Listed banks' profits fall 4% to Rs165bn in 3Q2026

Nine-month earnings fall 1% to Rs506bn as non-interest expenses rise 14% despite growth in interest income Pakistan's listed banks reported a 4% year-on-year decline in combined profitability to Rs165 billion during the third quarter of 2026, while earnings fell 2% compared with the preceding quarter, mainly due to higher operating expenses and reduced non-interest income. According to a report issued by Topline Securities, cumulative earnings for the first nine months of 2026 stood at Rs506 billion, down 1% from the corresponding period last year. Net interest income (NII) increased by 3% year-on-year to Rs556 billion during the July-September quarter, supported by growth in business volumes. On a quarterly basis, Net interest income rose by 6%, primarily due to asset repricing. BankIslami Pakistan (BIPL), JS Bank (JSBL), Askari Bank (AKBL) and Meezan Bank (MEBL) recorded NII growth ranging from 10% to 24% year-on-year. In contrast, Samba Bank (SBL), Soneri Bank (SNBL), National Bank of Pakistan (NBP) and Habib Metropolitan Bank (HMB) reported declines of 6% to 13%. Non-interest income increased by 4% year-on-year to Rs153 billion, supported by higher fee-based and foreign exchange earnings. However, it declined by 14% compared with the previous quarter because of lower capital gains and foreign exchange income. Meanwhile, non-interest expenses increased by 14% year-on-year to Rs374 billion, with United Bank Limited (UBL) reporting a 66% rise in expenses associated with its growth strategy and branch expansion. Excluding UBL, expense growth across the remaining banks stood at 7% year-on-year. On a quarterly basis, non-interest expenses increased by 4%, with UBL, Meezan Bank and Askari Bank recording increases ranging from 12% to 20%. Consequently, the banking sector's cost-to-income ratio increased to 52.8% in the third quarter, compared with 51.3% in the preceding quarter and 47.9% in the corresponding quarter of 2025. The sector recorded provision reversals of Rs11.3 billion during the quarter, compared with provisioning charges of Rs1.5 billion a year earlier. Cumulative provision reversals reached Rs19.2 billion during the first nine months of 2026, providing support to overall earnings. The effective tax rate stood at 52.5%, unchanged from the preceding quarter but lower than 53.3% recorded in the third quarter of 2025. Among individual banks, UBL recorded the highest quarterly profit of Rs30.7 billion, followed by Meezan Bank at Rs26 billion, Habib Bank Limited (HBL) at Rs19.6 billion, National Bank of Pakistan at Rs16.3 billion and MCB Bank at Rs16.2 billion. In terms of earnings growth, BankIslami led with a 59% year-on-year increase, followed by Bank Alfalah (BAFL) at 46%, Bank AL Habib (BAHL) at 27%, HBL at 16% and Meezan Bank at 11%. Conversely, Bank of Khyber (BOK), Soneri Bank, National Bank of Pakistan, Habib Metropolitan Bank and Allied Bank (ABL) recorded earnings declines ranging from 17% to 43% year-on-year. Bank Makramah (BML), meanwhile, reported a quarterly loss of Rs1.1 billion. Most banks maintained their quarterly dividend distributions. MCB Bank announced a dividend of Rs9 per share, while Meezan Bank and UBL declared Rs8 per share each. HBL announced a dividend of Rs6 per share, followed by Allied Bank at Rs4, Bank AL Habib at Rs3.5, Habib Metropolitan Bank at Rs2.5 and Askari Bank at Rs2 per share. Bank Alfalah and Faysal Bank (FABL) announced dividends of Rs1.5 per share each. The brokerage maintained a market-weight stance on the banking sector, identifying Meezan Bank and UBL as its preferred stocks.