Pakistan Banks Earnings to increase 7% YoY in 2Q2025
Staff Report
Topline Banking Universe is likely to post an earnings growth of 7% YoY in 2Q2025, driven by higher Net Interest Income (NII) and Non-Interest Income.
Despite the decline in the average policy rate from 21.5% in 2Q2024 to 11.3% in 2Q2025, Net Interest Income (NII) of banks in our universe is expected to increase by 12% YoY to Rs303bn, driven by (1) volumetric growth particularly in current accounts and (2) higher investment yields on old portfolio.
Non-interest income of Topline Universe is also expected to post a 14% YoY growth, reaching Rs84bn in 2Q2025, mainly driven by an increase in fee and commission income and higher gain on sale of securities.
Pakistan Banks’ Earnings to Fall 6% QoQ and Up 22% YoY in 2Q2024
Non-interest expenses are expected to increase by 8% YoY to Rs161bn in 2Q2025, in line with inflation and branch expansion.
Total provision expense of the Topline Universe is likely to clock in at Rs9.1bn in 2Q2025, compared to Rs5.9bn in 2Q2024.
In Topline Universe, United Bank (UBL) is likely to post the highest earnings growth of 148% YoY in 2Q2025, driven by strong growth in current accounts and positive OMO spreads. This is followed by Habib Bank (HBL), with expected earnings growth of 4% YoY, supported by lower provision and a decline in the cost-to-income ratio.
On a QoQ basis, earnings in the banking universe are likely to decline by 5%, mainly due to a drop in NII and higher provisions. The average policy rate also declined by 100bps QoQ.
This takes the Topline Banking Universe’s 1H2025 earnings to Rs210bn, up 10% YoY. Given the comfortable buffers above their respective minimum adequacy levels and robust profitability growth, banks are expected to maintain higher dividend payouts in 2Q2025. In the case of UBL, we expect the dividend to increase to Rs8.0/share in 2Q2025, up from Rs5.5/share in 1Q2025, driven by strong earnings and comfortable buffers over the Capital Adequacy Ratio (CAR) and leverage ratio at regulatory level.
We maintain market weight stance on banking sector where Habib Bank (HBL), and Bank Alfalah (BAFL) are our preferred picks,” Topline said.