Central bank’s interest and markup income falls sharply as lower rates weigh on earnings
KARACHI: The State Bank of Pakistan (SBP) recorded a nearly 21% decline in net profit during fiscal year 2025-26 (FY26), mainly as higher tax payments coincided with a significant decline in interest and markup earnings.
According to the SBP’s consolidated financial statements for FY26, the central bank posted profit after tax of around Rs2 trillion, compared with Rs2.51 trillion in the preceding fiscal year.
The decline in profitability came despite a sharp turnaround in exchange-related earnings. The SBP recorded an exchange gain of Rs76.40 billion during FY26, compared with an exchange loss of around Rs55 billion in the previous year.
Tax expense rises 41%
The central bank’s income tax expense increased to Rs3.20 billion during FY26 from Rs2.27 billion in the preceding fiscal year, representing an increase of around 41%.
Meanwhile, total interest and markup earnings declined substantially to Rs1.92 trillion from Rs2.60 trillion a year earlier, reflecting the impact of lower interest rates and reduced earnings from interest-bearing assets.
The SBP’s total income stood at Rs2.11 trillion in FY26, compared with Rs2.60 trillion in the previous fiscal year.
Banknote printing costs increase
On the expenditure side, the central bank spent around Rs29 billion on the printing of banknotes and prize bonds during FY26, up from Rs24.67 billion in the preceding year.
General administrative expenses also increased to Rs61.53 billion from Rs52.25 billion, indicating higher operating costs during the year.
The increase in operating expenditure added further pressure to the central bank’s financial performance amid weaker income from its core interest and markup operations.
Comprehensive income falls
After accounting for unrealised amounts and expenses related to staff retirement benefits, the SBP’s total comprehensive income stood at Rs2.53 trillion in FY26, compared with Rs3.20 trillion in the previous fiscal year.
The financial results indicate that the decline in the SBP’s core interest and markup income more than offset the benefit from the reversal in exchange-related performance, resulting in a substantial reduction in annual profitability.
The rise in administrative and currency-printing expenses, alongside higher tax payments, also contributed to the weaker overall financial performance during FY26.