SBP report highlights steady performance of Pakistani banks
The State Bank of Pakistan (SBP) has released
its Mid-Year Performance Review of the Banking
Sector for 2025, covering January–June (H1CY25). The review highlights
steady performance, robust capital buffers, and resilience despite a
challenging macroeconomic environment.
Growth in assets and deposits
The banking sector’s asset base grew 11% in
H1CY25, driven mainly by investments in government securities to meet fiscal
financing needs. While overall advances to the public and private sectors
contracted, fixed investment loans to SMEs continued to expand.
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On the funding side, deposits surged 17.7%, reducing reliance on borrowings and strengthening banks’ liquidity position.
Credit risk and asset quality
Credit risk remained broadly contained.
Although gross non-performing loans (NPLs) inched up to 7.4% of total
loans—largely due to a contraction in advances—the net NPL ratio improved to -0.5%,
as banks maintained strong provisioning buffers.
Earnings and profitability
Earnings stayed stable, supported by higher
volumes of earning assets. The sector’s Return on Assets (ROA) was unchanged at
1.3%, while Return on Equity (ROE) stood at 21.3%, broadly consistent with
December 2024 levels.
Strong capital adequacy
The sector’s solvency position improved, with
the Capital Adequacy Ratio (CAR) rising to 21.4%, comfortably above the
regulatory minimum of 11.5%. Stress tests confirmed that CAR would remain well
above minimum thresholds under both baseline and severe stress scenarios,
underscoring resilience against potential credit and market shocks.
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Financial markets and risk outlook
Financial markets saw higher volatility in
H1CY25 compared to late 2024, mainly due to equity market fluctuations tied to
trade tariff uncertainty and geopolitical developments.
Findings from the SBP’s Systemic Risk Survey
(SRS) show that experts rank geopolitical risk as the most significant concern.
However, they expressed confidence in the financial system’s stability and the
SBP’s ability to manage unexpected shocks.
Source: Profit Pakistan