Pakistan Banking Sector Shows Resilience in H1CY26, Says SBP
The State Bank of Pakistan reports a 9.1% balance‑sheet expansion, lower NPL ratio and strong capital adequacy for banks in the first half of 2026, signalling sector stability despite modest earnings.
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Desk Analysis
How This Affects the Exchange
Sector Effect
Positive · Buy bias
Banks show strong balance‑sheet growth and lower NPLs, indicating a positive outlook and a buy bias for banking tickers.
Sectors & Direction
Desk read
Desk call: Buy bias · Positively affected
- BanksPositively affected
Companies
Mentions in This Briefing
Sectors: Banks — Positive · Buy bias. PSX tickers: HBL, MCB, UBL, ABN, BANK, CIB. Banks show strong balance‑sheet growth and lower NPLs, indicating a positive outlook and a buy bias for banking tickers.
Full Story
Open on Business Recorder## Overview
The State Bank of Pakistan (SBP) released its Mid‑Year Performance Review for the banking sector, confirming that the industry remained resilient during the first half of calendar year 2026 (H1CY26). Total assets grew by 9.1% year‑on‑year, driven mainly by higher holdings of government securities and a rise in advances to both public and private borrowers.
## Credit Growth and SME Support
Advances expanded across the board, with long‑term financing to small and medium enterprises (SMEs) continuing its upward trend. Mortgage lending also gained momentum, bolstered by the government’s subsidised housing scheme.
## Deposit Mobilisation
Banks attracted an additional Rs 3.673 trillion in deposits during the period, reinforcing liquidity positions.
## Asset Quality Improvements
The non‑performing loan (NPL) ratio fell to 5.5% in June 2026 from 6.1% at the end of 2025, reflecting a sharp reduction in bad loans and a rise in new advances. Provisioning coverage improved to 110.2% from 107.7%.
## Profitability and Solvency
Despite the balance‑sheet growth, profitability was modest. Return on assets slipped to 1.1% and return on equity to 19%, down from 1.3% and 21.3% respectively a year earlier. Nonetheless, the sector’s capital adequacy ratio (CAR) remained robust at 19.6%, indicating strong solvency.
## Stress‑Test Results and Risks
SBP’s latest macro‑stress tests project that large systemically important banks can withstand severe shocks over the next two years. While equity‑market stress rose due to Middle‑East geopolitical tensions, foreign‑exchange and money‑market conditions stayed relatively calm. Commodity‑price volatility, especially oil, and global geopolitical risks were flagged as top systemic concerns.
## Outlook
Overall, the banking sector’s balance‑sheet expansion, improved asset quality and high capital buffers suggest continued stability, even as earnings pressure and external risks persist.