KARACHI: The State Bank of Pakistan (SBP) has reported an 11 per cent growth in the banking sector’s assets during the first half of the calendar year 2025 (H1CY25), largely driven by increased investments in government bonds.

The SBP issued its Mid-Year Performance Review on Wednesday, highlighting the performance and soundness of the banking sector for the period from January to June 2025.

The review indicated that investments in government securities were the primary contributors to this asset growth, reflecting the government’s ongoing reliance on the banking sector for funding. In addition to this, domestic debt, which is predominantly composed of bank lending, grew by Rs7.13 trillion during the financial year 2025, pushing the total debt to 70.2pc of the GDP, creating additional strain on the economy.

Despite these concerns, the SBP noted that advances showed contraction across both public and private sectors. Fixed investment advances to small and medium-sized enterprises (SMEs) continued to increase, while deposits grew at an impressive 17.7pc, reducing banks’ dependence on borrowings.

The review also highlighted that the credit risk of the banking sector remained contained, with non-performing loans (NPLs) declining. However, due to a contraction in advances, the gross NPL-to-loans ratio increased marginally to 7.4pc by June 2025. Despite this, the sector maintained a solid net NPL-to-net loans ratio of -0.5pc, reflecting lower risk on a net basis due to the banks holding higher provisions for loan losses.

Earnings in the sector remained stable, with banks benefiting from higher volumes of earning assets. As a result, the Return on Assets (ROA) remained steady at 1.3pc, while the Return on Equity stood at 21.3pc, nearly unchanged from December 2024.

The banking sector’s Capital Adequacy Ratio improved to 21.4pc, from 20.6pc in December 2024.

Published in Dawn, September 11th, 2025