www.thefinancialdaily.com  Jul banking spreads up by 16bps YoY Ahmed Siddique KARACHI: The State Bank of Pakistan (SBP) released lending and deposit rates of the banking system for the month of July 2010. Banking spreads increased by 16bps to 7.51 per cent compared to 7.35 per cent in July 2009. If we compare on month-on-month basis the spread was dipped by 9 bps where they were 7.60 per cent in June 2010. Cost of deposits increased by 5bps at 5.84 per cent while they were 5.79 per cent in previous month. However lending cost dipped by 4bps on monthly basis to 13.35 per cent. Though, implication of increase in discount rate by 50 bps on 30 July 2010 were not seen in July spread, we expect August spread would be 30-35 bps higher MoM at 7.85 per cent. We also expect that the full year average spreads of CY10 are likely to hover in the range of 7.6 per cent to 7.7 per cent as inflation has gradually picking up and 6-month KIBOR which is the benchmark for almost 80 per cent lending to private sector has progressively increasing would likely to keep interest rate steady in short term resulted into consolidation of lending rate while deposit rates to remain same mainly due to imposition of floor of 5 per cent on saving accounts.