Banks Expected to Report Lower Profits for Q2 2026

Pakistan’s banking sector is expected to record a 10 percent quarter on quarter decline in earnings during the second quarter of 2026, mainly due to the absence of unusually high capital gains recorded by some banks in the previous quarter.

According to an earnings preview by Topline Securities, the banking sector’s profit after tax is estimated to reach Rs. 121.9 billion in 2Q2026, compared with Rs. 135.5 billion in the previous quarter.

On a year on year basis, earnings are expected to decline by 1 percent due to higher operating expenses and the return of provision charges compared with reversals recorded during the same period last year.

The sector’s profit before tax is projected to decrease by 10 percent year on year to Rs. 254.2 billion in 2Q2026, while the decline is expected to be 11 percent compared with the previous quarter. A lower effective tax rate of 52 percent is likely to partially offset the impact of weaker profitability.

Despite pressure on overall earnings, banks are expected to see improvement in their core income streams. Net interest income is projected to increase 5 percent year on year to Rs. 409.4 billion, supported by loan growth, policy rate adjustments, and repricing benefits. On a quarterly basis, net interest income is expected to rise 4 percent.

However, non interest income is expected to remain under pressure, declining 13 percent year on year and 31 percent quarter on quarter to Rs. 84 billion. The decline is mainly attributed to lower capital gains compared with both the same period last year and the previous quarter.

Provision expenses are also expected to increase significantly, reaching Rs. 8.5 billion in 2Q2026 compared with a reversal of Rs. 1.3 billion recorded in the same quarter last year. Provisions are expected to rise 6.5 times compared with the first quarter of 2026.

Among individual banks, earnings performance is expected to remain mixed in 2Q2026. Meezan Bank is projected to report the highest earnings per share (EPS) among the covered banks at Rs. 13.7, representing a 2 percent year on year increase. United Bank Limited is expected to follow closely with EPS of Rs. 13.6, reflecting the strongest year on year growth of 19 percent. Habib Bank’s earnings are expected to remain stable, with EPS estimated at Rs. 12.2.

On the downside, Bank Alfalah is projected to record the largest decline, with EPS falling 26 percent year on year to Rs. 1.9, while National Bank of Pakistan and Bank Al Habib are expected to post declines of 15 percent and 14 percent, respectively. Dividend payouts are expected to remain stable, with MCB and UBL maintaining some of the highest expected quarterly payouts at Rs. 9 and Rs. 8 per share, respectively.

Topline Securities expects banks to maintain quarterly dividend payouts due to their comfortable capital buffers. The brokerage also expects banks’ revaluation reserves to remain largely stable, supported by improved secondary market prices and repricing of floating Pakistan Investment Bonds.