KARACHI: The State Bank of Pakistan (SBP) on Monday said the banking sector’s balance sheet expanded by 9.1 per cent in the first half of calendar year 2026, primarily driven by investments in government securities.
The Mid-Year Performance Review issued on Monday suggests that the banking sector’s credit risk posed no serious concerns for financial stability during H1CY26.
‘The latest macro stress tests indicate that the banking sector in general and large systemically important banks in particular are expected to remain solvent, exhibit resilience and can withstand even severe shocks over the projected horizon of two years,’ said the SBP review.
It said the banking sector’s performance and resilience remained intact during H1CY26.
The review assesses the performance and soundness of the banking sector for January-June 2026. It also briefly discussedfinancial market performance and the results of the Systemic Risk Survey (SRS). The latter reflects independent experts’ views on key current and potential future risks to financial stability.
The review said bank advances also increased across public and private segments.
‘Encouragingly, longterm financing to SMEs kept trending upward during H1CY26,’ said the SBP review. In addition, mortgage loans gained further traction largely due to the government’s subsidised scheme.
‘On funding side, banks mobilised additional deposits of Rs3,673 billion during the reviewed period,’ noted the mid-year review.
This was due to a significant reduction in nonperforming loans (NPLs) andanincreaseinadvances. The NPL ratio fell to 5.5 per cent in June (6.1pc in December 2025).
Provisioning coverage ratio further improved to 110.2pc in June from 107.7pc in December 2025, the report said. It added the relative increase in the sector’s earnings was, however, moderate. Consequently, return-on-asset and return-on-equity softened to 1.1pc and 19pc, respectively, in June.