Pakistan Banking Perspective 2025

Sector snapshot
KPMG’s Pakistan Banking Perspective 2025 analyses the performance and strategic trends of Pakistan’s banking sector. The report covers financial results of leading banks, the impact of IFRS-9, growth in Islamic banking, digital transformation, asset quality, profitability pressures, and regulatory developments. The sector faces a mixture of resilience and structural challenges.

Performance & asset quality
Banks reported asset and deposit growth, though profitability compressed in places due to elevated provisioning requirements under IFRS-9, interest rate dynamics, and legacy non-performing loans in some segments. KPMG stresses that provisioning and risk management remain focal areas — banks need rigorous credit risk frameworks and forward-looking models to manage IFRS transition effects and cyclical stress.

Digital & Islamic banking
Digital banking and fintech adoption expanded rapidly, reshaping customer channels and transaction volumes. Islamic banking growth continues to outpace conventional segments, driven by product innovation and changing customer preferences. KPMG identifies both opportunity and compliance implications (Shariah governance for Islamic products and cyber/security/regulatory controls for digital channels).

Regulatory environment
The State Bank of Pakistan’s supervisory agenda emphasises financial stability, governance, and cyber resilience. KPMG notes regulatory focus on liquidity, capital adequacy, and stress testing in a changing macro backdrop. Banks also face operational demands around AML/KYC and data protection as digitisation scales up.

Strategic recommendations
KPMG suggests banks invest in analytics and credit-risk modelling, accelerate digital transformation with robust controls, and diversify revenue streams (fee income, digital products). For policymakers, supporting the banking sector’s role in financial intermediation requires careful balancing of stability and growth objectives.

References
KPMG Pakistan. Pakistan Banking Perspective 2025. State Bank of Pakistan, Financial Stability Review 2025.

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