Karachi: Banks listed on the Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index recorded their highest-ever half-year profitability in the first six months of 2025, according to a report released by Arif Habib Limited on Friday.
The listed banks posted a combined profit after tax (PAT) of Rs326 billion (USD 1.16 billion) in 1HCY25, reflecting a 19% year-on-year (YoY) growth. The strong momentum carried into the second quarter as profits surged to Rs160 billion, up 23% YoY, driven by balance sheet expansion and diversified income streams.
At the core of the performance, Net Interest Income (NII) remained the main growth driver, reaching an unprecedented Rs1 trillion in 1HCY25, marking a 22% YoY increase. In 2QCY25 alone, NII hit Rs510 billion, up 20% YoY on the back of expanding asset volumes. Meanwhile, non-markup income also rose to Rs255 billion (+7% YoY) during the half year, with 2QCY25 contributing Rs132 billion (+9% YoY).
Deposits, Advances Hit Record Highs
The sector also posted double-digit growth in deposits and advances as of June 2025. United Bank Limited (UBL) led with the fastest deposit growth of 32% YoY to Rs4.3 trillion, while Habib Bank Limited (HBL) maintained the largest deposit base at Rs5.2 trillion. Overall, 11 of the 13 listed banks achieved record deposit levels.
Despite inflationary pressures pushing operating expenses up by 18% to Rs553 billion, the sector maintained cost efficiency, with the cost-to-income ratio at 46%, only slightly higher than the 45.4% in 1HCY24.
Banking Stocks Outperform KSE-100
On the capital markets front, banks significantly outperformed the benchmark KSE-100, delivering a 70% return year-to-date in 2025, compared to the index’s 27% gain. The rally was supported by record profitability, resilient asset quality, and surprise dividend announcements that boosted investor confidence.
National Bank of Pakistan (NBP) led stock market gains with a 148% rise in share price, followed by UBL (111%) and Askari Bank (AKBL) (105%), each benefiting from robust earnings momentum and capital distribution.
Dividend surprises further lifted sentiment, with Bank of Punjab (BOP) announcing its first-ever interim dividend of PKR 1/share, while AKBL declared Rs2/share, its first such payout since 2014.
Islamic Banks Under Pressure
In contrast, Islamic banks faced a profitability squeeze, with profits slipping 13% YoY to Rs57 billion in 1HCY25. The decline was attributed to lower interest rates and regulatory changes effective from January 2025. Conventional banks, however, continued to thrive, posting a strong 29% YoY growth in profits during the same period.
Contribution to National Exchequer
The banking sector remained a major contributor to government revenues, paying Rs394 billion in taxes in 1HCY25, a sharp 44% YoY increase, due to a higher effective tax rate of 54%, compared to 48% in 1HCY24.
Source: Business Recorder
