A sharp decline in domestic interest rates has significantly impacted the earnings of Standard Chartered Bank (Pakistan) Ltd in the first half of 2025. The bank’s net interest income fell 33% year-on-year to Rs32.5 billion as mark-up revenue plunged 41%, reflecting the effects of monetary easing on the banking sector’s core income.
While the bank managed to grow non-funded income by 21% to Rs11.9 billion—driven by higher fee income, gains on securities, and derivative transactions—the increase could not fully offset the steep decline in margins. Total income for the period contracted by 24% to Rs44.4 billion, highlighting the sector-wide strain caused by rapid rate adjustments.
Profitability indicators also came under pressure. Profit before tax slid 33% to Rs32.9 billion, while profit after tax was down 23% to Rs16.6 billion compared to the same period last year. Earnings per share fell to around Rs4.3 from Rs5.6, signaling the revenue and margin compression banks are facing as lending yields adjust downward.
Despite this earnings dip, Standard Chartered Pakistan maintained its shareholder return policy by announcing an interim cash dividend of Rs3.5 per share, reflecting its continued focus on consistent payouts even during a challenging macroeconomic cycle.
On the expense side, cost pressures remained manageable. Operating expenses rose 17% year-on-year but stayed well controlled relative to industry peers. The cost-to-income ratio reached 27.2%, still ranking among the most efficient in the sector. Return on equity, however, eased to 28.8% from a robust 43.8% in the corresponding period of 2024, illustrating how the decline in rates has directly impacted profitability.
Bank management indicated in its briefing that the bulk of the earnings impact from rate cuts was concentrated in the second quarter of the year. With further large reductions in policy rates not anticipated in the near term, margins may stabilize going forward, allowing the bank to rebuild some of its lost net interest income over the coming quarters.
The broader banking sector has been navigating similar pressures as monetary easing continues to reshape balance sheet dynamics. Lower interest income typically compresses spreads, especially for banks heavily reliant on asset repricing, while competition for deposit growth remains steady.
Standard Chartered Pakistan’s ability to contain costs and boost non-funded income streams offers some resilience, but sustaining profitability in a lower-rate environment will likely depend on a stronger focus on fee-based services, transaction banking, and digital channels.
The bank’s performance is also being closely watched as a bellwether for foreign-owned institutions operating in Pakistan’s evolving banking landscape. Its results could influence strategic positioning for the rest of the year as financial institutions adapt to a changing interest rate cycle and shifting liquidity trends.
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