Islamabad: Pakistan’s banking sector has shown signs of partial recovery in the second quarter of 2024, with core income experiencing a slight uptick following a previous quarter’s halt in growth. Non-interest income also grew, and lower provisioning expenses contributed to a reduction in credit costs to a level not seen in the past nine quarters. Despite these gains, the sector’s overall bottom line declined by 14%, marking the most significant contraction since the second quarter of 2022.

According to JS Global, the sector’s core income rebounded in the second quarter of 2024 after the growth streak of 12 consecutive quarters was interrupted in the first quarter. The analysis includes key profitability and balance sheet indicators and ratios from a sample of 12 banks, which represent 84% of the sector’s market capitalization. The report released today highlighted several banks’ strategic adjustments, including increased leverage to invest in higher-yielding assets in anticipation of a more pronounced monetary easing cycle.

Despite these strategic shifts, the sector’s bottom line still faced a downturn, primarily due to factors that had previously affected profitability two years ago, including significant budgetary adjustments. The current adjustments in banking strategies and balance sheet management underscore the sector’s adaptive measures in response to evolving economic conditions.