KARACHI, Oct 31 (Focus Pakistan) - Pakistan banks profit fell 4% year-on-year to Rs165 billion in the third quarter of 2026, as operating costs grew more than four times faster than net interest income, according to a sector review by analysts.
Profit also slipped 2% from the preceding quarter. Nine-month earnings stood at Rs506bn, down 1% year-on-year.
The cost line tells most of the story. Non-interest expenses climbed 14% to Rs374bn, and one lender drove the bulk of that jump. United Bank Limited (UBL) lifted its expenses 66% as it pushed its growth strategy and expanded its branch network. Strip UBL out, and sector-wide expense growth drops to 7%.
UBL still finished first. The bank earned Rs30.7bn in the quarter, ahead of Meezan Bank at Rs26.0bn, Habib Bank Limited (HBL) at Rs19.6bn, National Bank of Pakistan (NBP) at Rs16.3bn and MCB Bank at Rs16.2bn.
Efficiency took the hit. The sector’s cost-to-income ratio rose to 52.8% from 51.3% in the April–June quarter and 47.9% a year ago. Put simply, banks now spend almost 53 paisa to earn each rupee of income.
Thin growth in core income
Net interest income, the banks’ core lending margin, rose just 3% year-on-year to Rs556bn on the back of volume growth. Asset repricing pushed it 6% higher from the previous quarter.
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Performance split sharply. BankIslami Pakistan, JS Bank, Askari Bank and Meezan Bank grew net interest income by 10–24%. Samba Bank, Soneri Bank, NBP and Habib Metropolitan Bank saw declines of 6–13%.
Non-interest income gained 4% to Rs153bn, helped by fees and foreign exchange earnings. The quarterly picture looked worse. It fell 14% from April–June as capital gains and FX income dried up. That drop, combined with a 4% sequential rise in costs, explains the quarter-on-quarter dip in profit. UBL, Meezan and Askari led the cost increase, raising expenses by 12–20% from the previous quarter.
Reversals soften the blow
Bad-loan provisions worked in the banks’ favour. The sector recorded a provision reversal of Rs11.3bn, against a Rs1.5bn charge in the same quarter last year. Reversals over nine months reached Rs19.2bn.
The exchequer kept its outsized share. Banks paid an effective tax rate of 52.5%, unchanged from the second quarter and marginally below 53.3% a year earlier. More than half of every rupee of pre-tax profit went to the government.
Pakistan banks profit: winners and losers
BankIslami posted the sharpest earnings growth at 59%. Bank Alfalah followed at 46%, Bank AL Habib at 27%, HBL at 16% and Meezan at 11%.
At the other end, Bank of Khyber, Soneri Bank, NBP, Habib Metropolitan Bank and Allied Bank reported profit declines ranging from 17% to 43%. Bank Makramah slipped into a Rs1.1bn loss.
Most lenders kept their quarterly payouts going. MCB declared Rs9.0 per share, Meezan and UBL Rs8.0 each, HBL Rs6.0, Allied Bank Rs4.0 and Bank AL Habib Rs3.5. Habib Metropolitan announced Rs2.5 and Askari Rs2.0, while Bank Alfalah and Faysal Bank paid Rs1.5 each.
Cheap on paper
Banking universe trades at 7.3 times estimated 2026 earnings and 1.4 times book value, with a return on equity of 21%. The brokerage holds a “market weight” stance on the sector.
Its two top picks: Meezan Bank and UBL, the lender that spent most aggressively this quarter.
