According to the weekly statement of position available on the SBP website, in FY10 scheduled banks have recorded healthy deposit growth of 15%YoY vs. 8%YoY growth in FY09. Risk aversion remains in vogue as total investments are up 35%YoY against loan growth of just 5%YoY. Sequential data also suggests scheduled banks (domestic operations only) have booked relatively low aggregate provisions of ~PkR11bn in 2QCY10. While we caution that this figure may actually tag in higher (given propensity of last minute additions to provisions), more optimistic investors may take this as a signal for potential positive earnings surprises in 1HCY10 results. From an investment perspective, while we believe investors will continue to pay a premium for quality (MCB), banks with troughed valuations (UBL, BAFL) may also merit renewed investor attention.
