- The trend to continue amid sector’s healthy profitability and sufficient CAR buffer: analysts
Commercial banks in Pakistan continued to earn windfall profits, being the only sector with steady, low-risk earnings driven largely by government borrowing. According to a report by Topline Securities, listed banks recorded a combined profit of PKR170 billion in 3Q2025, reflecting an increase of 8%YoY and 2%QoQ.
The banking sector’s assets have been expanding faster than any other industry in the country, yet lending to the private sector has dropped to its lowest level. Nearly four months into the current fiscal year, net private-sector credit off-take remains negligible.
Banking experts attribute this stagnation to two key factors: 1) banks’ preference for investing in high-yield government securities, which offer assured returns, and 2) private sector’s reluctance to borrow amid elevated interest rates and uncertain economic policies that continue to restrain growth.
The sector’s net interest income (NII) improved by 6%YoY but remained largely flat QoQ. The YoY rise was driven mainly by the United Bank (UBL), its NII surged 78% to PKR92 billion, followed by the National Bank of Pakistan (NBP) with 74% growth to PKR61 billion, and the Bank of Punjab (BOP) with a 61% increase to PKR23 billion.
Excluding these three banks, the overall NII of the sector declined 10%YoY. On a QoQ basis, most banks saw little change as gains in a few institutions were offset by declines in others. Some banks achieved modest QoQ growth due to higher business volumes and a favourable shift in deposit mix towards current accounts.
Non-interest income rose 13%YoY and 1%QoQ to PKR146 billion in 3Q2025, supported by capital gains, fee income and stronger foreign-exchange revenues. Non-interest expenses, however, climbed 19%YoY and 5%QoQ to PKR329 billion, largely due to higher remittance-related costs. Consequently, the sector’s cost-to-income ratio rose to 47.9% in 3Q2025 from 45.9% in the previous quarter and 43.3% a year earlier.
The Net Interest Income (NII) on YoY basis improved 6% and remained flattish on QoQ basis. The improvement on YoY basis (in absolute terms) was led by United Bank (UBL) registering NII growth of 78%YoY, from PKR40 billion to PKR92 billion followed by National Bank (NBP) NII growth of 74%YoY, from PKR26 billion to PKR61 billion and Bank of Punjab (BOP) NII growth of 61%, from PKR9 billion to PKR23 billion. Excluding UBL, NBP, and BOP, NII of the sector has declined by 10%YoY.
On QoQ basis, NII remained largely flattish as growth in few banks was offset by decline in other banks. Askari Bank (AKBL) posted growth of 11% QoQ, BOP 9% QoQ and MCB bank (MCB) 3% QoQ. While NII of Bank Islami (BIPL) fell 16% QoQ, Habib Metropolitan Bank (HMB) 9% and Meezan Bank (MEBL) 2%.
Sector recorded a provisioning reversal of PKR3.1 billion in 3Q2025 as against a charge of PKR26.9 billion in 3Q2024 and reversal of PKR8.0 billion in 2Q2025. The banks have recorded reversals considering no major risk to their loan book after decline in interest rates and as they had booked subjective provisions previously.
Effective tax rate for 3Q2025 was reported at 53%, as compared to 56% in 2Q2025 and 53% in 3Q2024. To recall, at the end of 2024, the government removed the ADR-related tax while increasing the overall tax rate from 49% (including super tax) to 53% (including super tax) for calendar year 2025.
United Bank (UBL) led the sector with the highest earnings of PKR35.4 billion in 2Q2025, followed by Meezan Bank (MEBL) at PKR23.4 billion, National Bank (NBP) at PKR23.3 billion, HBL at PKR16.9 billion, and MCB Bank (MCB) at PKR15.2 billion.
In 3Q2025, most banks maintained their dividend payouts, but few banks skipped dividend like Bank of Punjab, and Bank of Khyber. Moving forward, the brokerage house expects this trend to continue amid the sector’s healthy profitability and sufficient CAR buffer.