KARACHI: The provisional banking spread has declined by 42bps on month-on-month basis during May 2022 and stood at 4.6 percent. This is the highest level of monthly decline in the spread during last 20 months.

Lending rates stood at 10.8 percent during May, up by 52bps on month-on-month basis. On the other hand, deposit rates increased by 94bps MoM to 6.2 percent during the month under review.

In addition, fresh lending rates stood at 12.9 percent during the month under review, up by 104bps MoM, while fresh deposit rates increased by 220bps MoM to 8.0 percent. Thus, fresh banking spread during February stood at 4.9 percent — down 117bps MoM.

On a cumulative basis, average banking spread posted slight improvement of 24bps on YoY during first five months of calendar year 2022.

“As per our estimates, banking spreads have started to shrink (due to early re-pricing of deposit rates), which is expected to continue in coming months before improving from fourth quarter of 2022 onwards,” Fayaz Hussain at Sherman Securities said.