Pakistan’s banking sector is expected to report a modest financial performance for the second quarter of 2025 (2QCY25), with major banks likely to experience a 1% year-on-year (YoY) decline in profitability and a 14% quarter-on-quarter (QoQ) drop, according to data from two brokerage firms.
This comes after a reduction in yields and a 100-basis-point (bps) cut in the policy rate by the State Bank of Pakistan in May.
Insight Securities estimates that key banks, including HBL, UBL, MCB Bank, Meezan Bank, and Bank Alfalah, will experience a 1% YoY decline and a 14% QoQ decline in profitability due to shrinking net interest margins (NIMs) and a reduction in capital gains.Â
Non-markup income is also expected to drop as capital gains normalise after elevated levels in the previous quarters.
Despite margin pressures, banks are likely to maintain earnings support from volumetric growth and an increased focus on mobilising zero-cost deposits. Banks are also expected to continue paying healthy dividends, backed by strong profitability and capital buffers.
The estimated earnings per share (EPS) for the major banks are as follows: HBL at Rs9.5, UBL at Rs11.3, MCB Bank at Rs9.9, Meezan Bank at Rs11.4, and Bank Alfalah at Rs4.9. Dividend per share (DPS) estimates stand at Rs4.5 for HBL, Rs7 for UBL, Rs9 for MCB Bank, Rs7 for Meezan Bank, and Rs2.5 for Bank Alfalah. UBL is expected to outperform due to robust earnings and strong deposit growth.
Sector-wide banking deposits are projected to reach Rs35 trillion, marking a significant 12.5% YoY and 10.7% QoQ increase. However, advances have declined by 4.1% QoQ to Rs12.9 trillion, resulting in a decrease in the sector’s advances-to-deposit ratio (ADR) by approximately 570 bps. On a positive note, investments have grown by 12.8% QoQ to Rs36.5 trillion, reflecting the continued preference for government securities.
Provisioning expenses are expected to rise sequentially, reversing the trend from the previous quarter, when banks had booked reversals to meet end-of-year ADR targets. However, the overall financial health of the sector remains sound, and banks are expected to continue rewarding shareholders with steady dividends.
Topline Securities predicts a 7% YoY earnings growth in 2Q2025 for the banks it covers, driven by higher net interest income (NII) and non-interest income. Despite the reduction in the policy rate from 21.5% to 11.3%, NII is expected to increase by 12% YoY to Rs303 billion, supported by strong deposit growth and higher returns on older investments. Non-interest income is expected to grow by 14% YoY to Rs84 billion.
Individually, UBL is expected to lead the sector with a 148% YoY earnings growth, while HBL is projected to see a 4% increase. However, the overall sector earnings are expected to decline by 5% QoQ due to lower NII and higher provisioning.
For 1H2025, cumulative earnings are estimated to be Rs210 billion, a 10% YoY increase. Dividend payouts are expected to remain strong, with UBL’s DPS forecast to rise to Rs8 from Rs5.5 in the previous quarter.
Meanwhile, Pakistan’s banking sector has seen a rebound in its price-to-book (P/B) ratio, which reached 1.24 times as of June 2025. This marks a significant recovery from decade-low levels and signals growing investor confidence, driven by improved profitability metrics and more favourable macroeconomic conditions.
