Pakistani banks listed at the Pakistan Stock Exchange (PSX) benchmark KSE-100 Index posted their highest-ever half-year profitability in the first six months of the calendar year 2025.
According to a report by Arif Habib Limited, released on Friday, banks listed on the KSE-100 index recorded a combined profit after tax (PAT) of Rs326 billion (USD 1.16 billion) in 1HCY25, up 19% year-on-year (YoY).
The strong performance carried through the second quarter, when profits climbed to Rs160 billion, a 23% surge YoY, “powered by balance sheet growth and diversified income
stream”.
“At the core, Net Interest Income (NII) remained the heavy lifter, reaching a staggering Rs1 trillion in 1HCY25 i.e. 22% YoY.
“In 2QCY25, NII alone clocked Rs510 billion, a solid 20% YoY leap, backed by expanding asset volumes. Adding another layer of strength, non-markup income rose to Rs255 billion in 1HCY25 (+7% YoY), while 2QCY25 delivered Rs132 billion (+9% YoY),” read the report.
Banking sector: deposits, advances post double-digit growth YoY in June
Despite inflationary pressures pushing operating expenses up by 18% clocking in at Rs553 billion, the sector maintained cost efficiency, with the cost-to-income ratio holding at 46%, just marginally higher than 45.4% in 1HCY24.
On the capital markets front, the banking sector has been a star performer, delivering a 70% return year-to-date in 2025, far outpacing the KSE-100’s 27% gain.
“The rally has been underpinned by record profitability in 1HCY25, resilient asset quality, and surprise dividend announcements that boosted investor confidence,” read the report.
The National Bank of Pakistan (NBP) led sectoral gains with a 148% stock price increase, followed by United Bank Limited (UBL) at 111% and Askari Bank (AKBL) at 105%, “each benefiting from strong earnings momentum and capital distribution”.
Deposits also touched historic highs, with 11 of the 13 listed banks achieving record levels. UBL posted the fastest growth at 32% YoY to Rs4.3 trillion, while HBL maintained the largest deposit base at Rs5.2 trillion.
Dividend surprises further buoyed investor sentiment. Bank of Punjab (BOP) announced its first-ever interim dividend of PKR 1/share, while AKBL announced a dividend of Rs2/share in 2QCY25, marking its first such payout since 2QCY14.
Profitability squeeze on Islamic banks
However, Islamic banks faced a profitability squeeze, with profitability declining 13% YoY to Rs57 billion in 1HCY25.
The Islamic banks were “hit by both the broader decline in interest rates and the regulatory change effective January, 2025,” read the report. In contrast, conventional banks, despite the rate cut environment, posted a robust 29% YoY growth in profits in 1HCY15.
The banking sector also remained a significant contributor to the national exchequer, paying Rs394 billion in taxes during the half year, a sharp 44% YoY jump due to a higher effective tax rate of 54% in 1HCY25 versus 48% in 1HCY24.
American Dollar Exchange Rate