KARACHI, March 28: For the first time the profit of the Islamic banking industry crossed Rs10 billion-mark while the assets of the industry rose to constitute 7.8 per cent of the overall banking in the calendar year 2011.

The State Bank in its Islamic Banking Bulletin issued on Wednesday concluded that profits of the Islamic banks were rising significantly.

According to the report the asset base of the industry reached Rs641 billion indicating 13 per cent quarterly growth by end December 2011 while the year-on-year growth was 34 per cent.

Growth in assets is mainly contributed by financing and investment that together grew by15 per cent during the last quarter while the year-on-year growth was 40 per cent.

Deposits reached to Rs521 billion depicting a quarterly growth of 12.5 per cent andyearly growth of 34 per cent.

The report said the expansion of the Islamic banking industry was complemented with rising trend of profitability that had reached Rs10.6 billion by end Dec 2011.

With the 886 branches the Islamic Banking Institutions (IBIs) completed 94 per cent of approved expansion plan during calendar 2011 showing an increase of 45 branches during the last quarter of the year; full fledged Islamic banks (IBs) constitute 66 per cent while conventional banks having Islamic windows (IBDs) hold 34 per cent of overall network of the industry.

However, no change in terms of regional allocation of branches was observed; 78 per cent concentration of branches remains in Punjab and Sindh while among cities 65 per cent of the network is concentrated in 7 big cities (Karachi, Lahore, Faisalabad,Peshawar, Islamabad, Quetta and Rawalpindi), said the bulletin.

The report said the financing of IBIs jumped to Rs212 billion by the quarter ending December 31, 2011 depicting a quarterly growth rate of 13 per cent compared to retrenchment of almost 6 per centin the precedingguarter.

Client type wise financing of IBIs showed heavy concentration of financing portfolio in corporate sector with a share of 73 per cent followed by consumer financing (14 per cent), SME (5.2 per cent) and commodity financing (5.9 per cent); all other categories constitute negligible share said the report.

Islamic financing in agriculture sector though started showing slight improvement; however, its share is still negligible at 0.1 per cent. The investment pattern of the industry showed the components of investment that indicate a considerable rise in share of federal government securities from 35 per cent (Rs25.6 billion) in calendar 2009 to 65 per cent share (Rs179 billion ) by end of calendar 2011.

The bulletin report said the overall asset quality of IBIs is significantly better than the banking industry as a whole with NPF (nonperforming financing) ratio of IBIs being less than half of that of the banking system.

`Rising trend of profitability also translated into continuous improvement in return on assets (ROA) and return on equity (ROE).

During 2011, IBIs achieved ROA of 2 per cent which is twice as large as of the overall banking industry average,` said the report.