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Business Recorder
01-05-2025
- Business
- Business Recorder
Profitability of listed banks jumps to Rs173bn
KARACHI: Pakistan's listed banks' profitability clocked in at Rs 173 billion, up by 14 percent YoY and 12 percent QoQ in the first quarter (Jan-March) of 2025 (1Q2025). According to a report issued by the Topline Securities, despite the decline in interest rates, the sector's NII clocked in at Rs 536 billion, up 23 percent YoY and 2 percent QoQ in 1Q2025, led by volumetric growth, favourable repricing, and higher yield of repo borrowings. Interest income declined by 19 percent YoY and 13 percent QoQ to Rs 1.4 trillion, whereas interest expense declined by 32 percent YoY and 20 percent QoQ to Rs 0.9 trillion. For analysis, Topline have included all listed banks. Non-interest income of the sector increased by 6 percent YoY but declined by 28 percent QoQ to Rs 133 billion 1Q2025. The QoQ decline is due to a fall in capital gains and fees & commission income. Profitability of listed banks rises 5pc YoY On the other hand, non-interest expense rose by 19 percent YoY but declined by 19 percent QoQ to Rs 293 billion 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. This takes the sector's Cost-to-Income ratio to 44percent in 1Q2025, compared to 44 percent in 1Q2024 and 51 percent in 4Q2024. Sector recorded a provisioning charge of Rs6 billion in 1Q2025, down 36 percent YoY and 83 percent 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 percent, compared to 50 percent in 1Q2024 and 56 percent in 4Q2024. To recall, at the end of 2024, the government removed the ADR-related tax while increasing the overall tax rate from 49 percent (including super tax) to 53percent (including super tax) for calendar year 2025. Copyright Business Recorder, 2025
Business Recorder
25-04-2025
- Business
- Business Recorder
FSR for CY24 unveiled: SBP says financial system's resilience remains intact
KARACHI: Pakistan's financial sector continued to maintain its resilience and managed to grow at a decent pace of 17.8 percent in CY24. In addition, macroeconomic conditions showed marked improvement during CY24, with easing inflation, monetary relaxation, fiscal consolidation, stable exchange rates and a stronger external account The State Bank of Pakistan (SBP) has issued its annual flagship publication Financial Stability Review (FSR) for the year 2024 on Thursday. The Review is prepared and published in terms of requirements prescribed in Section 39(3) of the State Bank of Pakistan Act, 1956. The FSR presents the performance and risk assessment of various segments of the financial sector including banks, microfinance banks (MFBs), development finance institutions (DFIs), non-bank financial institutions (NBFIs), insurance, financial markets and financial market infrastructures (FMIs). It also assesses the financial soundness of non-financial corporate sector, which is a major private sector user of bank credit. 'The Review' of SBP: Timely realization of IMF lending to help revive inflows The Review highlights thatoverall macroeconomic conditions improved considerably during CY24, as reflected by receding inflationary pressures and consequent significant monetary easing, fiscal consolidation, stable rupee-dollar parity, pick-up in economic activity, and improved external account balance. In this backdrop, financial sector-growing by a decent pace of 17.8 percent, maintained its operational and financial resilience during CY24. Amid turnaround in macroeconomic environment, volatility in financial markets subsided. The banking sector exhibited steady performance and maintained its financial soundness. The balance sheet of the banks expanded by 15.8 percent in CY24. The expansion in assets was driven by both investments as well advances. Private sector advances witnessed a strong rebound, due to revival in economic activity, easing in monetary policy, and advances-to-deposit ratio (ADR) linked tax policy for income from government securities. This tax policy also dampened the deposit mobilization, which further increased the banks' reliance on borrowings. While revival of economic activity is expected to improve the repayment capacity of the borrowers, the current level of credit risk of the banking sector also remained within a comfortable range as non-performing loans (NPLs) to gross loans ratio fell to 6.3 percent in December 2024 from 7.6 percent in December 2023. The provisioning coverage further improved amid implementation of IFRS-9, with allowances and provisions held for loan losses exceeding the stock of outstanding NPLs, indicating a minimal net credit risk to solvency. The earning volume remained steady, while key profitability indicators witnessed moderation over the year. The capital adequacy ratio, however, improved to 20.6 percent by end December 2024 and remained well above the minimum regulatory requirements. Copyright Business Recorder, 2025
Express Tribune
24-04-2025
- Business
- Express Tribune
Banking sector expands 15.8% in 2024
Listen to article The State Bank of Pakistan's 2024 Financial Stability Review signals improving macroeconomic conditions, with easing inflation, stable exchange rates, and a rebound in private sector credit. The banking sector showed strong performance, though concerns remain over rising borrowings, stressed microfinance banks, and global protectionist risks. The review highlights that macroeconomic conditions improved considerably during CY24, as reflected by receding inflationary pressures and consequent significant monetary easing, fiscal consolidation, stable rupee-dollar parity, pick-up in economic activity, and improved external account balance. In this backdrop, financial sector — growing by a decent pace of 17.8% — maintained its operational and financial resilience during CY24. Amid turnaround in macroeconomic environment, volatility in financial markets subsided. The banking sector exhibited steady performance and maintained its financial soundness. The balance sheet of banks expanded 15.8% in CY24. The expansion in assets was driven by both investment as well as advances. Private sector advances witnessed a strong rebound, due to a revival in economic activity, easing of monetary policy, and advances-to-deposit ratio (ADR) linked tax policy for income from government securities. This tax policy also dampened deposit mobilisation, which further increased the banks' reliance on borrowings. While revival of economic activity is expected to improve the repayment capacity of borrowers, the current level of credit risk of the banking sector also remained within a comfortable range as non-performing loans (NPLs) to gross loans ratio fell to 6.3% in December 2024 from 7.6% in December 2023. The provisioning coverage further improved amid implementation of IFRS-9, with allowances and provisions held for loan losses exceeding the stock of outstanding NPLs, indicating a minimal net credit risk to solvency. The earning volume remained steady, while key profitability indicators witnessed moderation over the year. The capital adequacy ratio, however, improved to 20.6% by the end of December 2024 and remained well above the minimum regulatory requirements. Within the banking sector, Islamic banking institutions witnessed a strong increase in asset base and a marked expansion in branch network, which also reflects SBP's focus on promoting Shariah-compliant financial services. Along with contained credit risk, resilience of the Islamic banks remained steady in CY24. Nonetheless, microfinance banks (MFBs) continued to remain under stress. The review further highlighted that the non-bank financial sector presented a mixed performance. The balance sheet of DFIs contracted while that of NBFIs manifested a remarkable expansion. Moreover, the insurance sector continued to perform steadily. Whereas the supply side of the financial sector presented a comfortable position, the demand side was affected by the erstwhile tighter financial conditions and subdued economic activity. In particular, the sales of non-financial large corporate sector witnessed pressure and moderation in earnings. However, liquidity profile and repayment capacity of the sector remained comfortable. Encouragingly though, the creditworthiness and repayment capacity of the large borrowers of the banking sector remained steady during CY24. The review highlights that the FMIs continued to support financial system stability through operational resilience. The digital transactions continued to drive the momentum of retail transactions. With a view to facilitating and supporting remittances from the Gulf region, the SBP signed a memorandum of understanding (MoU) with the Arab Monetary Fund (AMF) to enable the integration of Raast with Buna – a cross-border payment system. Moreover, Raast maintained the momentum of strong growth, which particularly got traction after the introduction of person-to-merchant module in late 2023. Going forward, a continued perceptible progress on structural reforms is crucial for sustained economic growth, building of external buffers and reducing external financing risks. The heightened uncertainty amid the recent wave of protectionist measures and its associated implications on global economic growth and financial conditions may also pose challenges for domestic economy.
