Bank profits rise despite weak private credit demand
KARACHI: Banks continued to post strong profits in the third quarter of calendar year 2025, remaining the only sector with steady, low-risk earnings driven largely by government borrowing.
According to a report by Topline Securities issued on Friday, listed banks recorded a combined profit of Rs170bn in 3Q2025, reflecting an increase of 8pc year-on-year (YoY) and 2pc quarter-on-quarter (QoQ).
The banking sector’s assets have been expanding faster than any other industry in the country, yet lending to the private sector has dropped to its lowest level. Nearly four months into the current fiscal year, net private-sector credit off-take remains negligible.
Banking experts attribute this stagnation to two key factors: banks’ preference for investing in high-yield government securities, which offer assured returns, and the private sector’s reluctance to borrow amid elevated interest rates and uncertain economic policies that continue to restrain growth.
The sector’s net interest income (NII) improved by 6pc YoY but remained largely flat QoQ. The YoY rise was driven mainly by the United Bank Ltd, whose NII surged 78pc to Rs92bn, followed by the National Bank of Pakistan with 74pc growth to Rs61bn, and the Bank of Punjab with a 61pc increase to Rs23bn.
High yields on govt papers lift earnings
Excluding these three banks, the overall NII of the sector declined 10pc YoY. On a QoQ basis, most banks saw little change as gains in a few institutions were offset by declines in others. Some banks achieved modest QoQ growth due to higher business volumes and a favourable shift in deposit mix towards current accounts.
Non-interest income rose 13pc YoY and 1pc QoQ to Rs146bn in 3Q2025, supported by capital gains, fee income and stronger foreign-exchange revenues. Non-interest expenses, however, climbed 19pc YoY and 5pc QoQ to Rs329bn, largely due to higher remittance-related costs. Consequently, the sector’s cost-to-income ratio rose to 47.9pc in 3Q2025 from 45.9pc in the previous quarter and 43.3pc a year earlier.
Published in Dawn, November 2nd, 2025
