Karachi, March 3, 2025 – The banking sector in Pakistan has reported a notable increase in after-tax earnings, reaching Rs 597 billion for the year ending December 31, 2024. This marks a 5% year-on-year (YoY) growth compared to Rs 567 billion recorded in the previous year, demonstrating the resilience of banks amid evolving economic conditions.
According to a report by Topline Securities Limited, Pakistan’s listed banks posted Rs 153 billion in profitability for the fourth quarter of 2024 (4Q2024), reflecting a 1% YoY decline and a 2% quarter-on-quarter (QoQ) dip. Despite the overall decrease in interest rates, the sector’s Net Interest Income (NII) reached Rs 523 billion, up 5% YoY and 4% QoQ in the third quarter of 2024 (3Q2024), supported by volumetric growth and favorable repricing effects.
Total interest income witnessed a 4% YoY and 13% QoQ decline, settling at Rs 1.6 trillion, while interest expenses dropped by 8% YoY and 20% QoQ, reaching Rs 1.1 trillion. Meanwhile, non-interest expenses surged by 30% YoY and 42% QoQ to Rs 329 billion in 4Q2024, primarily due to NBP’s one-time pension expense of Rs 57 billion for the full year.
The banking sector’s cost-to-income ratio rose to 47% in 4Q2024, compared to 40% in 4Q2023 and 42% in 3Q2024. Additionally, provisioning charges increased by 39% YoY and 29% QoQ to Rs 34 billion, mainly due to the implementation of IFRS-9 and sectoral stress in textile and steel industries.
The effective tax rate for 4Q2024 was 56%, up from 53% in 3Q2024, reflecting the increase in the overall tax rate for banks from 49% (including super tax) to 54%.
For 2024, bank profitability was primarily driven by a 9% growth in NII to Rs 1.9 trillion and a 50% jump in Non-Interest Income to Rs 560 billion. Key banking institutions that reported the highest profits include Meezan Bank (Rs 101.5 billion), United Bank (Rs 75.8 billion), MCB Bank (Rs 63.5 billion), Habib Bank (Rs 57.8 billion), and Standard Chartered Bank (Rs 46.1 billion).
In contrast, Bank Makramah (BML) was the only bank to report a loss of Rs 5.2 billion. The highest YoY NII growth was recorded by Meezan Bank (27%), Bank Al Habib (26%), JS Bank (22%), United Bank (16%), and BankIslami (15%).
Most banks maintained their dividend payouts in 2024, with NBP resuming dividends after seven years, declaring Rs 8 per share, its highest payout ever. Moving forward, experts anticipate continued healthy profitability in the sector.
The banking sector remains an attractive investment, with Topline Banking Universe trading at a 2025E PE of 5.7x and a PBV of 1.0x, offering a Return on Equity (ROE) of 18%. Analysts maintain a ‘market weight’ stance on the banking sector, with Meezan Bank (MEBL) and Habib Bank (HBL) as top investment picks.