Brokers see modest EPS boost for banks on SBP's removal of MDR floor above Rs10m

July 07, 2026 (MLN): The State Bank of Pakistan (SBP) has removed the Minimum Deposit Rate (MDR) floor on high-value savings deposits, prompting Pakistan's leading brokerages to issue same-day research notes on July 7, 2026, assessing the earnings impact on listed banks.

The revised rule, effective August 1, 2026, exempts individual savings accounts with average monthly balances above Rs10mn from the minimum-rate floor, alongside Trusts and private limited businesses, while retaining the floor for smaller retail savers.

All four brokerages linked the timing of the move to the government's discontinuation of the Telegraphic Transfer Charges Incentive Scheme (TTCIS), the remittance rebate that had subsidised banks' cost of acquiring foreign remittances.

With that subsidy gone, brokers said the MDR relaxation gives banks room to reprice large-value deposits and partially offset the higher remittance-acquisition cost now sitting on their own books.

Topline Securities noted that the central bank had already removed the MDR requirement for financial institutions, public sector enterprises and public limited companies back in November 2024, while private limited companies, Trusts and individuals continued to receive MDR of policy rate minus 1.5%.

The July 7 circular extends that exemption to Trusts and private limited businesses regardless of deposit size, and to individual deposits exceeding Rs10mn.

AKD Securities linked the change directly to the formal launch of the INVESTPAK portal, which the brokerage said enables both retail and corporate investors to directly invest in government securities, and framed the MDR relaxation as complementary to that channel.

JS Global's Muhammad Waqas Ghani similarly flagged that customers now have direct, low-friction access to government securities via InvestPak, which could prompt deposit outflows rather than pure margin gains if banks cut rates too aggressively.

JS Global's Muhammad Waqas Ghani estimated the potential EPS impact for ten banks from a 100bp adjustment in the yield paid on customer savings deposits, using the last four quarters' average savings deposit base.

In the absence of a depositor-wise breakdown, the brokerage approximated individual savings deposits by applying the ratio of individual-to-total deposits to each bank's reported savings deposit base.

On that basis, BAHL showed the largest proportional impact at 9% of annual EPS (Rs2.8/share), followed by HBL at 6% (Rs3.0/share), with AKBL, ABL and MCB each at 5%. BOP, NBP, UBL and BAFL showed smaller impacts of 2–4%.

Ghani cautioned that only the portion of individual deposits with monthly average balances above Rs10mn is exempt from the minimum-rate floor, meaning the true repriceable base is likely smaller than shown, and noted the circular's wording implies it is also applicable to Islamic banks.

Arif Habib Limited's research desk built its estimate around a sensitivity analysis assuming 30% of individual savings deposits qualify for the Rs10mn exemption and that exempt accounts are repriced 75bps below the policy rate.

On that base case, AHL estimated a limited annual EPS impact of approximately 1.0–1.5% for banks under coverage.

The brokerage said it does not expect any material liquidity impact, since high-value deposits are likely to either remain with banks at negotiated rates or be redirected into government securities via InvestPak, keeping funds within the banking channel.

AHL's overall conclusion was a neutral to slightly positive impact on banks, supported by manageable earnings implications and limited risk of deposit outflows.

Topline Securities' Asad Ali and Shankar Talreja sized the opportunity at the industry level. Using Dec-2025 SBP data, they estimated private business deposits (pvt limited and public limited) at Rs7.1tn, Trust deposits at Rs814bn, and individual deposits above Rs10mn at roughly Rs5tn of a Rs17tn individual deposit base.

Applying an industry savings-deposit ratio of 43%, Topline calculated that Rs3.5–4.5tn of deposits would become eligible for non-MDR pricing.

Assuming banks capture 50–100bps of savings on that pool, which the analysts flagged as "practically difficult" to fully achieve, Topline estimated the industry could earn up to Rs20-45bn in extra gross income, which it said could potentially offset the roughly Rs70bn remittance cost banks are now absorbing after the TTCIS discontinuation.

The brokerage named HBL, UBL, MEBL, BAHL and MCB as the banks best placed to benefit, citing their prestige/premium banking franchises and higher retail and savings deposit mix.

It also flagged that deposits above Rs10mn had actually declined 3% between June and December 2025 versus 6% industry deposit growth, a trend it attributed to the government's decision to bring interest income above Rs50mn into the normal tax regime, with the money reportedly flowing into mutual funds instead.

AKD Securities estimated net potential cost-of-deposit savings of approximately 61bps on individual deposits, versus a lower ~20bps on private sector deposits given their comparatively stronger negotiating power.

AKD noted that individual accounts with balances exceeding Rs10mn make up around 31% of total individual deposits industry-wide.

The brokerage maintains an overweight stance on banking sector, arguing the industry stands to benefit from moderating inflation, expected monetary easing, rising deposit inflows and continued formalisation of the economy.

AKD's top picks are UBL, MEBL and HBL, carrying December-2026 target prices of PkR590, PkR672 and PkR483 per share, respectively.

On EPS impact, AKD's estimates ranged from 3.0% of CY26 earnings for BAHL and 2.5% for MEBL down to roughly 1.0–1.7% for UBL, ABL, BAFL and MCB, with NBP, BOP and SCBPL not under its coverage.

Because each brokerage used different assumptions- JS Global's flat 100bp shock, AHL's 30%-exemption/75bps scenario, Topline's 50bps combined estimate, and AKD's bank-specific ~61bps/20bps split- the absolute rupee and percentage figures below are not directly comparable across houses, but the directional read is consistent: HBL, BAHL, MCB and MEBL screen among the larger beneficiaries, while BOP, NBP and smaller-deposit-franchise banks show the least sensitivity.

*MEBL and HMB figures are not directly comparable across brokerages, as JS Global's table covers HMB while AHL, Topline and AKD cover MEBL. Sources: JS Global (100bp shock, % of annual EPS), AHL (Rs/share at 30% exemption), Topline (combined per-share impact at 50bps), AKD (Rs/share and % of CY26E earnings). N.C = Not Covered.

*% of individuals' savings deposits exempted from the MDR regime. Source: Company Accounts, AHL Research.

Source: SBP, Topline Research.

N.C = Not under coverage. Source: PSX, SBP, AKD Research.

Copyright Mettis Link News