Qudsia Bano

Banking professionals believed Pakistan’s financial sector had shown resilience in the first half of 2025, even as the lending activity slowed and external uncertainties added pressure to the wider economy.

Their views align with the State Bank of Pakistan’s (SBP) Mid-Year Performance Review, which points to strong buffers and consistent profitability across the sector. From a banker’s perspective, the most striking feature of the first half was how well deposits grew, said Nosheen Ahmed, Treasury Manager at Faysal Bank Limited.

With deposits rising by over 17 percent, the banks were less reliant on expensive borrowings. That cushion, along with steady income from government securities, helped maintain stability despite muted credit growth. The SBP Review notes that between January and June 2025, the banking sector’s asset base expanded by 11 percent, largely driven by investments in government securities.

However, the public and private sector advances contracted. The only exception was the SME segment, where fixed investment loans showed an encouraging uptick – a sign that targeted lending opportunities are still present. Credit risks remained manageable. The non-performing loans declined in absolute terms, though the gross NPL ratio edged up to 7.4 percent due to lower advances.

The provisions remained high, keeping the net NPL ratio at a negative 0.5 percent. According to Imran Siddiqui, Senior Lending Officer at the Soneri Bank, this highlights how the banks prioritise risk management. “Most institutions have built stronger buffers after the recent cycles of stress.

That is why even with a dip in lending, the sector’s solvency and profitability are not at risk,” he said. The SBP’s Systemic Risk Survey confirmed that experts viewed geopolitical risk as the leading challenge, but remained confident in the regulator’s ability to safeguard financial stability.

Experts agreed that while headline numbers reflected stability, the real test for the banking sector would come from how effectively it could revive credit flows without compromising risk discipline.

Credit: INP-WealthPk