Faysal Bank Limited (PSX: FABL) reported a decline of 18.15% in its net profit after tax for the quarter ended March 31, 2025, as higher operating costs and reduced interest income weighed on overall earnings. The bank posted a net profit of Rs5.41 billion in Q1 2025, compared to Rs6.61 billion in the same period last year. This decline translated to an earnings per share (EPS) of Rs3.56, down from Rs4.35 year-on-year.
Despite the dip in profitability, the bank declared an interim cash dividend of Rs1.5 per share, representing a 15% payout on the face value of Rs10 per share, continuing its shareholder reward strategy.
The bank’s total income for the quarter stood at Rs23.02 billion, reflecting a modest 3.57% decrease from Rs23.87 billion in Q1 2024. The key contributor to this decline was a drop in net profit/return, which fell 8.51% to Rs17.22 billion. This contraction came on the back of a steep 30.32% decrease in profit/return earned, although this was partially offset by a 40.18% drop in profit/return expensed, highlighting the ongoing impact of a changing interest rate environment and asset re-pricing.
In contrast, non-mark-up income provided some cushion to the bottom line. Total other income rose by 14.85% to Rs5.8 billion. This was driven primarily by a 31.64% surge in fee and commission income, underpinned by rising customer transactions, and an 8.14% increase in foreign exchange income, reflecting gains from currency operations. The bank also booked a positive Rs15.49 million from derivatives, reversing a loss of Rs17.95 million last year. However, the growth was muted by declines in dividend income (-50.17%) and gains on securities (-79.58%), indicating reduced investment returns and portfolio volatility.
Operating expenses were a key pressure point, rising sharply by 24.71% to Rs13.66 billion. This increase pushed total other expenses up by 23.75%, significantly eating into operating margins. The rise in costs likely reflects both inflationary effects and ongoing investments in technology and infrastructure.
Additionally, the share of profit from associates fell sharply by 53.65% to Rs47.26 million, adding further strain to the bank’s consolidated income. On a positive note, Faysal Bank recorded a net reversal in credit loss allowance and write-offs amounting to Rs2.31 billion, a notable improvement from the Rs36 million charge last year. This reversal helped offset the overall expense burden and provided some stability to earnings.
As a result, profit before taxation stood at Rs11.49 billion, down 9.63% from Rs12.71 billion in the same quarter last year. Taxation remained stable at Rs6.08 billion, nearly unchanged from the previous year’s Rs6.10 billion, leading to the final profit after taxation of Rs5.41 billion.
Faysal Bank’s Q1 2025 results highlight the challenges posed by rising operational costs and lower interest income in a transitioning macroeconomic environment. While the growth in non-interest income and credit quality improvements are encouraging, the pressure on margins and profitability underscores the importance of strategic cost control and enhanced digital banking services in maintaining long-term financial resilience.
As market dynamics evolve, FABL’s ability to leverage technology, improve fee-based income, and optimize asset allocation will be crucial in driving sustainable earnings growth.