Banking sector balance sheet grows 17.8pc in CY25

KARACHI: Pakistan’s banking sector recorded 17.8 per cent growth in its balance sheet during calendar year 2025, up from 15.8pc in the preceding year, according to the State Bank of Pakistan’s annual Financial Stability Review released on Tuesday.

The review covers the performance and risk profile of banks, microfinance banks, development finance institutions, non-bank financial institutions, insurance firms, financial markets and financial market infrastructures. It also evaluates the non-financial corporate sector, which the report describes as a major user of bank credit.

According to the SBP publication, the expansion in the banking sector was led mainly by investment in government securities. "Strong balance sheet growth was primarily driven by investments in government securities," The review said and added that the share of investments in the asset mix rose to 62pc from 55.5pc a year earlier.

The report also showed strong growth on the funding side, with deposits increasing by 24.7pc during CY25, reversing the effect of the sharp slowdown seen in CY24.

Asset mix and liquidity position

The Financial Stability Review said the banking sector maintained a strong liquidity profile during the year under review. Treasury securities accounted for 58.6pc of the asset base and, their active secondary market helped banks manage daily liquidity requirements.

The review said banks’ exposure to low-risk sovereign instruments remained high. A significant share of credit-worthy borrowers in banks’ loan books pointed to contained credit risk. Rated borrowers made up around 62pc of banks’ corporate and commercial lending portfolio.

Earnings, taxation and solvency

The SBP said banks’ after-tax profits rose by 11.2pc in CY25. The increase was mainly driven by volumes, while key earnings indicators showed slight moderation.

On taxation, the central bank’s publication stated that the tax charges on banks’ pre-tax profits rose to 54.3pc in CY25 from 52.9pc in CY24, indicating a higher tax burden compared to the previous year.

The sector’s solvency position also improved further during the year. The Capital Adequacy Ratio increased to 20.8pc at the end of 2025, compared to 20.6pc at the end of 2024. This level remained comfortably above both the domestic minimum benchmark of 11.5pc and the international minimum benchmark of 10.5pc.

Islamic banking posts faster growth

The review said Islamic banking institutions sustained their expansion in CY25 and reached 23pc of the total assets of the banking sector. That, with the highest-ever branch expansion during the year, Islamic banking assets grew by 30.7pc, outpacing conventional banks for the second consecutive year.

According to the Financial Stability Review, both investments and financing in the Islamic banking segment posted notable growth during the year, supported by a marked increase in deposits.

The SBP review overall presented a picture of continued expansion in the banking system during CY25, with growth led by government securities, a strong deposit base, improved capital buffers and continued momentum in Islamic banking.