (SMEs) financing and agriculture financing in overall financing of the Islamic banking industry remained low.

Asset quality

Asset quality indicators of the Islamic banking industry, including non-performing finances (NPFs)-to-financing (gross) and net NPFs-to-net financing were recorded at 2.7% and 0.4% respectively by end-June 2018.

"It is pertinent to mention here that both these ratios were better than those of the overall banking industry's averages," the SBP said.

Liquid assets-to-total assets and liquid assets-to-total deposit ratios were registered at 24.6% and 30% respectively by end-June 2018.

Financing-to-deposits ratio (net) of the Islamic banking industry was recorded at 65% by end-June 2018.

Capital base of the Islamic banking industry increased to Rs156 billion by end-June 2018 compared to Rs146 billion in the previous quarter.

Capital-to-total assets and capital minus net non-performing assets to total assets ratios of the Islamic banking industry were recorded at 6.3% and 6.1%, respectively.