Banks listed on the Pakistan Stock Exchange’s benchmark KSE-100 Index have posted their strongest ever half-year performance, marking a significant milestone for the country’s financial sector. According to a report issued by Arif Habib Limited, KSE-100 banks collectively recorded a profit after tax of Rs326 billion, equivalent to USD 1.16 billion, in the first half of calendar year 2025. This represents a 19% year-on-year increase in profitability, underscoring the resilience of the sector amid a challenging economic landscape.
The momentum carried into the second quarter of 2025, where profits surged to Rs160 billion, up 23% year-on-year. Analysts attributed this performance to expanding balance sheets, a diversified income stream, and improved operational efficiency. Net Interest Income (NII) remained the key driver of growth, climbing to Rs1 trillion in the first half of the year, up 22% year-on-year. In the second quarter alone, NII reached Rs510 billion, reflecting a solid 20% increase on the back of growing asset volumes.
Non-markup income also contributed positively, rising 7% year-on-year to Rs255 billion in 1HCY25, with the second quarter accounting for Rs132 billion, a 9% improvement compared to the same period last year. While operating expenses increased 18% to Rs553 billion due to inflationary pressures, banks managed to preserve cost efficiency with the cost-to-income ratio standing at 46%, only marginally higher than the 45.4% recorded in the corresponding period of 2024.
The sector’s strong fundamentals translated into remarkable gains in the capital markets. Banking stocks have delivered an impressive 70% return year-to-date in 2025, significantly outperforming the KSE-100 Index, which advanced 27% in the same period. Investor confidence was bolstered by record-breaking profitability, resilient asset quality, and surprise dividend announcements.
Among individual performers, the National Bank of Pakistan led the rally with a 148% rise in its stock price, followed closely by United Bank Limited with 111% and Askari Bank at 105%. These banks benefitted from robust earnings momentum and attractive dividend payouts. In terms of deposits, 11 of the 13 listed banks achieved historic highs. UBL posted the fastest growth of 32% year-on-year, reaching Rs4.3 trillion, while HBL continued to hold the largest deposit base at Rs5.2 trillion.
Dividend declarations provided further impetus to investor sentiment. The Bank of Punjab announced its first-ever interim dividend of Rs1 per share, while Askari Bank declared a Rs2 per share payout in the second quarter of 2025, its first interim dividend since 2014.
However, the performance was not uniform across the sector. Islamic banks reported a 13% decline in profitability, totaling Rs57 billion in the first half of the year. The segment was adversely impacted by lower interest rates and regulatory changes implemented at the beginning of 2025. By contrast, conventional banks recorded a 29% year-on-year increase in profits over the same period.
The sector also remained a major contributor to public finances, paying Rs394 billion in taxes during the half year, reflecting a sharp 44% year-on-year increase. This surge was largely due to a higher effective tax rate of 54%, compared to 48% in the previous year.
Overall, the banking sector’s record-setting performance in 1HCY25 highlights its ability to adapt to economic headwinds while delivering exceptional returns for shareholders and sustaining its role as a critical pillar of Pakistan’s economy.
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