Pakistan Bank Profits Slip to Rs505 Billion
Pakistan bank profits slipped 1 per cent to Rs505 billion in the first nine months of calendar year 2026, as higher interest expenses and operating costs offset growth in non-interest income and lower taxation. An Arif Habib Limited (AHL) report showed the marginal decline, The Express Tribune reported on Saturday, October 31.
Total interest earned rose 6 per cent, but expenses climbed 9 per cent, leaving net interest income flat at Rs1.6 trillion. The result is a banking sector that earned more on paper yet kept less of it after funding costs.
Pakistan bank profits: the nine-month picture
| Measure | Nine months, calendar 2026 | Change |
|---|---|---|
| Profit after tax | Rs505 billion | Down 1 per cent |
| Net interest income | Rs1.6 trillion | Flat |
| Non-interest income | Rs504 billion | Up about 18 per cent |
| Operating expenses | Rs1.1 trillion | Up about 15 per cent |
| Effective taxation | 53 per cent | Lower, offsetting a 5 per cent fall in pre-tax profit |
The average policy rate stood at approximately 11.1 per cent, against 11.4 per cent a year earlier, as banks realigned balance sheets ahead of expected rate volatility from the US-Iran conflict.
Average interest yield fell to about 11 per cent from 13 per cent, while the average cost of funds declined to around 6 per cent from 8 per cent. That combination took the sector-wide net interest margin to approximately 4 per cent.
Where banks still made money
Non-interest income grew about 18 per cent to Rs504 billion, with fee income up 11 per cent, foreign exchange income up 36 per cent and capital gains up 30 per cent. Those three streams carried the sector while interest margins stood still.
The sector also recorded a net provisioning reversal of about Rs21 billion, against Rs8 billion a year earlier, led by National Bank of Pakistan at Rs6 billion.
Costs, however, ate into those gains. Operating expenses reached Rs1.1 trillion, up about 15 per cent. Meezan Bank Limited recorded the lowest cost-to-income ratio at 32 per cent, followed by Standard Chartered Bank Pakistan Limited at 33 per cent and United Bank Limited at 38 per cent. Effective taxation declined to 53 per cent, which partly offset a 5 per cent fall in pre-tax profit and left the bottom line down 1 per cent.
The third quarter in detail
On a quarterly basis, listed banks recorded a combined profit of Rs164 billion, down 3 per cent year-on-year and 2 per cent quarter-on-quarter. A 100-basis-point policy rate hike in the second quarter pushed average yields to about 11 per cent in the third quarter, from 10.7 per cent, while the average cost of funds rose to around 6.4 per cent from 6.1 per cent.
Quarterly interest earned was about Rs1.6 trillion and expenses Rs1.1 trillion, up 13 per cent and 18 per cent year-on-year. Non-interest income fell 4.6 per cent sequentially to Rs154 billion as capital gains normalised. The sector recorded a net provisioning reversal of Rs12.2 billion, against Rs4.9 billion a year earlier, while quarterly operating expenses reached Rs384 billion, up 14 per cent.
What happens next for banks and borrowers
Bank earnings face slight pressure in the fourth quarter after a 50-basis-point policy rate hike at the end of October, though strong deposit profiles, lower debt and shorter portfolios could offset it.
Deposit growth slowed to just 0.02 per cent quarter-on-quarter, though United Bank Limited led with 6 per cent growth to Rs6.5 trillion in deposits, followed by Meezan Bank at 5 per cent and MCB at 4 per cent.
Total investments across the sector declined around 6 per cent quarter-on-quarter as banks allowed investments to mature and used proceeds to reduce exposure to open market operations. That shift points to balance-sheet deleveraging ahead of the expected rate outlook.
The result connects with wider reforms: the State Bank’s draft open banking rules, the government’s Rs100 billion National Grid sukuk and a narrowing first-quarter fiscal surplus.
Frequently asked questions
How much profit did Pakistan’s banks make in nine months?
Rs505 billion, down 1 per cent year-on-year, according to an Arif Habib Limited report.
Why did profits slip if interest earned rose?
Interest expenses climbed 9 per cent, faster than the 6 per cent rise in interest earned, so net interest income stayed flat at Rs1.6 trillion while operating expenses rose about 15 per cent.
