Seasonal flows leading credit offtake

Following a 6%YoY contraction in the stock of private sector loans in 9MCY09, latest SBP data indicates that the banking sector has extended loans of PkR181bn to the private sector in 4QCY09. Within the manufacturing sector, fresh credit disbursement has mainly occurred in textiles (particularly spinners). Credit has also been concentrated towards utility companies, exporters and retailers. On the flipside, consumer financing (particularly auto loans) has continued to be a laggard. Improving credit flows towards the private sector, albeit largely seasonal, indicate growing confidence on the part of lenders, in our view. At current levels, our top banking sector picks are NBP, MCB and ABL. We prefer NML in the textile sector while INDU (product mix less dependent on financing) is our top auto sector pick.