Hbl Report

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Data And Methodology

The data used in this research includes both primary and secondary data. The primary data has been taken from the quarterly statements of HBL (habib bank ltd Pakistan). Five years data from 2005-2009 a total of 20 observations have been taken.

Secondary data including inflation rate, discount rate, GDP and T-bill rate has been collected for five years from State Bank of Pakistan and Economic Survey of Pakistan.

The results have been computed through Linear Regression model using the following variables

Dependent Variable

Based on the data available from HBL’s financial statements, Interest spread of the bank has been calculated and taken as a dependent variable. Interest spread is calculated as the difference between interest paid on deposits and received on Loans.

Independent Variables

Market Determinants of Banking Sector Interest Rate Spreads

Bank/GDP ratio

Bank/GDP ratio is calculated as the total assets of commercial bank divided by current GDP. This ratio reflects the overall level of development of the bank.

Reserves to total deposits Ratio

The variable used is the ratio of reserves to deposits, and is calculated as the bank aggregate reserves divided by its total deposits.

Macroeconomic Determinants of Banking Sector Interest Rate Spreads

Average Inflation rate (3 months)

CPI Inflation rate data have been used to determine its affect on the interest spread of the bank. This variable is an indicator of the cost of doing business in an economy.

Average discount rate (3months)|
The second macro-policy indictor, the discount rate is defined as the cost faced by bank when borrowing from central bank.

Average Treasury Bill rate (3 months)

Treasury bill rate is also included as a variable. It is generally regarded as an indicator of the interest rate policy being pursued by the government, and a benchmark for the rates charged by commercial bank.
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