BankIslami Pakistan Limited (PSX: BIPL) has reported a sharp decline in profitability for the first half of fiscal year 2025, reflecting mounting cost pressures and weaker income streams. According to the bank’s latest financial disclosures for the period ending June 30, 2025, profit after tax fell by 37.34 percent to Rs4.41 billion compared to Rs7.04 billion in the same period of the previous year.
Earnings per share followed the downward trajectory, slipping to Rs3.98 from Rs6.35, marking a year-on-year decline of 37.35 percent. Despite the significant drop in bottom-line earnings, the bank announced an interim cash dividend of Rs1.5 per share, representing a payout of 15 percent for its shareholders.
The contraction in profitability was largely driven by higher operating expenses and a decline in total income. During the review period, total income fell by 4.90 percent to Rs23.42 billion from Rs24.62 billion a year earlier. At the same time, operating expenses surged 47.15 percent, climbing to Rs15.01 billion compared to Rs10.20 billion in the corresponding half of 2024. This jump in costs eroded much of the bank’s income advantage, compressing margins.
Profit before taxation stood at Rs8.96 billion, showing a 34.80 percent drop against Rs13.74 billion in the first half of last year. Net profit/return declined 16.02 percent to Rs18.52 billion, down from Rs22.06 billion a year earlier, underlining the challenges faced in core banking operations.
However, the bank did manage to post some positive indicators within its income streams. Fee and commission income registered an impressive 63.60 percent growth, reaching Rs1.78 billion. Dividend income also advanced by 77.74 percent to Rs111.15 million. Gains on securities surged over fivefold, climbing 533.49 percent to Rs2.39 billion, which contributed significantly to a 90.58 percent increase in total other income that reached Rs4.90 billion.
Not all areas showed improvement. Foreign exchange income dropped sharply by 82.48 percent, down to Rs246.61 million from Rs1.40 billion a year earlier. Meanwhile, income from Shariah-compliant forward FX contracts rebounded positively, registering Rs287.59 million compared to a loss of Rs445.88 million during the same period last year.
The bank’s expense structure remains a key concern. Total other expenses jumped 46.72 percent to Rs15.38 billion, reflecting rising operational and administrative costs. Even with a reduction in workers’ welfare fund expenses and taxation—down 35.06 percent and 32.13 percent respectively—the overall cost base weighed heavily on earnings.
The consolidated financials highlight that while certain non-core income areas offered some relief, they were insufficient to offset the steep rise in expenditures and the erosion in core returns. With profit before credit loss allowance dropping 43.17 percent to Rs8.04 billion, the overall profitability profile remained under strain.
Looking ahead, BankIslami will likely need to balance cost efficiency with its revenue growth strategies in order to stabilize earnings performance. The interim dividend signals management’s intent to maintain shareholder value despite the earnings slump, but sustaining profitability will depend on controlling costs while leveraging growth in fee-based and Shariah-compliant income streams.