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Commercial banks are likely to report lower profitability in the second quarter of 2026 due to increased provisions on bad loans and the decline in the non-interest income sources, which will weigh on the earnings despite good banking activities.
The banking sector’s profit after tax (PAT) is expected to drop to around Rs112 billion in the April-June quarter as compared to Rs133 billion in the previous quarter, market data said. However, the profit is still anticipated to be slightly up from the same period of the previous year.
One of the reasons of the expected drop, the report indicates, is the significant rise in provisions for potential bad loans. Meanwhile, falling capital gains and dividend incomes are also likely to impact on profitability.
Banks are still making decent profits on their lending but growth of net interest income is slowing due to a declining margin. The analysts suggest that the industry is now moving into a period where growing business volumes will be increasing in significance rather than on increases in the margins of the loan.
The revenues of banking services are expected to be relatively stable, with some major banks to post moderate increases in this segment due to fees. Non-interest income, though, is expected to drop overall from last quarter.
Although the slowdown is to be expected, the banking sector is financially sound. In the first half of 2026, the revenues and after-tax profits of banks were still higher than in the same period of the previous year, thanks to a moderate growth in lending and the strengthening of their business.
The banking sector in Pakistan might also be a winner in the long run as the country’s gradual transition to a cash-less and digital economy is expected to help the industry in the future, market analysts further added. The growth of digital banking services and the greater amount of financial transactions will help support deposit growth and drive efficiencies in operations.
Experts are confident that the sector will continue to be stable as the economy improves and financial changes continue, although short-term adversity is still ahead.
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