Banking sector earnings preview: what to expect in 2QCY25?
Pakistan’s listed banks are about to report their earnings for the second quarter of 2025, and the numbers may not impress.
Taurus Securities expects the banks under its coverage to report 13% lower earnings QoQ and a 9% drop YoY in 2QCY25. Even the first half of the year is likely to show a small 1% earnings decline YoY.
Why the slowdown?
- Tighter Margins: Net Interest Margins (NIMs), the difference between what banks earn from loans and what they pay on deposits, are expected to shrink. The State Bank of Pakistan (SBP) cut its policy rate by 1% to 11%, which reduces how much banks earn from lending.
- Flat Fee Income: Non-markup income (like fees, commissions, and capital gains) is expected to stay flat. Weak trading income and lower capital gains hurt profitability.
- Rising Costs: Operating expenses are expected to rise 10% quarter-on-quarter due to seasonal factors, pushing the cost-to-income ratio to 49%.
- More Lending to Government, Less to Businesses: Industry Advance-to-Deposit Ratio (ADR) fell to 38%, showing that banks continue to favor lending to the government rather than private businesses.
Company-wise Expectations
Here’s a snapshot of expected EPS and dividends from major banks:
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Bank | EPS (2QCY25E) | EPS (1QCY25A) | DPS (2QCY25E) |
---|---|---|---|
MCB | 11.1 | 12.4 | 9.0 |
HBL | 10.5 | 11.3 | 4.5 |
UBL* | 11.4 (Actual) | 14.6 | 8.0 |
MEBL | 12.2 | 12.3 | 7.0 |
ABL | 6.1 | 7.4 | 4.0 |
BAFL | 4.3 | 4.5 | 2.5 |
FABL | 3.0 | 3.6 | 1.5 |
HMB | 4.9 | 5.8 | 2.5 |
BAHL | 8.2 | 9.7 | 3.5 |
BOP | 0.6 | 0.5 | NIL |
(*UBL’s numbers are already out and included for reference.)
Investment takeaway
Despite the temporary dip in earnings, dividend payouts are expected to stay strong, reflecting the solid histories of most banks. UBL has already announced a generous PKR 8/share dividend.
Long-term investors may find value in stable, high-dividend banks like MCB, MEBL, and HBL. With interest rates expected to gradually fall and economic activity recovering, better performance may follow in the second half of 2025.
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⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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