KARACHI: Reflecting a strong growth in the banking sector, its balance sheet expanded by 17.8 per cent during the calendar year 2025 (CY25), against 15.8pc a year ago.

The State Bank issued its annual publication, Financial Stability Review, for CY25 on Tuesday. The FSR presents the performance and risk assessment of various segments of the financial sector — banks, microfinance banks (MFBs), development finance institutions (DFIs), non-bank financial institutions (NBFIs), insurance companies, financial markets and financial market infrastructures (FMIs).

It also assesses the non-financial corporate sector, a major user of bank credit. “Strong balance sheet growth was primarily driven by investments in government securities,” said the FSR.

“The share of investments in the asset mix increased to 62pc from 55.5pc the previous year,” it added. The FSR also indicates that banking in Pakistan mostly revolves around government papers.

SBP report says growth mainly driven by investment in govt securities

On the funding side, deposits grew by 24.7pc, reversing the impact of sharp slowdown in CY24, said the FSR. Besides a large exposure to low-risk sovereign securities, a high share of credit-worthy borrowers in banks’ loan portfolio indicates contained credit risk. Rated borrowers constitute around 62pc of banks’ corporate and commercial loans. It also indicates that banks are not lending to private sector as they carry risks.

Liquidity profile

The liquidity profile of the banking sector remained strong during CY25. The treasury securities — representing the substantial part of asset base at 58.6pc — have an active secondary market, helping banks in managing daily liquidity needs.

Banks’ after-tax earnings have grown by 11.2pc as this growth was mainly volume driven, key earning indicators slightly moderated. “The tax charges on banks’ pre-tax profits rose to 54.3pc in CY25 from 52.9pc in CY24,” said the SBP publication.

The banking sector’s solvency further strengthened as Capital Adequacy Ratio (CAR) improved to 20.8pc at the end 2025 (20.6pc at end 2024).

The prevailing CAR level remains well above the domestic and international minimum benchmarks of 11.5pc and 10.5pc, respectively.

Islamic banking institutions (IBIs) continued their growth momentum during CY25, reaching 23pc of the total banking sector assets, said the FSR.

With the highest-ever branch expansion during the year, IBIs’ assets grew by 30.7pc and outpaced growth of their conventional counterparts for the second consecutive year. Investments and financing both witnessed remarkable growth during the year under review, supported by a notable growth in deposits.

Published in Dawn, May 6th, 2026