KARACHI : The State Bank of Pakistan (SBP) has issued the Mid-Year Performance Review (The Review) of
the Banking Sector for 2025. The Review covers the performance and soundness of banking sector for
the period from January to June 2025 (H1CY25). It also briefly discusses the performance of financial
markets as well as the results of the Systemic Risk Survey (SRS), which represents the views of
independent experts about key current and potential future risks to financial stability.
As per official announcement, the Review highlights that banks managed to grow their asset base by 11.0 percent in H1CY25.
Investments in government securities primarily supported the asset growth, reflecting government’s
needs from the banking sector. Advances observed contraction across both public and private sectors.
Nonetheless, fixed investment advances to SMEs continued to grow. On funding side, deposits grew at
an impressive pace of 17.7 percent, leading to a decline in banks’ reliance on borrowings.
The Review notes that the credit risk of banking sector remained contained. Non-performing loans of
the sector declined during the period under review, however, due to contraction in advances, the gross
NPLs to loans ratio marginally deteriorated to 7.4 percent in June 2025. Nonetheless, as the banks hold
higher stock of provisions for loan losses, the net NPLs to net Loans ratio clocked at negative 0.5
percent, reflecting muted risks on net basis. The earnings of the sector remained steady — backed by
rising volumes of earning assets. Accordingly, the Return on Asset (ROA) and Return on Equity (ROE)
remained steady at 1.3 percent (1.3 percent in December-2024) and 21.3 percent (21.5 percent in
December-2024), respectively. The solvency position of the banking sector also remained strong as the
Capital Adequacy Ratio (CAR) improved to 21.4 percent (20.6 percent in December-2024) and was well
above the minimum regulatory requirement. The latest stress test results reveal that CAR of the
banking sector is expected to remain comfortably above the minimum regulatory requirement of 11.5
percent under both baseline as well as hypothetically severe stressed macro-financial scenarios over
the two-year forecast horizon. Results also indicate strong resilience of banks to withstand hypothetical
shocks to credit and market risk factors.
The Review shows that financial markets exhibited a relatively higher volatility in H1CY25 as compared
to H2CY24, mainly stemming from equity market owing to short-lived impact of trade tariffs
uncertainty and geopolitical tensions. The independent respondents in the latest wave of the Systemic
Risk Survey highlight geopolitical risk as the topmost risk, however they expressed confidence in the
stability of the financial system and the ability of the regulator to manage any unforeseen shocks.
