SBP earnings decline as interest rates fall

KARACHI: The State Bank of Pakistan (SBP) reported a net profit of Rs2.5 trillion for the fiscal year that ended on June 30, down from Rs3.4 trillion a year earlier, due to lower earnings from government debt amid declining interest rates.

The central bank released its financial statements for the fiscal year 2025 along with the auditors’ report on Thursday. “During the year, the SBP earned the net profit of Rs2.5 trillion and after accounting for appropriation as required under the accounting framework and statutory requirements, the surplus profit of Rs2.428 billion has been remitted to the federal government,” the SBP said in a statement.

Analysts said that the SBP’s FY25 profit, which is lower than the exceptional Rs3.4 trillion windfall in FY24, was mainly driven by high interest rates and increased earnings from government securities.

“The moderation in FY25 highlights the beginning of normalisation as monetary conditions ease, suggesting that such extraordinary profits are not a structural revenue source for the government,” said Saad Hanif, head of research at Ismail Iqbal Securities.

“While this provides near-term fiscal support, sustainable improvement will ultimately depend on expanding the tax base and strengthening fiscal discipline,” Hanif added.The SBP raised interest rates to 22 per cent in June 2023 to curb inflation. However, it has reduced its benchmark interest rate from 22 per cent to 11 per cent since June 2024.

“SBP profits declined due to lower markup earned on securities purchased under agreement to resell and return on government securities as policy rate dropped to an average of 14.6 per cent in FY25 from 21.6 per cent in FY24,” said Awais Ashraf, director of research at AKD Securities Limited.

He also said that the increase in payout to the government also contributed to the decline in the SBP’s profit during FY25. The dividend payout to the federal government surges by 2.8x YoY to Rs2.7 trillion during FY25 compared to Rs972 million in FY24. Exchange losses of Rs54 billion, as compared to exchange gains of Rs186 billion, also drag central bank profitability, Ashraf said.

“During the year, the bank has recognised an appreciation of Rs591,221.68 million (2024: Rs211,883.56 million) based on the closing market rate of $3,287.45 (2024: $2,330.9) per troy ounce of the fine gold content fixed by the London Bullion Market Association. However, this gain is not reflected in the profit and loss account,” he added.