BankIslami Pakistan Limited is actively pivoting toward a future-proof business model as it moves past a demanding 2025. During a recent corporate briefing, the bank’s management detailed an ambitious roadmap characterized by a focus on low-cost deposit mobilization and the diversification of its financing sectors. Despite a temporary hit to profitability caused by a sharply lower interest rate environment, the bank has utilized the past year to implement structural improvements. These changes are intended to lay a solid foundation for sustainable earnings and higher efficiency as the country’s Islamic banking sector evolves in a shifting macroeconomic climate.
A primary component of the bank’s strategy is the continued expansion of its deposit base, which grew by 18 percent in 2025 to reach Rs660 billion. This performance aligns with a consistent five-year compound annual growth rate that management intends to maintain throughout 2026. The institution is placing a heavy emphasis on current and savings accounts, aiming to keep its CASA mix stable between 70 and 71 percent. Notably, current accounts now make up roughly 43.6 percent of total deposits, a significant increase from just 33 percent in 2020. This durable shift in the deposit profile allows the bank to manage its funding costs more effectively while navigating market volatility.
On the lending front, BankIslami is moving away from a concentration in corporate financing toward higher-yielding priority sectors. SME financing emerged as a massive growth driver in 2025, surging by 122 percent, while agricultural financing grew by 32 percent. Management expects these two segments to remain the primary engines of credit growth in the coming year. Additionally, the bank is preparing to give a larger push to housing finance, citing long-term potential in Pakistan’s underpenetrated mortgage market. While auto financing saw a slight decline due to subdued market conditions, the bank remains focused on diversifying its asset side to capture better margins in specialized sectors.
The financial landscape of 2025 was marked by a steep decline in the six-month KIBOR, which fell to 11.40 percent from over 18 percent the previous year. This drop placed significant pressure on the bank’s net spreads. However, the bank’s sukuk portfolio is well-protected against revaluation risks, as only about 4.5 percent of it carries fixed rates. Management pointed out that a future rise in interest rates could serve as a meaningful upside lever, with every 100-basis point increase potentially lifting the net spread by billions of rupees. This alignment with market movements ensures the bank remains resilient regardless of the interest rate cycle.
To support its long-term goals, BankIslami has invested heavily in human resources and infrastructure, adding over 1,100 employees and opening 97 new branches over the last two years. While these aggressive investments caused the cost-to-income ratio to rise to 70 percent, management views this as a necessary phase of the current investment cycle. The bank is now targeting a return to a 50 percent cost-to-income ratio as these investments mature and operational expenses normalize. A key part of this efficiency play is the bank’s digital ambition, which includes the aik Digital App and biometric One Touch banking, positioning the institution as a leader in the digital Islamic banking space.
As the bank enters 2026, it presents a leaner earnings profile but a much stronger internal structure. Asset quality has improved, with the infection ratio on the Islamic portfolio dropping to 5.34 percent and a comfortable coverage ratio of 114 percent providing a buffer against credit stress. Despite a decline in the capital adequacy ratio due to the settlement of a long-term facility, the bank remains well above regulatory requirements. By combining a deepening deposit franchise with a bold push into digital services and high-growth financing sectors, BankIslami is positioning itself for a robust recovery and sustained leadership in the local financial ecosystem.
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