Karachi, April 15, 2025 – Soneri Bank Limited (PSX: SNBL) has reported a significant 34.82% decline in its profit after taxation for the first quarter of 2025, posting a figure of Rs 1.15 billion, compared to Rs 1.76 billion in the same period last year. This sharp dip in profitability comes amid rising taxation expenses and a reversal in credit loss allowances, signaling pressures on the bank’s financial performance.
The decline was accompanied by a drop in earnings per share (EPS), which stood at Rs 1.04 for Q1 2025, down from Rs 1.60 in Q1 2024. The bank’s financial statement, released today, also revealed a reduction in its profit before taxation, which dropped by 6.12%, from Rs 3.55 billion in the first quarter of last year to Rs 3.34 billion.
Tax Expenses Surge
One of the primary factors contributing to the reduced profitability was the 22.02% increase in tax expenses, which amounted to Rs 2.19 billion. This jump in taxation, coupled with the reversal in credit loss allowances, has impacted the bank’s bottom line. In Q1 2025, Soneri Bank booked a net credit loss allowance of Rs 300.64 million, in stark contrast to the net reversal of Rs 487.51 million recorded in Q1 2024. The increase in credit loss provisions indicates a more cautious stance by the bank as it navigates the ongoing economic environment.
Interest Income and Expenses
While the mark-up/return/interest earned by Soneri Bank saw a notable decline of 19.02%, amounting to Rs 22.28 billion in Q1 2025, the bank managed to partially offset this drop with a 24.62% increase in net mark-up income, which reached Rs 7.29 billion. This growth was attributed to a 30.80% reduction in interest expenses, which decreased to Rs 14.99 billion, signaling effective cost management.
Despite the challenges in interest income, the bank’s non-mark-up income showed resilience, albeit with a slight 2.47% decline to Rs 1.56 billion. This category of income includes fee and commission income, which rose by 24.13% to Rs 1.2 billion, indicating a stronger performance in fee-based services. However, foreign exchange income faced a significant dip, falling by 34.87% to Rs 331.95 million, reflecting global forex volatility and fluctuating market conditions.
Operating Expenses on the Rise
Operating expenses increased by 19.27% year-on-year, reaching Rs 5.14 billion in Q1 2025. This rise was largely in line with the broader industry-wide pressures on costs, as inflation and rising operational expenditures affected financial institutions across the board. Including Workers’ Welfare Fund contributions and other charges, total non-mark-up expenses increased by 18.93%, reaching Rs 5.21 billion.
Outlook for the Bank
Despite the drop in profitability, Soneri Bank’s total income grew by 18.79%, reaching Rs 8.85 billion, up from Rs 7.45 billion in the same period last year. This indicates that the bank has been able to generate more revenue, even amid challenging conditions. However, the impact of higher taxation and the reversal in credit loss provisions will likely continue to affect future earnings if these trends persist.
Looking ahead, the banking sector remains under pressure as inflationary trends, exchange rate fluctuations, and global economic uncertainties influence local financial markets. Soneri Bank’s leadership will likely need to continue focusing on managing costs, improving its asset quality, and maintaining strong liquidity positions to weather the ongoing challenges and return to a growth trajectory.