⚡ Flash Summary

BankIslami Pakistan Limited’s quarterly report for the period ended September 30, 2025, reveals a mixed financial performance. The bank achieved deposit growth of 8.29% since December 2024 and 9.7% since September 2024, signaling strong customer confidence. However, profitability suffered a setback due to a sharp reduction in policy rates, leading to a contraction in net spread earned by -22.27%. The bank maintains a comfortable CAR (Capital Adequacy Ratio), although it declined to 17.78% from 24.11% in December 2024, and a resilient CASA ratio exceeding 60%.

📌 Key Takeaways

• ✅ Deposit growth is positive, with an 8.29% increase since December 2024.
• 📈 Overall deposits portfolio reached PKR 605.5 billion.
• 💧 Current deposits increased by 20.9% since December 2024, indicating strong transactional activity.
• 💰 Savings deposits also saw a positive growth of 2.3% since December 2024.
• 📉 Term deposits consistently declined, shifting towards a more liquid deposit mix.
• 📊 CASA ratio improved to 68.6%, showing improved customer confidence.
• 🔻 Gross financing portfolio declined by 11.3% since December 2024 due to cautious lending.
• ⚠️ Advances-to-Deposit Ratio (ADR) reduced to 47.9% from 58.5% in December 2024.
• 🚧 Delinquent financing portfolio decreased by 8.7%, but the infection ratio increased to 7.6%.
• 🛡️ Coverage ratio strengthened to 111.9% from 105% at year-end 2024.
• ⬆️ Investment portfolio increased by 2.45% since December 2024.
• 📉 Capital Adequacy Ratio (CAR) decreased to 17.78% from 24.11% in December 2024.
• 📉 Operating profit before credit loss allowance decreased by 51.72% to PKR 10.148 billion.
• 📉 Profit after taxation decreased by 50.09% to PKR 5.077 billion.
• ⭐ Non-Funded Income (NFI) increased by 106.9%, offsetting core financing income challenges.

🎯 Investment Thesis

Given the challenging financial performance highlighted by decreased profitability and a declining CAR alongside deposit growth, my recommendation is HOLD. While BankIslami maintains a strong customer confidence and has made strategic investments, the headwinds from decreased policy rates and operational costs cannot be ignored. It’s difficult to issue a BUY rating without more clarity on how the bank expects to recover profitability. Given the uncertain environment, I prefer to revisit the recommendation after observing trends over the next 2-3 quarters. My price target is PKR 10, with a time horizon of 12 months.