Bank of Khyber earnings slide 37% in Q1

April 27, 2026 (MLN): The Bank of Khyber (PSX: BOK) reported a significant 36.65% decline in its profit after taxation for the first quarter ended March 31, 2026, falling to Rs1.02bn from Rs1.60bn recorded in the same period last year.

The decline came as the bank grappled with mounting pressure on both its core lending margins and non-funded income streams.

The bank encountered considerable headwinds across funded and non-funded operations alike, reflecting the broader impact of a declining interest rate environment on Pakistan's banking sector.

On the funded side, mark-up/return/interest earned dropped by 15.75% year-on-year to Rs11.37bn.

While the cost of funds mark-up/return/interest expensed also declined, albeit at a slower pace of 14.88% to Rs7.15bn, the net mark-up/interest income still contracted sharply by 17.18%, settling at Rs4.23bn compared to Rs5.11bn in the prior-year period.

The most severe blow to the bank's profitability, however, came from its non-funded income.

Total non-mark-up/interest income plummeted by 48.08% to Rs467.26m from Rs899.91m last year.

This collapse was primarily driven by a staggering 87.28% crash in gain on securities, which evaporated from Rs520.72m in Q1 2025 to a mere Rs66.23m this quarter.

Compounding the damage, the bank swung to a net loss of Rs29.69m on derecognition of financial assets, reversing a gain of Rs50.97m recorded in the corresponding period.

The share of profit from its associate also edged down 6.17% year-on-year.

These losses were partially offset by a 33.35% surge in fee and commission income, which climbed to Rs304.17m, alongside a 26.90% rise in foreign exchange income to Rs91.83m, and a 28.83% increase in other income to Rs31.93m.

Dragged down by the steep drop in non-core gains and shrinking core margins, total income contracted by 21.81% to Rs4.70bn from Rs6.01bn in Q1 2025.

Operational overheads compounded the pressure, rising amid an inflationary environment.

Operating expenses climbed 8.11% to Rs2.94bn, pushing total non-mark-up/interest expenses up by the same magnitude to Rs2.94bn.

Crushed between falling revenues and rising costs, the profit before credit loss allowance nosedived by 46.58% to Rs1.75bn.

A silver lining emerged from credit provisioning, where a reversal of credit loss allowance and write-offs net widened to Rs357.13m from Rs117.99m in the prior year, providing a meaningful cushion to the bottom line.

Profit before taxation nonetheless registered a steep 37.94% decline, settling at Rs2.11bn.

After accounting for a proportionally lower taxation charge of Rs1.10bn down 39.09% year-on-year the bank closed the quarter with a net profit after taxation of Rs1.02bn.

Basic and diluted earnings per share fell to Rs0.88 from Rs1.38, a year-on-year erosion of 36.23%.

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