Banks Profit Grew by 14% in 1Q2025
ISLAMABAD: Pakistan Listed Banks: Profit grew by 14% in 1Q2025 Despite Falling Rates; Mainly Supported by UBL & NBP.
Pakistan’s listed banks profitability clocked in at Rs173bn, up by 14% YoY and 12% QoQ in 1Q2025.
Despite the decline in interest rates, the sector’s NII clocked in at Rs536bn, up 23% YoY and 2% QoQ in 1Q2025, led by volumetric growth, favourable repricing, and higher yield of repo borrowings. Interest income declined by 19% YoY and 13% QoQ to Rs1.4trn, whereas interest expense declined by 32% YoY and 20% QoQ to Rs0.9trn.
Non-interest income of the sector increased by 6% YoY but declined by 28% QoQ to Rs133bn in 1Q2025. The QoQ decline is due to a fall in capital gains and fees & commission income.
On the other hand, non-interest expense rose by 19% YoY but declined by 19% QoQ to Rs293bn in 1Q2025. The YoY increase is attributed to inflationary impact and branch expansions. However, the QoQ decline is mainly due to the absence of a one-time pension expense recorded by NBP.bank alfalah app registration
This takes the sector’s Cost-to-Income ratio to 44% in 1Q2025, compared to 44% in 1Q2024 and 51% in 4Q2024.
Sector recorded a provisioning charge of Rs6bn in 1Q2025, down 36% YoY and 83% QoQ. This decline is primarily due to the absence of provisioning charges following the implementation of IFRS-9 and improved asset quality, according to our channel checks.
Effective tax rate for 1Q2025 stood at 53%, compared to 50% in 1Q2024 and 56% in 4Q2024. To recall, at the end of 2024, the government removed the ADR-related tax while increasing the overall tax rate from 49% (including super tax) to 53% (including super tax) for calendar year 2025.
For our analysis, we have included all listed banks.
Bank-wise, United Bank (UBL) led the sector with the highest earnings of Rs36.1bn in 1Q2025, followed by Meezan Bank (MEBL) at Rs22.4bn, National Bank (NBP) at Rs22.1bn, Habib Bank (HBL) at Rs16.6bn, and MCB Bank (MCB) at Rs14.7bn.
On the other hand, only Bank Makramah (BML) recorded loss of Rs0.9bn in 1Q2025.
In terms of NII growth, United Bank (UBL) recorded the highest growth of 200% YoY, followed by National Bank (NBP) at 139% YoY, Bank of Punjab (BOP) at 75% YoY, Askari Bank (AKBL) at 70% YoY, and Bank of Khyber (BOK) at 45% YoY in 1Q2025.
In 1Q2025, most banks maintained their dividend payouts. Moving forward, we expect this trend to continue amid the sector’s healthy profitability.
Topline Banking Universe is trading at a compelling valuations, with 2025E PE and PBV of 5.9x and 1.1x, respectively having a ROE of 19%.
We have an ‘market weight’ stance on Banking Sector with MEBL, and HBL as our prefferd picks.
