KARACHI: The current equity market turmoil has raised concerns over its impact on various stakeholders, particularly the banking sector, which carries substantial exposure through a combination of direct investment, margin financing and CFS financing.“The banking sector is already going through a tough phase due to declining deposit growth and rising bad loans because of high interest rates and credit crunch. Our estimates suggest that banks have an exposure in the range of Rs100-150 billion in the stock market, which is 20-25 per cent of their equity base,” stated Farhan Rizvi, analyst at JS Research, in a report.
With the Karachi Stock Exchange index already down 24 per cent since the lifting of floor on Dec 15, “we think further erosion in the sector’s book value along with capital adequacy ratio (CAR). Moreover, default on margin financing and Continuous Funding System (CFS) exposures also remain significant risks for the sector.”
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