KARACHI, May 5, 2026 – Pakistan’s banking sector posted strong growth in 2025, largely driven by increased investments in government securities, according to the latest report by the State Bank of Pakistan (SBP).
The central bank, in its Financial Stability Review 2025, highlighted that banks maintained resilience and steady performance despite economic challenges.
Strong Balance Sheet Growth
The SBP reported that the banking sector’s balance sheet expanded by 17.8% in 2025, compared to 15.8% in the previous year.
This growth was primarily fueled by investments in government securities, whose share in total assets increased to around 62%, up from 55.5% a year earlier.
Deposits Rise, Borrowing Declines
On the funding side, deposits recorded robust growth of 24.7%, reversing the slowdown seen in 2024.
As a result, banks reduced their reliance on borrowings, with its share in the asset base declining to 25.1% from 27.9%.
Lending Trends and Credit Risk
Advances declined by 6.0%, mainly due to the high base effect from last year’s ADR-linked tax policy. However, after adjusting for this effect, lending activity showed improvement.
Credit risk remained contained:
• Non-performing loans (NPLs) ratio fell to 6.1% (from 6.3%)
• Loan-loss coverage improved to 107.7%
A large proportion of loans were extended to creditworthy borrowers, further strengthening asset quality.
Liquidity and Market Stability
The banking sector maintained a strong liquidity position, supported by a significant share of treasury securities in assets.
Key liquidity indicators remained well above regulatory requirements:
• Liquidity Coverage Ratio (LCR): 215.0%
• Net Stable Funding Ratio (NSFR): 174.3%
Market risk also remained limited due to low exposure to foreign exchange and equities.
Profitability and Capital Strength
After-tax profits of banks increased by 11.2% in 2025, although key profitability ratios slightly declined:
• Return on Assets (ROA): 1.2%
• Return on Equity (ROE): 19.8%
Meanwhile, the Capital Adequacy Ratio (CAR) improved to 20.8%, well above both domestic and international benchmarks.
Growth in Islamic Banking
Islamic Banking Institutions (IBIs) continued to expand, reaching 23% of total banking sector assets.
• Assets grew by 30.7%
• Non-performing financing ratio declined to 2.4%
However, profitability indicators moderated compared to the previous year.
Outlook
The SBP noted that the banking sector remains well-capitalized and resilient, supported by strong earnings, improved asset quality, and adequate liquidity buffers.
The central bank expects the sector to continue supporting economic activity while maintaining financial stability in the coming period.