Pakistan’s listed banks reported combined profitability of Rs168 billion during the second quarter of calendar year 2026, with earnings remaining broadly flat compared with the same quarter last year and declining 4% from the preceding quarter. According to an analysis by Topline Securities, the sector’s cumulative profit for the first half of calendar year 2026 reached Rs342 billion, also remaining broadly unchanged on a year on year basis. The quarterly performance reflected pressure on core interest income as well as higher operating expenses, although stronger non-interest income provided some support.
On a quarter on quarter basis, the sector’s net interest income declined 2% to Rs527 billion, while non-interest expenses increased 7% to Rs361 billion. The combination of lower net interest income and higher expenses placed pressure on overall profitability during the quarter. This was partly offset by a 4% increase in non-interest income, which reached Rs177 billion. On a year on year basis, net interest income also declined 2% in the second quarter, while the first half figure was down 1%, reflecting changes in the interest rate environment and banks’ balance sheet strategies.
The decline in net interest income was attributed to the lagged repricing impact of the April 2026 rate hike. The effect was partly cushioned by banks’ continued focus on current account deposits and growth in deposit volumes. Among individual institutions, JS Bank, Bank of Punjab, Bank Alfalah and Askari Bank recorded relatively stronger year on year net interest income growth, ranging between 6% and 24%. In contrast, Samba Bank, Soneri Bank, National Bank of Pakistan and Habib Metropolitan Bank recorded net interest income declines ranging from 16% to 31%.
Non-interest income provided a stronger contribution to the sector’s quarterly performance. The figure increased 23% year on year and 4% quarter on quarter to Rs177 billion, with higher foreign exchange income supporting the overall increase. Askari Bank, United Bank, Bank AL Habib and MCB Bank recorded particularly strong year on year growth in non-interest income, with increases of 128%, 87%, 49% and 29%, respectively.
At the same time, non-interest expenses remained a major pressure point for the banking sector. These expenses increased 15% year on year and 7% quarter on quarter, reaching Rs361 billion during the second quarter. As a result, the sector’s cost to income ratio increased to 51.3%, compared with 48% in the previous quarter and 45.9% in the second quarter of 2025. The higher cost base was particularly evident at Askari Bank, United Bank, Meezan Bank and Bank AL Habib, where cost growth ranged between 20% and 41% year on year, largely reflecting branch expansion and inflation linked staff costs.
The sector also recorded a provision reversal of Rs6.2 billion during the second quarter, compared with a reversal of Rs8 billion in the same quarter last year and Rs1.8 billion in the first quarter of 2026. United Bank accounted for a significant portion of the latest reversal through a Rs3.8 billion reversal. Excluding this amount, the sector’s provision reversal stood at Rs2.4 billion. The provision position provided some support to profitability during the quarter despite pressure from interest income and operating costs.
The effective tax rate for listed banks stood at 52.5% in the second quarter of 2026, compared with 55.8% in the corresponding quarter of 2025 and 52.4% in the first quarter of 2026. The lower effective tax rate compared with the same period last year provided some relief to sector earnings. However, the overall profitability remained broadly unchanged because of the combined impact of lower net interest income and higher expenses.
On a bank wise basis, United Bank led the sector with earnings of Rs37.5 billion during the second quarter of 2026. Meezan Bank followed with Rs26.2 billion, while Habib Bank reported earnings of Rs18.4 billion. National Bank of Pakistan recorded Rs16.6 billion in quarterly earnings, followed by MCB Bank with Rs15 billion. These banks remained among the largest contributors to the overall profitability reported by listed banks during the period.
In terms of year on year earnings growth, JS Bank recorded the strongest increase at 704%, although the sharp rise was partly influenced by a low base in the corresponding period. Askari Bank followed with 91% growth, while United Bank and Bank Alfalah recorded earnings increases of 31% and 27%, respectively. The results indicate significant differences in performance across individual banks, with some institutions benefiting from stronger income growth while others faced pressure on profitability.
Several banks reported declines in earnings during the quarter. Bank of Khyber, Standard Chartered Bank Pakistan, Habib Metropolitan Bank and National Bank of Pakistan recorded earnings declines ranging between 21% and 74% year on year. Bank Makramah reported a loss of Rs3.9 billion during the second quarter, making it the most significant negative result among the banks highlighted in the sector review.
Dividend distributions remained another notable feature of the quarterly results, with most banks maintaining their existing payout levels. Meezan Bank increased its dividend to Rs8 per share, while MCB Bank announced Rs9 per share, United Bank Rs8 per share, Habib Bank Rs6 per share, Allied Bank Rs4 per share, Bank AL Habib Rs3.5 per share and Habib Metropolitan Bank Rs2.5 per share. Askari Bank announced Rs2 per share, while Bank Alfalah and Faysal Bank announced Rs1.5 per share each.
Several institutions announced half yearly rather than quarterly dividends. Standard Chartered Bank Pakistan announced Rs3 per share, Bank of Punjab announced Rs1.6 per share and BankIslami Pakistan announced Rs1.5 per share. Overall, the dividend announcements showed that several listed banks continued to maintain shareholder distributions despite the mixed earnings environment during the second quarter.
The banking sector’s first half performance therefore remained broadly stable at Rs342 billion in aggregate earnings, but the second quarter highlighted growing pressure from operating costs and changes in net interest income. Stronger foreign exchange and fee related income, lower provision charges and differences in individual banks’ balance sheet strategies helped offset some of the pressure. The results also show a wide variation in earnings growth across Pakistan’s listed banking sector, with some institutions recording substantial increases while others reported notable declines or losses.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.