Business

Banks Post Record Rs672bn Profit in 2025

By Aftab Ahmed • March 13, 2026

In CY25 the banking sector posted an all-time high profit of Rs672bn, reflecting an 11%YoY increase. This growth was achieved despite a cumulative 250bps decline in the policy rate from 13% to 10.5% during the year.

The strong profitability was primarily driven by a significant reduction in provisioning charges, particularly among large banks.

The banking sector represents 25% of the total market capitalization of the Pakistan equity market. The sector delivered a robust price return of 84% in CY25, outperforming the KSE-100 Index by 33%, which posted a return of 51%.

With Pakistan’s economic indicators stabilizing and credit ratings improving, we believe the banking sector still offers upside. The sector’s CAR currently stands at 19.5%, significantly higher than the CY17–18 average of 15.7%, when Pakistan held investment ratings of B3 from Moody’s and B from S&P.

During that period, banks traded at an average P/BV of 1.4x, compared to the current 1.28x despite the stronger capital position.

UBL & NBP Posted Outstanding Performance in CY25

Among the leading banks, UBL reported an EPS of Rs52, registering a strong 72%YoY growth in CY25. The increase was primarily driven by a 108%YoY growth in NII, along with a reversal of provisioning, reflecting operational expansion and improved core profitability.

NBP stood out for the highest earnings growth in the sector, posting a 224%YoY surge in profitability, taking its EPS to Rs40. This sharp growth is primarily driven by a 45% increase in NII, coupled with a 30%YoY decline in non-interest expenses.

However, the earning growth was inflated primarily due to a one-time expense of Rs57.5bn related to the pension fund in CY24. Excluding this charge, NBP earning growth will normalize to 66%, while the banking sector’s earnings growth will moderate to 7% in CY25, compared to the reported growth of 11%.

In contrast, MEBL reported an EPS of Rs50, reflecting an 11%YoY decline. Earnings were pressured by a 12%YoY drop in NII and a 3%YoY increase in other expenses. However, the impact was partially mitigated by a 58%YoY decline in provisioning.

Highest Dividend Payout by Banking Sector in 2025

In CY25, the banking sector recorded a dividend payout ratio of 62%, ranking among the highest across all sectors. This reflects a significant increase from 54% in CY24, continuing a consistent upward trend in payouts since 2021.

Among the major banks, SCBPL recorded the highest dividend payout ratio at 87% in CY25, maintaining its historically strong distribution trend. NBP also reported a payout ratio of 87%, supported by the highest dividend per share (DPS) of Rs35 during the year, driven by strong earning growth.

Both banks distributed earnings well above the sector average payout ratio of 62%. In contrast, AKBL reported the lowest payout ratio in the sector at 31%, indicating a relatively conservative dividend policy compared to its peers.

NBP Outperformed with 16% Dividend Yield

Dividend yields across the banking sector remained attractive in CY25, based on current market prices, supported by strong cash distributions. NBP offered the highest dividend yield of 16%, significantly above peers, driven by its strong DPS during the year.

A group of banks including HMB, MCB, BAFL, and SCBPL delivered yields of around 10%, while MEBL and AKBL recorded relatively lower yields of 6% and 5%, respectively.

Banking Sector Posted Highest-ever Deposits at Rs35tr

On the balance sheet side, the Pakistan banking sector showed resilient performance, with average deposits growing 16%YoY to Rs35tr. Among the sector, HBL reported the highest average deposits of Rs5tr, reflecting 10%YoY growth in CY25.

UBL followed with average deposits of Rs4.4tr, recording the highest growth of 54%YoY. Meanwhile, NBP posted average deposits of Rs4.3tr, representing an average 12%YoY increase during CY25.

At the same time, average investments of the banking sector grew by 25%YoY to Rs38tr. Whereas, UBL recorded the highest average investment base in the sector at Rs8.8tr, reflecting a robust 52%YoY growth. It was followed by NBP with average investments of Rs4.9tr, up 5%YoY. HBL ranked third with average investments of Rs3.8tr, marking 33%YoY growth in CY25.

P/B Multiple Leaders Above 2x, Laggards Under 0.9x

The banking sector is currently trading at a P/B multiple of 1.28x. MEBL commands the highest valuation in the sector with a P/B of 2.78x, followed by SCBPL at 2.35x, both trading significantly above the sector average.

In contrast, HBL, AKBL, and ABL trade at the lowest P/B multiple of 0.84x, 0.77x, and 0.73x respectively, reflecting a notable discount to the sector. In terms of segmentation, government-owned banks are trading at an average P/B of around 1.0x, whereas Islamic banks command a premium valuation, trading at an average P/B of 2.11x.

P/E Valuation Trend in the Banking Sector

The banking sector is currently trading at a trailing P/E multiple of 6.9x. Among the sector, MEBL, UBL, and MCB trade at a premium to the sector with the P/E of 8.47x, 7.95x, and 7.43x respectively.

In contrast, HMBL is trading at a lower P/E multiple of 5.0x. Among Islamic banks, FABL is trading at the lowest P/E of 5.84x.