Pakistan’s listed banks recorded Rs168 billion in profit during the second quarter of 2026, remaining flat year-on-year but declining 4% compared with the previous quarter, according to a sector research report issued on August 28.
The latest results take the banking sector’s 1H2026 earnings to Rs342 billion, also broadly unchanged from the same period last year.
The quarterly decline was mainly attributed to higher expenses and weaker net interest income (NII). Non-interest expenses increased 7% QoQ to Rs361 billion, while NII declined 2% to Rs527 billion.
The impact was partially offset by a 4% quarterly increase in non-interest income to Rs177 billion, supported by higher foreign exchange income.
Net interest income declined 2% YoY and 2% QoQ during 2Q2026, reflecting the delayed impact of the April 2026 interest rate hike.
However, the decline was partly cushioned by banks’ focus on current-account deposits and growth in lending and deposit volumes.
JS Bank, Bank of Punjab, Bank Alfalah and Askari Bank recorded NII growth of 6% to 24% YoY, while Samba Bank, Soneri Bank, National Bank of Pakistan and Habib Metropolitan Bank posted NII declines ranging from 16% to 31%.
Non-interest income increased 23% YoY and 4% QoQ, reaching Rs177 billion. Askari Bank recorded the strongest growth at 128% YoY, followed by United Bank at 87%, Bank AL Habib at 49% and MCB Bank at 29%.
Non-interest expenses increased 15% YoY and 7% QoQ, pushing the sector’s cost-to-income ratio to 51.3%, compared with 48% in the previous quarter and 45.9% in 2Q2025.
Askari Bank, United Bank, Meezan Bank and Bank AL Habib recorded cost growth of 20% to 41% YoY, mainly due to branch expansion and inflation-linked staff expenses.
The sector recorded a Rs6.2 billion provision reversal during the quarter, compared with Rs8 billion in 2Q2025 and Rs1.8 billion in 1Q2026. United Bank accounted for Rs3.8 billion of the latest reversal.
The effective tax rate stood at 52.5% in 2Q2026, compared with 55.8% a year earlier and 52.4% in the previous quarter.
United Bank (UBL) reported the highest quarterly earnings at Rs37.5 billion, followed by:
- Meezan Bank: Rs26.2 billion
- Habib Bank: Rs18.4 billion
- National Bank of Pakistan: Rs16.6 billion
- MCB Bank: Rs15 billion
On a year-on-year basis, JS Bank posted the highest earnings growth at 704%, although this was driven by a low base. It was followed by Askari Bank at 91%, UBL at 31% and Bank Alfalah at 27%.
Bank of Khyber, Standard Chartered Pakistan, Habib Metropolitan Bank and NBP recorded earnings declines ranging from 21% to 74% YoY. Bank Makramah reported a Rs3.9 billion loss.
Most listed banks maintained their quarterly dividend payouts. Meezan Bank increased its dividend to Rs8 per share.
MCB announced a dividend of Rs9 per share, while UBL announced Rs8, HBL Rs6, Allied Bank Rs4, Bank AL Habib Rs3.5, Habib Metropolitan Bank Rs2.5, Askari Bank Rs2 and both Bank Alfalah and Faysal Bank Rs1.5 per share.
For half-yearly dividends, Standard Chartered Pakistan announced Rs3 per share, Bank of Punjab Rs1.6 and BankIslami Rs1.5 per share.
The banking sector is currently trading at an estimated 2026 price-to-earnings ratio of 8.1x and price-to-book value of 1.5x, with an estimated return on equity of 19%.
The research house maintained a “market weight” stance on the banking sector, identifying Meezan Bank and United Bank as its top picks.
