Banks' profits to drop 14% QoQ
Pakistan's banking sector is expected to report a subdued financial performance for the second quarter of 2025 (2QCY25), with profitability likely to decline by around 1% year-on-year (YoY) and 14% quarter-on-quarter (QoQ) for major banks following a drop in yields and a 100-basis-point (bps) cut in policy rate by the State Bank in May.
"We estimate profitability of ISL coverage banks – HBL, UBL, MCB Bank, Meezan Bank and Bank Alfalah – to decline by 1% YoY and 14% QoQ," noted Insight Securities. "The decline is primarily attributable to the falling yield, resulting in net interest margins (NIMs) compression along with moderation in capital gains."
Additionally, non-markup income is projected to decline due to normalisation of capital gains, which were elevated in the previous quarters.
Despite margin pressures, some support to earnings is expected from volumetric growth and a stronger focus on mobilising zero-cost deposits. Banks are also expected to maintain healthy dividend payouts, aided by decent profitability and strong capital buffers.
According to estimates, HBL, UBL, MCB Bank, Meezan Bank and Bank Alfalah are projected to post earnings per share (EPS) of Rs9.5, Rs11.3, Rs9.9, Rs11.4 and Rs4.9, respectively. Dividend per share (DPS) forecasts for the same banks stand at Rs4.5, Rs7, Rs9, Rs7 and Rs2.5, with UBL likely to stand out due to robust earnings and above-average deposit growth.
Sector-wide trends show banking deposits reaching Rs35 trillion, marking a significant increase of 12.5% YoY and 10.7% QoQ. Notably, a sharp 7% week-on-week growth was observed in the latest data.
However, advances declined 4.1% QoQ to Rs12.9 trillion, pulling down the sector's advances-to-deposit ratio (ADR) by roughly 570 bps. On the other hand, investments grew 12.8% QoQ to Rs36.5 trillion, reflecting continued preference for government securities, while borrowings remained stable at around Rs14.8 trillion.
Provisioning expenses are expected to rise sequentially, reversing the trend from the previous quarter, when banks booked reversals after trimming advances to meet end-of-year ADR thresholds. Despite the uptick in provisioning, the sector's overall financial health remains sound and banks are expected to continue rewarding shareholders with steady dividends.
However, Topline Securities expects banks under its coverage – Bank Alfalah, Bank AL Habib, HBL, MCB Bank, Meezan Bank and UBL – to post 7% YoY earnings growth in 2Q2025, led by higher net interest income (NII) and non-interest income. Despite a drop in average policy rate from 21.5% to 11.3%, NII is projected to rise 12% YoY to Rs303 billion, supported by strong deposit growth and higher returns on older investments.
Non-interest income is expected to grow 14% YoY to Rs84 billion, driven by increased fee income and gains on securities. Expenses are forecast to rise 8% YoY to Rs161 billion, in line with inflation and branch expansion. Provisions are likely to jump up to Rs9.1 billion from Rs5.9 billion last year.
Among individual banks, UBL is projected to lead with 148% YoY earnings growth, followed by HBL with 4% growth. However, sector earnings are expected to decline 5% QoQ due to lower NII and higher provisions, noted Topline.
For 1H2025, cumulative earnings are estimated at Rs210 billion, up 10% YoY. Dividend payouts are expected to remain strong, with UBL's DPS likely rising to Rs8 from Rs5.5 in the previous quarter. Topline maintains a market-weight stance on the sector, with HBL and Bank Alfalah being preferred picks.
Meanwhile, after hitting decade-low levels, Pakistan's banking sector has witnessed a strong and consistent rebound in its price-to-book (P/B) ratio since late 2023, reflecting improved investor sentiment and sector performance, according to Optimus Capital Management.
As of June 2025, the sector's P/B ratio climbed to 1.24 times, crossing its historical average and median of 1.0 times for the first time in years. The recovery signals growing investor confidence, underpinned by strong profitability metrics, stabilising macroeconomic conditions and a more favourable interest rate environment.
The rebound marks a sharp reversal from the sustained downward trend seen over the past decade, which was driven by inflationary pressures, regulatory tightening and macroeconomic uncertainty.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
a day ago
- Business Recorder
CCP 2019 order: Appellate Tribunal grants partial relief to flour mills, upholds Rs35mn fine
The Competition Appellate Tribunal (CAT) upheld the order of the Competition Commission of Pakistan (CCP) against the Pakistan Flour Mills Association (PFMA) for 'fixing the price of wheat flour'. However, the CAT reduced the fine amount to Rs35 million from previously Rs75 million the CCP had imposed in its 2019 order, according to a CCP statement on Tuesday. In 2019, the CCP had noted that the PFMA had been involved in fixing the wheat grinding quota for each member mill, which led to an increase in flour prices across the country. The PFMA later challenged the CCP order before the CAT. According to CCP's Tuesday statement, CCP's counsel argued in court that Sections 4(1) and 4(2)(a) of the Competition Act, 2010 prohibit any agreement or decision between undertakings, including associations, aimed at fixing prices. Sugar crisis: Finance minister Aurangzeb, CCP chairman Sidhu discuss ways to stabilise market 'The CCP maintained that the repeated and structured issuance of price instructions by PFMA displaced the commercial autonomy of individual mills, constituting a horizontal agreement with an anti-competitive object.' After hearing arguments from both sides and examining the record, the tribunal upheld CCP's findings but reduced the penalty to Rs35 million.
Express Tribune
4 days ago
- Express Tribune
PTV staff unpaid for months amid alleged plan to sell properties: Murtaza
Listen to article Pakistan Peoples Party (PPP) leader Hassan Murtaza alleged that Pakistan Television (PTV) is facing an artificial financial crisis, claiming the situation has left employees without salaries for several months. In a statement, Murtaza accused the government of deliberately weakening the state broadcaster as part of a plan to privatise its valuable properties. He alleged that the privatisation lobby is targeting PTV's real estate assets, worth trillions of rupees, and warned of possible building auctions. He said delays in salaries and pensions were unnecessary and linked to the removal of the Rs35 PTV fee from electricity bills. Murtaza also held the Minister for Information and the PTV managing director responsible for what he described as the broadcaster's near-bankruptcy. The PPP leader criticised the privatisation of Pakistan Steel Mills and other state-run enterprises, terming it detrimental to workers and aimed at benefiting specific groups. Read: State TV spent nearly Rs140m on power bills Earlier, state-run Pakistan Television Headquarters racked up electricity bills exceeding Rs138.94 million over the past five fiscal years, according to official figures submitted to the National Assembly. According to a written response submitted by the Ministry of Information and Broadcasting in the NA, PTV's electricity expenditure has steadily risen each year, with a total of Rs138,936,472 spent from 2020-21 to 2024-25. In the fiscal year 2020-21, the electricity bill stood at Rs17,287,399, which increased to Rs24,045,382 in 2021-22, followed by Rs28,895,833 in 2022-23. The upward trend continued in 2023-24, when Rs37,693,235 was spent. Although the figure slightly decreased in 2024-25, it still amounted to Rs31,014,623. The cumulative total over the five years came to Rs138,936,472.
Business Recorder
5 days ago
- Business Recorder
NJHP tunnel collapse costs Rs35bn: Nespak
ISLAMABAD: The National Engineering Services Pakistan (Nespak) on Friday revealed that one tunnel of Neelum-Jhelum Hydroelectric Project collapsed, causing physical damage of around Rs35 billion, besides over Rs100 billion losses due to non-power generation. This was revealed before the Senate Standing Committee on Cabinet Secretariat, which was chaired by Rana Mahmood ul Hassan, here on Friday. Nespak officials informed the committee a tunnel of the Neelum-Jhelum project has collapsed. Three committees have been formed to inquire into the matter, said Nespak officials, adding that physical damage of Rs35 billion occurred. Further a loss of over Rs100 billion resulted due to lack of electricity generation. The location where the tunnel is located is 5.5 km below, said the officials, adding that it was being examined that whether the fault lies with the project consultants or the geological conditions of the site. A briefing was also given by the managing director Nespak on the organisation's performance over the past three years. The committee was apprised that Nespak has successfully undertaken 4,822 projects both domestically and internationally. Of these, 595 projects were completed internationally in 40 countries, including Afghanistan, Azerbaijan, Bangladesh, Bahrain, Benin, Cameroon, Chad, Comoros Islands, Dominica, Ethiopia, Gabon, Gambia, Ghana, Guinea, Iran, Iraq, Jordan, Kazakhstan, Kyrgyzstan, Libya, Nepal, Nigeria, Oman, Qatar, Yemen, Papua New Guinea, Saudi Arabia, Senegal, Sierra Leone, Somalia, Sudan, Syria, Tajikistan, Tanzania, Thailand, Türkiye, Turkmenistan, UAE, Uganda, and Uzbekistan. Non-availability of NJHP project: Consumers overpaid Rs167.787bn for costly power NESPAK has also entered into joint ventures with renowned foreign and local firms on a project-to-project and long-term basis, which have proven beneficial to all stakeholders involved. The matter was deferred. The committee directed a list of NESPAK's ongoing projects for review in the next session. The committee also considered The Cannabis Control and Regulatory Authority (Amendment) Bill, 2025, introduced by Senator Dr Afnanullah Khan. He explained that the bill seeks to allocate one per cent of the authority's annual fund to corporate social responsibility (CSR) initiatives. These may include the establishment of rehabilitation centres for drug addicts, skill development and employment generation, poverty alleviation, and efforts to promote gender equality and empower women. It was also presented that the authority shall ensure transparency and accountability in the use of CSR funds, per the rules and regulations to be formulated under the Act. After a thorough discussion, the committee decided to defer the bill. The committee directed the Cannabis Authority to submit its recommendations on the proposed amendments after placing them before its board. The committee then took up Starred Question No 27, raised by Senator Shahadat Awan in the Senate session held on July 25, concerning the criteria adopted by the Pakistan Telecommunication Authority for enforcing roll-out obligations in the absence of a formal regulation or framework regarding right-of-way. After deliberation, the committee decided to defer the matter and invite the Ministry of Information Technology to the next meeting for a comprehensive briefing on the policy framework currently in place. The remaining agenda items were deferred due to the absence of members. The session was attended by senators, Farooq Hamid Naek, Fawzia Arshad, Dr Afnanullah Khan, and Shahadat Awan. As well as special invitees, senators, Bilal Khan Mandokhel and Sardar Al Haj Muhammad Umer Gorgaij. The committee took up key legislative and oversight matters concerning regulatory frameworks, national development initiatives, and institutional performance. Copyright Business Recorder, 2025
