ISLAMABAD: Pakistan’s Banking sector is expected to report lower profits during the second quarter of 2026, mainly due to the absence of one-time capital gains that boosted earnings in the previous quarter.
According to market estimates, the Banking sector is likely to post a profit after tax (PAT) of Rs121.9 billion during the April-June quarter. This represents a 10 percent decline compared to the Rs135.5 billion reported in the first quarter of 2026.
On a yearly basis, profits are projected to fall by around 1 percent. Analysts attribute the decline to rising operating expenses and the return of provisioning charges after banks benefited from provision reversals during the same period last year.
Profit before tax (PBT) for the Banking sector is expected to reach Rs254.2 billion. This would mark a 10 percent decline year-on-year and an 11 percent decrease quarter-on-quarter.
Despite the lower pre-tax earnings, analysts believe a reduced effective tax rate of nearly 52 percent will help limit the overall impact on net profits.
While overall earnings are expected to soften, banks’ core lending business is likely to remain stable. Net interest income (NII), which reflects earnings from lending activities, is forecast to increase by 5 percent year-on-year to Rs409.4 billion.
On a quarterly basis, NII is also expected to rise by 4 percent. The increase is supported by stronger loan growth, changes in the policy interest rate, and the repricing of earning assets.
In contrast, non-interest income is expected to decline sharply. Analysts estimate it will fall to around Rs84 billion, representing a 13 percent drop from last year and a 31 percent decline from the previous quarter.
The main reason for this decrease is the absence of exceptional capital gains that had significantly supported earnings in recent quarters. Without those one-time gains, banks are expected to rely more heavily on their core banking operations.
Provisioning expenses are also expected to weigh on profitability. Banks are likely to record around Rs8.5 billion in provisioning costs during the second quarter.
This marks a major change from the same period last year when banks recorded a provision reversal of Rs1.3 billion. Compared with the first quarter of 2026, provisioning expenses are expected to increase by nearly 6.5 times.
Analysts say this trend reflects a return to more normal credit costs after an unusually favorable period last year. Higher provisioning generally reduces short-term profits but helps banks strengthen their financial position against future risks.
Despite the expected decline in earnings, dividend payouts are likely to remain stable. Pakistan’s major banks continue to maintain strong capital positions, allowing them to reward shareholders.
Among the leading institutions, MCB Bank is expected to announce a quarterly dividend of Rs9 per share. United Bank Limited (UBL) is also expected to maintain its quarterly dividend at Rs8 per share.
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Market experts believe the Banking sector remains financially strong despite the temporary decline in profits. They expect the industry’s core business performance and healthy capital base to support long-term stability, even as earnings normalize during the second quarter of 2026.
