Islamabad, May 1, 2025: In the first quarter of 2025 (1Q2025), Pakistan’s publicly listed banks witnessed a 14% year-over-year (YoY) rise in profitability, reaching Rs173 billion, as per Topline Securities.
The sector’s net interest income (NII) surged by 23% YoY, amounting to Rs536 billion, driven by strong growth volumes, favorable repricing, and an increased return on repo borrowings.
Even with declining interest rates, NII experienced a 2% quarter-on-quarter (QoQ) uptick.
Interest income across the sector dropped by 19% YoY and 13% QoQ to Rs1.4 trillion.
On the other hand, interest expenses saw a 32% YoY decrease and a 20% QoQ drop, standing at Rs0.9 trillion.
Non-interest income posted a 6% YoY increase but fell 28% QoQ to Rs133 billion, mainly due to lower capital gains and reduced fee & commission earnings.
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The sector’s non-interest expenses increased by 19% YoY, reaching Rs293 billion in 1Q2025, although it declined by 19% QoQ.
The rise was primarily linked to inflationary pressures and branch expansions, while the QoQ drop was attributed to the absence of one-off pension expenses from National Bank of Pakistan (NBP).
The banking sector’s cost-to-income ratio remained steady at 44% in 1Q2025, in line with 1Q2024, but much lower than 51% in 4Q2024.
Provisioning charges declined by 36% YoY to Rs6 billion, with a significant 83% QoQ drop, thanks to improved asset quality and the application of IFRS-9.
The effective tax rate for the first quarter of 2025 stood at 53%, up from 50% in 1Q2024 but lower than 56% in 4Q2024.
The increase was largely due to the government removing the ADR-related tax and raising the tax rate for 2025 from 49% to 53%.
In terms of profitability, United Bank (UBL) led the sector with earnings of Rs36.1 billion in 1Q2025, followed by Meezan Bank (MEBL) at Rs22.4 billion, National Bank (NBP) at Rs22.1 billion, Habib Bank (HBL) at Rs16.6 billion, and MCB Bank (MCB) at Rs14.7 billion. Conversely, Bank Makramah (BML) posted a loss of Rs0.9 billion.
Regarding NII growth, UBL posted the highest YoY increase at 200%, followed by NBP at 139%, Bank of Punjab (BOP) at 75%, Askari Bank (AKBL) at 70%, and Bank of Khyber (BOK) at 45%.
Despite a challenging economic backdrop, most banks continued their dividend payouts, and this trend is expected to persist due to robust sector profitability.
Topline Securities maintains a “market weight” recommendation for the banking sector, with Meezan Bank (MEBL) and Habib Bank (HBL) being their top picks.
