At Bank AL Habib, falling rates bite even as deposits rise

For Bank AL Habib, 2025 was the year in which the blessing of high interest rates turned into a test of resilience. The bank did not suffer from a loss of franchise. It did not see deposits flee, nor did its network shrink, nor did it lose its reputation as one of Pakistan’s better-run mid-to-large private banks. Quite the opposite: deposits rose, the branch network expanded, and the bank continued to lean into trade finance, Islamic banking and digital services. Yet the income statement told a harsher story. Profit after tax fell to Rs30.6 billion in 2025 from Rs39.9 billion a year earlier, while profit before tax declined to Rs65.5 billion from Rs83.8 billion. Earnings per share fell to Rs27.57 from Rs35.87.

That is the paradox at the heart of Bank AL Habib’s latest performance. The bank got bigger in the ordinary sense: customer deposits increased to Rs2.60 trillion from Rs2.28 trillion, a rise of roughly 14%. But it became less profitable because the interest-rate cycle turned against the earnings model that had served Pakistani banks so well during the previous two years. Management was unusually direct about the cause, saying profit declined mainly because of the “significant decrease” in interest rates over the previous two years and slow growth in the bank’s current deposits.