Pakistan’s banking sector continues to showcase structural resilience and operational strength as listed banks collectively posted Rs170 billion in profit during the third quarter of 2025. The results represent an 8 percent year-on-year increase and a 2 percent rise over the previous quarter, signaling stable momentum in profitability despite a complex macroeconomic backdrop, fluctuating interest rate dynamics, and elevated operating costs.
The performance, highlighted in a briefing from Topline Securities, reflects steady financial management across the industry, supported by disciplined asset strategies and targeted efficiency measures. The sector’s Net Interest Income registered a 6 percent year-on-year increase, although quarter-on-quarter growth remained muted as variations across individual institutions balanced overall movement. Analysts attribute the year-on-year growth trend primarily to improvements in earning assets and disciplined loan pricing strategies at some of the country’s largest banking institutions.
UBL, NBP, and BOP emerged as standout performers with substantial NII expansion. UBL led with a sharp 78 percent jump, reaching Rs92 billion compared to Rs52 billion a year earlier, reflecting the bank’s strategic portfolio positioning and stronger interest-earning asset performance. National Bank of Pakistan recorded a 74 percent increase, scaling from Rs26 billion to Rs61 billion, while Bank of Punjab posted a 61 percent rise from Rs9 billion to Rs23 billion. Excluding these three outperformers, sector-wide NII declined 10 percent year-on-year, indicating the uneven impact of shifts in interest rate cycles and asset repricing timelines.
Quarter-on-quarter results showed stability in NII performance, with some banks offsetting declines at others. Askari Bank registered an 11 percent quarterly increase, BOP strengthened by 9 percent, while MCB reported a modest 3 percent rise. Conversely, Bank Islami posted a 16 percent decline, Habib Metropolitan Bank fell 9 percent, and Meezan Bank recorded a 2 percent reduction, reflecting margin pressures and portfolio rebalancing during the rate transition phase.
Non-interest income contributed positively, rising 13 percent year-on-year and 1 percent quarter-on-quarter to Rs146 billion, supported by capital gains, fee income growth, and improved foreign exchange earnings. This component remains a critical buffer for banks navigating cost inflation and evolving revenue structures.
Operating expenses increased 19 percent year-on-year and 5 percent quarter-on-quarter to Rs329 billion, driven largely by remittance-related expenses and inflation-linked cost pressures. The sector’s cost-to-income ratio climbed to 47.9 percent compared to 45.9 percent in the prior quarter and 43.3 percent in the same period last year, highlighting the importance of continued operational digitization and efficiency initiatives as banks manage inflationary burdens.
A significant tailwind emerged through provisioning trends, with a reversal of Rs3.1 billion recorded in 3Q2025 versus a Rs26.9 billion charge in 3Q2024. Sector analysts interpret this reversal as evidence of improving asset quality outlooks and reduced credit risk concerns amid stabilizing interest rates and recovering market confidence in portfolio performance.
Taxation remained a substantial factor in profitability, with an effective tax rate of 53 percent for the quarter, aligned with the previous year but slightly lower than the 56 percent recorded in 2Q2025 following recent adjustments in fiscal policy affecting the sector.
Despite inflation, regulatory adjustments, and liquidity management challenges, Pakistan’s banking system continues to demonstrate strong capital resilience, operational adaptability, and capacity to generate sustainable earnings. With digital transformation accelerating across the system and interest rate normalization underway, analysts expect sector profitability to remain comparatively stable in upcoming quarters, supported by healthy balance sheets and disciplined asset management practices.
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