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KARACHI: The first quarter of 2025 has brought with it a mixed financial landscape for Pakistani commercial banks. The sector is experiencing a noticeable slowdown in profit growth despite rising interest income.
Profitability is being squeezed by declining investment returns, rising operating expenses, and ongoing fluctuations in foreign exchange rates.
While banks continued to earn from core operations and fee-based services, the drop in returns from investments, particularly government securities and Islamic financing assets, offset much of the gains.
Meezan Bank’s Profit Drops 10.6% YoY to Rs22.42 Billion
The largest Islamic bank in the country, Meezan Bank, was particularly impacted by a 9.7% fall in income from Islamic financing and related assets.
Additionally, its earnings took a significant hit as “dividend income and securities gains… fell by 69% and 81%, respectively.”
Fee-based revenues and foreign exchange transactions provided some support, but not enough to reverse the declining profitability trend.
Bank Islami’s Earnings Decline
Bank Islami also reported a disappointing quarter, with after-tax profit falling from Rs3.21 billion in 2024 to Rs2.61 billion in 2025, representing an 18.72% decline. Though the bank saw a 6.34% increase in total income, core operations struggled. A 33.90% drop in profit from its core lending and investment activities reflected the stress in the market.
Interestingly, “a sharp increase in gains on securities… rose by 874.65%“, offering some cushion.
However, a 66.78% plunge in foreign exchange income and growing expenses weighed down the bottom line.
Bank of Punjab reports modest growth
In contrast, Bank of Punjab (BOP) managed to stay in the green, reporting a 6% increase in profit, rising to Rs1.79 billion. This came despite significant fluctuations in other income streams. Net interest income surged by 75%, but it wasn’t enough to create a sharp rise in overall profitability.
The broader banking sector in Pakistan appears to be entering a period of consolidation, where gains from interest-based income are being offset by low-yielding investments, reduced spreads, and rising costs.
This trend reflects the ongoing uncertainty in Pakistan’s macroeconomic landscape. Regulatory constraints, inflation-driven cost pressures, and foreign exchange income instability are further complicating the banks’ ability to grow profits sustainably.
