In 2022, eight of the Pakistans most profitable banks in 2022 reported all-time high profits while two banks reported a slight drop in profitability.
During 2022, Pakistani banks maintained solid profitability growth due to periodic increases in the policy rate by the State Bank of Pakistan (SBP), which also improved their margins.
Pakistans most profitable banks in 2022
The profits after tax (PAT) of Pakistan’s listed banks increased by 15 percent year on year (YoY) in 2022 according to Topline Securities. In spite of record-high interest rates profit growth slowed primarily due to higher provisions and taxes. In 2022 pre-tax profitability (PBT) increased 42 percent (YoY) while pretax profits before provisioning increased 50 percent YoY.
In US$ terms listed banks’ PAT fell 8 percent YoY to US$ 1.5 billion while PBT increased 13 percent (YoY) to US$ 3.1 billion.
As average policy rates were 13.52 percent in 2022 versus 7.42 percent in 2021 the Net Interest Income (NII) of the sector reached Rs. 1.1 trillion in 2022 versus Rs. 758 billion in 2021.
With the reimposition of Super Tax and additional tax on lower Advance to Deposit ratios banks also faced challenges paying higher taxes to the government.
In 2022, eight of the top 10 profitable banks in Pakistan reported all-time high profits while two banks reported a slight drop in profitability.
The following are the consolidated details:
1. Meezan Bank
The biggest Islamic bank in Pakistan, Meezan Bank, has become the most profitable bank in the country registering many records in 2022, including the highest profit ever recorded in the banking industry.
The company posted a profit of Rs. 45 billion in 2022 a 59 percent increase from the previous year. For the year 2022, the company announced a total cash dividend payout of Rs. 8.50 (85 percent). The financing-to-deposit ratio was 61 percent the highest in the industry.
2. MCB Bank
MCB Bank continued to hold the second spot. In 2022, it became more profitable by 6.6%, reaching Rs. 34.45 billion. Compared to Rs. 26.31 recorded in 2021, earnings per share grew by 29%. A final cash dividend of Rs. 6.0 per share, or 60%, was also declared by the board of directors for 2022, adding to the 140 percent that had already been paid, for a total cash dividend of 200 percent.
3. Habib Bank Limited
Habib Bank Limited lost its dominance in the banking sector in 2022 with a profit of Rs. 34.4 billion. The profitability suffered as a result. A final dividend of Rs. 1.50 per share was declared by the bank bringing the total payout for 2022 to Rs. 6.75 per share.
4. United Bank Limited
United Bank Limited (UBL) achieved an unprecedented profit level of more than Rs. 32 billion in 2022, an increase of 4 percent or Rs. 1.18 billion over the year before. It proposed a final cash dividend of Rs. 9.0 per share for this year added to the Rs. 13.0 already paid brings their total dividend to Rs. 22.0 per share the most generous within the industry though this saw they move from 3rd to 4th place in rankings.
5. National Bank of Pakistan
In 2022, the National Bank of Pakistan (NBP) reported the highest-ever profit of Rs. 30.9 billion, a jump from its previous profit of Rs. 30.5 billion in 2020. The bank’s board did not announce a cash dividend in 2020. The bank’s ranking has dropped from 4th to 5th.
6. Allied Bank Limited
From 8th to 6th in the list of top profitable banks, Allied Bank Limited (ABL) reported an increase in profit of 22 percent from last year with a bottom line of Rs. 21.2 billion, an all-time high.
In addition to the 60 percent dividend already announced in 2022, the board announced a dividend of Rs. 2.5 per share, or 25 percent.
7. Standard Chartered Bank Pakistan
A record all-time high profit of Rs. 19.84 billion was reported by Standard Chartered Bank Pakistan in 2022, 45 percent higher than the previous year. This is the bank’s highest profit ever.
The highest-ever full-year dividend was 40 percent (Rs. 4.00/- per share), which was announced by the board of directors as a final cash dividend of 25 percent (Rs. 2.50/- per share). The bank’s share price went from 3.55 to 5.13. The bank has added two new posts.
8. Bank Alfalah
With profitability reaching Rs. 18.4 billion, the bank announced a final cash dividend of Rs. 2.5 per share (25 percent) in addition to an interim cash dividend of Rs. 2.5 (25 percent).
9. Bank AL Habib
Among the top ten banks in the country, Bank AL Habib saw its profitability decline by 11 percent in 2022 primarily due to provisioning in sovereign bonds.
Against Rs. 18.6 billion reported last year, the bank reported Rs. 16.6 billion in profit in 2022, a decline of Rs. 2 billion. It announced a 70 percent dividend for its shareholders. The bank fell to 9th place from 6th place last year.
10. Habib Metro Bank
With a profit of Rs. 14.9 billion, Habib Metro Bank established its position among the top 10 profitable banks in Pakistan in 2022 and increase of 8 percent from last year. The bank had close competition with Askari Bank which posted a profit of Rs. 14 billion.
It was revealed that the final cash dividend would be Rs. 3.25 per share or 32.5 percent in addition to the interim dividend of Rs. 2.00 per share or 20% that had previously been paid. This makes a total of Rs. 5.25 per share or 52.5 percent.
Banks competing with each other
There is intense competition among mid-sized banks such as Habib Metro Bank, Askari Bank Limited, Bank of Punjab, and Faysal Bank.
Although though Askari Bank recovered in 2022, it narrowly missed making it into the top 10 most profitable banks. In 2022 it reported a 14 billion rupee profit. Bank of Punjab had a profit of Rs. 10.6 billion, while Faysal Bank Ltd reported a profit of Rs. 11.4 billion.
In 2022, BankIslami and Meezan Bank reported the highest earnings growth of 128% and 59%, respectively. However, Summit Bank Ltd (SMBL) and Samba Bank Ltd (SBL) reported losses of Rs. 3.2 billion and Rs. 428 million respectively, while Soneri Bank (SNBL) and Bank of Punjab (BOP) reported earnings declines of 34% and 14%, respectively.
In the future
A rise in policy rates by the central bank is expected to boost profitability for banks in 2023. In addition, banks can earn money by investing in government bonds and by gaining in currency exchange. Advance deposit ratios may also be used by banks to avoid extra taxes.
Despite the rising inflation, banks are expected to expand their network and business in 2023, potentially creating more jobs. But they will have to contend with high operating costs, mainly in logistics and utilities.