Pakistan Banking Sector Predicts Modest Earnings Growth with Market Weight Stance

Karachi: The banking sector in Pakistan is poised for a modest growth in earnings for the third quarter of 2025, according to a recent analysis. The Topline Banking Universe is projected to see a 2% year-on-year increase in earnings, driven primarily by higher interest income and lower provisioning charges. However, this growth is tempered by an expected 4% decline in non-interest income.

The sector’s profit before tax is anticipated to rise by 4% year-on-year, reflecting similar factors. Net interest income is projected to grow by 6% to Rs330 billion, attributed to volumetric growth, while non-interest income is expected to decline due to lower capital gains.

Provision expenses are likely to decrease significantly by 86% year-on-year, with some banks expected to report reversals, as indicated by data from the State Bank of Pakistan.

Quarter-on-quarter, the profit before tax earnings are expected to drop by 5%, despite a 3% increase in overall earnings due to higher taxation in the previous quarter.

For the first nine months of 2025, the Topline Banking Universe’s earnings are expected to reach Rs314 billion, marking a 7% year-on-year increase. Profit before tax for the period is likely to hit Rs688 billion, a 15% rise. United Bank and Habib Bank are projected to lead in earnings growth, with increases of 104% and 19% year-on-year, respectively.

Banks are predicted to maintain their current payout levels in the third quarter, supported by adequate buffers above minimum requirements. The market weight stance on the banking sector remains unchanged, with Bank Alfalah, Habib Bank, and MCB highlighted as top picks.