The Bank of Punjab (PSX: BOP) has indicated that it may explore a share buyback program if its stock continues to trade at undervalued levels, though management emphasized that the bank currently favors rewarding shareholders through dividends. The possibility of a hybrid strategy—balancing both dividends and repurchases—was also left open for future consideration.
This disclosure was made during the bank’s corporate briefing session on its half-yearly performance for calendar year 2025, where BOP reported its highest-ever half-yearly operating profit. The bank posted a profit after tax (PAT) of Rs6.8 billion, translating into earnings per share (EPS) of Rs2.1, up from Rs4.8 billion (EPS Rs1.5) in the same period last year. For the second quarter alone, earnings surged to Rs4.8 billion (EPS Rs1.45), representing a 55 percent year-on-year increase and a 175 percent rise compared to the previous quarter.
The strong earnings momentum was driven by a sharp rise in net interest income, which reached Rs35.8 billion in the first half of 2025. According to management, only a quarter of this growth stemmed from the removal of the Minimum Deposit Rate (MDR) on public sector deposits. The bulk of the increase came from improved current account balances, the introduction of innovative deposit products, and enhanced trade and cash management services.
Deposits grew 23 percent year-on-year to Rs1.95 trillion by June 2025. The bank expects this figure to cross Rs2 trillion by the end of the year, with an ambitious target of over Rs2.5 trillion within the next three years. Notably, the current account mix improved beyond expectations, reaching 24 percent in June against the earlier target of 22 percent, while average low-cost deposits rose by 40 percent.
On the asset side, gross advances stood at Rs777 billion, with nearly one-third allocated to small and medium enterprises (SMEs) and agriculture—sectors seen as crucial for sustainable growth. Importantly, 77 percent of these advances are covered under first-loss guarantee schemes, which significantly reduce potential credit risk. Despite recent flood-related disruptions, management noted that only 8 percent of the loan book is linked to affected regions. Overall, asset quality remains secure, with 93.5 percent of loans insured, only 6.5 percent unsecured, and just 0.4 percent exposed to provisioning risks.
The bank also highlighted its investment portfolio composition. Approximately 53–54 percent of its Pakistan Investment Bonds (PIBs) are floating rate with an average maturity of 2.5 years, while 17–18 percent are fixed rate with an average maturity of 2.7 years. Meanwhile, around 23–24 percent of funds are parked in treasury bills. The floating PIBs currently yield a spread of about 80 basis points, contributing to an overall investment portfolio return of nearly 12 percent.
Looking ahead, management is optimistic about sustained net interest income growth in the second half of 2025, supported by repricing of deposits and a continued focus on asset quality. They believe interest rates are nearing their lowest point, with only a further cut of 100 to 125 basis points likely by the first quarter of 2026.
Beyond financial performance, BOP reaffirmed its strategic shift towards Islamic banking. The bank has already submitted its comprehensive conversion plan to the Punjab government and is confident of completing the transition well ahead of the December 2027 deadline.
In a historic move, BOP announced its first-ever interim cash dividend since listing in 1991, offering Rs1 per share following regulatory approval. At present valuations, the stock trades at forward price-to-book multiples of 0.6x for 2025 and 2026, leaving management confident about its long-term value proposition.
As profitability strengthens and its balance sheet expands, the Bank of Punjab appears set to balance shareholder returns with growth, while positioning itself as a frontrunner in the country’s Islamic banking landscape.
Follow the PakBanker Whatsapp Channel for updated across Pakistan’s banking ecosystem.