KARACHI: Pakistan’s listed banks’ profitability clocked in at Rs137 billion, up 4 per cent year-on-year in the second quarter of 2024, according to a report from Topline Research issued on Friday.

“Excluding National Bank (NBP), profitability increased by 26pc YoY in 2Q2024. This growth was primarily driven by an increase in Net Interest Income (NII) and Non-Interest Income,” said the report.

Similarly, on a quarter-on-quarter (QoQ) basis, listed banks’ profitability was down 10 per cent, mainly due to a one-time loss booked by NBP. Excluding NBP, profitability was up 2 per cent QoQ.

To highlight, NBP booked a one-time loss of Rs49bn in the second quarter of 2024 related to the settlement of a pension case after the Supreme Court verdict.

Despite the decline in interest rates, the sector’s NII clocked in at Rs488bn, up 7 per cent YoY and 4 per cent QoQ in 2Q2024, led by volumetric growth and favourable re-pricing impact. Interest income was up by 35 per cent YoY and 6 per cent QoQ to Rs1.8trn, whereas interest expense was up by 47 per cent YoY and 6 per cent QoQ to Rs1.4trn.

The non-interest income of the sector was up by 49pc YoY and 2pc QoQ to Rs127bn in 2Q2024, primarily due to the gain in securities and higher FX income. On the other hand, non-interest expenses went up 20 per cent YoY and 7 per cent QoQ to Rs260bn in 2Q2024 due to higher admin expenses, which is in line with the inflation trend.

The cost-to-income ratio of the sector clocked in at 45pc in 2Q2024 compared to 43pc in 2Q2023 and 44 per cent in 1Q2024.

The effective tax rate for 2Q2024 clocked in at 49 per cent vs 52 per cent in 2Q2023 and 50pc in 1Q2024.

In the first half of 2024, banks’ profitability increased by 12pc YoY to Rs289bn, mainly driven by a 13pc growth in NII to Rs881bn and a 56pc jump in non-interest income.

“For our analysis, we have taken all listed banks that have announced their financial results except for Silkbank, which has not yet announced its,” said the report.

Published in Dawn, August 31st, 2024