The Bank of Punjab turned in another strong quarter, extending a two‑year run of outsized earnings as the provincial lender’s long push into low‑cost deposits, rural markets and digital origination starts to compound. Third‑quarter results show income advancing sharply and profits rising on the back of wider spreads and a better‑priced deposit base. Management says the repricing of legacy time deposits and a deliberate tilt towards current accounts should carry further gains into the year‑end.
The bank’s quarterly and nine‑month scorecards were the centrepiece of two post‑results briefings with analysts in November, which also laid out milestones in branch expansion, agricultural lending and an historic turn to dividends.
For 3QCY25, BOP posted profit after tax of about Rs5.1 billion, up 42% year‑on‑year. Earnings per share for the quarter printed around Rs1.6, up from Rs1.1 a year earlier, while 9MCY25 EPS rose to roughly Rs3.7 versus Rs2.6 last year, reflecting sustained operating leverage. Net interest income was up 61% year‑on‑year in the quarter, with total income up 42%; operating expenses rose 19%, far slower than income, helping lift profit before tax by 58% in Q3 and 81% for the nine months.
Arif Habib Ltd’s takeaways from the analyst call add more colour on deposits and funding costs. Deposits stood at about Rs1.8 trillion in September, with a seasonal quarter‑on‑quarter dip offset by healthier averages: current‑account balances increased 13.3% over six months and non‑MDR balances rose 10.5%, together adding an estimated Rs7.7 billion to revenue. Crucially, about 85% of high‑cost term deposits, roughly Rs427 billion of an estimated Rs500 billion, matured by late Q3. As these repriced, the weighted‑average cost of term deposits fell from 16.4% to 9.7%, with the full earnings effect expected to flow through Q4. Management’s current‑account share target for next year is 27% – another lever to sustain net interest margins even as the rate cycle stabilises.
Credit costs remained contained. Management highlighted that non‑performing loans total about Rs51 billion, of which Rs40 billion relate to legacy assets, with the NPL‑to‑book ratio at 6.5% – near the market average – and net NPLs at just 0.2% of book for the nine months. The cost‑to‑income ratio has improved to around 60%, with a stated aim to bring it lower next year as returns from earlier technology and process investments materialise.
Beyond spreads and funding, non‑interest income held steady year‑to‑date, with fee income up 31% and foreign‑exchange gains higher, partly offset by lower securities gains. Put together, the 9‑month total income rose 58%, against a 27% rise in operating expenses, lifting profit before tax by 81% year‑on‑year.
The sector backdrop has further helped. Since mid‑2024, the State Bank has lowered the policy rate from 22% to 12% by late January 2025, improving the asset/liability repricing outlook for banks; the Monetary Policy Committee later paused the easing cycle at 12% in March to watch inflation dynamics. With high‑yielding assets rolling in and expensive funding rolling off, BOP appears well‑placed to clip the spread in the near term.
Constituted through the Bank of Punjab Act 1989 and accorded scheduled bank status in 1994, BOP is headquartered in Lahore and remains majority‑owned by the Government of Punjab, which holds just over 57%, according to public filings and company materials. Its mandate has long straddled commercial banking and policy‑linked initiatives in the province, but the franchise today is national in reach.
A significant inflection came with the appointment of Zafar Masud as President and CEO in April 2020. The bank’s press release at the time underscored his remit to drive a modernisation and growth agenda, drawing on decades of international and domestic banking experience. Under his stewardship, BOP has pivoted hard into deposit mobilisation, digital origination, and inclusion‑linked lending – areas the bank now routinely highlights as engines of growth.
The branch network is the backbone of that push. The bank currently operates close to 900 branches across the country, and it houses a sprawling list of locations on its official site that stretches from large urban centres to smaller market towns – evidence of a strategy designed to skim deposits in deeper rural catchments as well as service mid‑market SMEs across the trading belt of Punjab and beyond.
BOP’s management told analysts the network will expand from about 900 to around 1,000 branches by 2027, with 50 openings planned in 2026 and 50 in 2027. Rural markets are a particular focus for low‑cost deposit acquisition, where competition is thinner and relationship banking still matters. The same briefings noted that private‑sector deposits have risen sharply since 2021, reducing historic reliance on public funds.
The funding transformation also has an operational spine: a multiyear investment in technology and process automation. Management says the returns are now visible in a better cost‑to‑income trend and in digital origination at scale. The briefings emphasised BOP’s status as Pakistan’s largest digital lender by cumulative disbursements – around Rs1,370 billion to nearly 1 million borrowers – and its position as the top credit‑card issuer, with more than 0.9 million cards in force. While these claims are couched in management’s own disclosures, they help explain the velocity in fee‑generating products and the bank’s confidence in cross‑selling as it adds branches.
Perhaps the most visible signal of balance‑sheet strength is dividends. In late summer 2025, BOP announced the first‑ever interim cash dividend in its history – Rs1.0 per share or 10% – a watershed moment for a bank that had previously prioritised capital build‑up over payouts. Multiple news outlets reported the milestone alongside record interim profits. Management has since indicated that, while it does not commit to quarterly payouts, a “historic” full‑year dividend is likely given earnings momentum and the stronger capital position.
Underpinning the strategy is funding discipline. As noted earlier, 85% of high‑cost term deposits matured between Q2 and Q3, bringing their cost down from 16.4% to 9.7%; with policy rates steady at 12%, that repricing should support margins in Q4 and into 2026. Meanwhile, management is targeting a 27% current‑account share over the next year, a level that would reduce the average cost of funds further and insulate earnings should asset yields drift lower. These assumptions sit explicitly in the AHL takeaways.
Finally, asset quality and governance remain on the scorecard. The bank’s NPL stock is still weighted to legacy positions, with much lower net NPLs on the current‑period book – a sign, management argues, that underwriting standards and collections are holding up even as lending scales. The briefings describe the pillars of “sustainable profitability” as asset quality, operational efficiency, governance and compliance, deposit growth and digital transformation – a checklist that aligns with the post‑2020 rebuild.
BOP’s agricultural franchise has become one of the bank’s signature differentiators. Management says the bank serves 18% of Pakistan’s agricultural borrowers, and has extended the Kissan Card programme rapidly in recent cycles. The portfolio stood near Rs60 billion in mid‑October and, by 13 November, about 85% had been recovered against maturity, with expectations of 98–99% recovery shortly thereafter – metrics that speak to both borrower selection and the mechanics of seasonal cash‑flow lending.
The bank also points to risk mitigants embedded in these books. Roughly 70% of the agriculture portfolio is secured by first‑loss guarantees from government programmes, in the 20–30% range; the remaining 30% is 95% collateralised. Management reports that only about 2% of agricultural borrowers were identified as flood‑affected – an exposure of around Rs650 million – and that this is fully collateralised. These specifics help contextualise both the provision line and the bank’s confidence in scaling agriculture without sacrificing asset quality.
Beyond agriculture, BOP has built share in SME lending, where it serves 44% of all SME borrowers since 2020, and in housing finance, where its share reportedly increased from 1.3% to 33% in recent years, with about Rs120 billion disbursed across more than 100,000 loans. The bank also claims leadership in logistics lending – from commercial vehicles and prime movers to tractors and farm‑to‑market transport. These business lines illustrate a mid‑market, cash‑flow centric lending strategy that fits neatly with the branch footprint’s tilt to trading and agro‑commercial districts.
The investment portfolio complements that posture. According to the AHL briefing, around 60–65% of investments are in floating‑rate PIBs, with the remaining 20–22% split between fixed‑rate bonds and T‑bills. Floating‑rate paper reportedly pays 75–80 basis points over the benchmark; T‑bills and fixed‑rate bonds yield around 11.2–12.0%, with duration kept near 2.0–2.3 years – parameters that align with a balance‑sheet strategy seeking yield while keeping interest‑rate risk in check.
On the deposit side, the mix is improving. Management told analysts that public‑sector deposits now account for roughly 50% of the book, down from 70%, while private deposits have grown strongly since 2021 and are projected to close the year near Rs1 trillion – a healthier balance that should make funding more resilient through cycles.
Banking profits across Pakistan have benefited from the rate cycle – higher yields on assets repricing faster than deposits – but BOP’s operational decisions are amplifying those tailwinds. The deposit mix is sliding towards cheaper current accounts; the cost of term deposits is resetting meaningfully lower as old tranches mature; and the bank is opening branches where deposit competition is thinner. Together, those choices are widening spreads even as policy rates level off.
At the same time, digital scale is starting to show up in the P&L: more cards in force, more customers sourced at lower marginal cost, and a pipeline of fee‑earning propositions around payments and cash management, especially as the government’s cashless initiatives gain traction. The bank’s own disclosures position it as the largest digital lender and a leading card issuer – claims that align with reported fee growth in the 9‑month figures and with the operating‑expense line that is rising slower than income.
The agriculture book merits close watch – not because the metrics are weak, but because the scale is material and seasonal. Here, BOP’s insistence on guaranteed or collateralised exposures, plus rapid recoveries on the Kissan cycle, reduces earnings volatility and frees up capital for growth in SME, housing and logistics lending. The briefings also stress that legacy NPLs dominate the problem asset pool, with net new slippages manageable – an important signpost for investors tracking whether growth is coming at the expense of underwriting.
Finally, the dividend. After years of balance‑sheet repair and scale‑up, the first‑ever interim cash dividend in 2025 signals both stronger capital and management’s confidence in the earnings runway. With term‑deposit costs falling and the branch roll‑out on schedule, BOP is preparing to move from a story of rebuild and catch‑up to one of repeatable profitability and shareholder returns – a transition the bank’s leadership has telegraphed since 2020.
