BankIslami Pakistan Limited is looking beyond a challenging 2025 with a forward-looking strategy anchored in low-cost deposit growth and sectoral financing diversification. The bank is making a bold push into digital banking as the country’s Islamic banking sector navigates a sharply lower interest rate environment.
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Speaking at the bank’s corporate briefing on Monday, management outlined an ambitious roadmap for the years ahead, expressing confidence that structural improvements made during 2025—despite the hit to profitability—have laid the groundwork for more sustainable earnings going forward.
Deposit Growth Strategy
Deposit mobilisation remains the centrepiece of BankIslami’s growth strategy. Having grown deposits by 18% in 2025 to Rs660 billion—a pace the bank has sustained as a five-year CAGR—management is targeting the same trajectory in CY26. The emphasis will remain squarely on current and savings accounts (CASA), with the bank aiming to hold its CASA mix steady at 70-71% and keep current accounts at roughly 43-44% of total deposits. With current account composition having nearly doubled from 33% in 2020 to 43.6% by December 2025, management appears confident the structural shift in its deposit profile is durable.
| Metric | 2025 | Target |
|---|---|---|
| Total Deposits | Rs660bn | Sustained 18% growth |
| CASA Mix | 70-71% | Maintain |
| Current Account Share | 43.6% | 43-44% |
Sectoral Financing Diversification
On the asset side, the bank is pivoting away from corporate-heavy concentration toward higher-yielding, priority sectors. SME financing surged 122% in 2025, and agri financing grew 32%, with both expected to remain primary growth drivers. Housing financing, which grew only modestly at 2% last year, is also earmarked for a greater push, as the bank sees long-term demand potential in Pakistan’s underpenetrated mortgage market. Auto financing, which slipped 7% due to subdued market conditions, is not a near-term focus.
| Sector | 2025 Growth | Outlook |
|---|---|---|
| SME Financing | +122% | Primary growth driver |
| Agri Financing | +32% | Primary growth driver |
| Housing Financing | +2% | Greater push planned |
| Auto Financing | -7% | Not a near-term focus |
Interest Rate Environment
With the average six-month KIBOR having fallen sharply to 11.40% in 2025 from 18.58% the prior year, the bank’s net spread came under significant pressure. However, management noted that each 100-basis point increase in interest rates could lift net spread by Rs2.0–2.5 billion—a meaningful upside lever should the rate cycle turn. Importantly, only around 4.5% of the sukuk portfolio carries fixed rates, limiting revaluation risk in a rising rate scenario and keeping the portfolio broadly aligned with market movements.
Investment in Growth
The bank’s cost-to-income ratio ballooned to 70% in 2025 from 45% in 2024—a reflection of aggressive investment rather than operational inefficiency, management argued. Over 1,100 new employees were added, 97 branches opened over two years, and significant capital was deployed toward technology and digital infrastructure. A new sea-front headquarters, expected to be completed within three years, will add to near-term costs. Nevertheless, management has set a target of bringing the cost-to-income ratio back toward 50% over the next couple of years, with expense growth expected to normalise as the current investment cycle matures.
| Investment Area | Scale |
|---|---|
| New Employees (2 years) | 1,100+ |
| New Branches (2 years) | 97 |
| Cost-to-Income (2025) | 70% |
| Cost-to-Income Target | ~50% (next 2 years) |
Digital Banking Ambition
Perhaps the most forward-looking element of BankIslami’s strategy is its digital ambition. The bank is positioning itself as Pakistan’s first Islamic digital bank, having already launched the ‘aik’ Digital App, biometric ATMs, and One Touch banking. Digital transformation is described as a key strategic priority, with further investments planned in technology and customer experience. Management views this as both a cost-efficiency play over the long term and a customer acquisition tool—particularly among younger, digitally native demographics.
Branch Expansion
Branch expansion will continue, but at a measured pace. The focus will be on underserved areas and converting conventional branches to fully Islamic operations. Currently, more than half of the bank’s network operates as fully Islamic branches—a share management intends to grow.
Capital Adequacy and Asset Quality
Despite the capital adequacy ratio declining to 16.55% from 24.11%—largely due to the settlement of a long-term SBP facility rather than deteriorating asset quality—the bank remains well-capitalised against the regulatory minimum of 11.50%. The infection ratio improved to 5.34% on the Islamic portfolio, and the coverage ratio, including Stage 1 and 2 provisions, rose to 114%, providing a comfortable buffer against potential credit stress.
| Metric | 2025 | Regulatory Requirement |
|---|---|---|
| Capital Adequacy Ratio | 16.55% | 11.50% |
| Infection Ratio (Islamic) | 5.34% | – |
| Coverage Ratio | 114% | – |
Outlook
BankIslami enters 2026 leaner in earnings but stronger in structure. Its non-funded income more than doubled last year, its deposit franchise deepened, and its asset quality improved—all achieved against one of the steepest rate decline cycles in recent memory. Whether management can execute on its cost-to-income targets while sustaining deposit and financing growth will be the defining test for the bank’s medium-term earnings recovery.
About BankIslami Pakistan Limited
BankIslami Pakistan Limited is one of Pakistan’s leading Islamic banks, offering a comprehensive range of Shariah-compliant banking products and services to retail, corporate, and institutional clients across the country.
