The Bank of Khyber (PSX: BOK) reported a steep 36.65% decline in its profit after taxation for the first quarter ended March 31, 2026, falling to Rs1.02 billion from Rs1.60 billion recorded in the same period last year. Basic and diluted earnings per share eroded to Rs0.88 from Rs1.38 a year ago.
The bank encountered considerable headwinds across both its funded and non-funded operations, reflecting the broader impact of a declining interest rate environment on Pakistan’s banking sector.
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Profit After Taxation | Rs1.02bn | Rs1.60bn | -36.65% |
| Earnings Per Share (EPS) | Rs0.88 | Rs1.38 | -36.23% |
| Net Mark-up/Interest Income | Rs4.23bn | Rs5.11bn | -17.18% |
| Total Non-Mark-up Income | Rs467.26m | Rs899.91m | -48.08% |
| Total Income | Rs4.70bn | Rs6.01bn | -21.81% |
| Operating Expenses | Rs2.94bn | Rs2.72bn | +8.11% |
| Reversal of Credit Loss Allowance | Rs357.13m | Rs117.99m | +202.68% |
Margins Under Pressure
On the funded side, mark-up/return/interest earned dropped by 15.75% year-on-year to Rs11.37 billion. While the cost of funds also declined, albeit at a slower pace of 14.88% to Rs7.15 billion, the net mark-up/interest income still contracted sharply by 17.18% , settling at Rs4.23 billion compared to Rs5.11 billion in the prior-year period.
| Income/Expense Category | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Mark-up/Interest Earned | Rs11.37bn | Rs13.50bn | -15.75% |
| Mark-up/Interest Expensed | Rs7.15bn | Rs8.39bn | -14.88% |
| Net Mark-up/Interest Income | Rs4.23bn | Rs5.11bn | -17.18% |
Non-Funded Income Collapses
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 Rs467.26 million from Rs899.91 million last year. This collapse was primarily driven by a staggering 87.28% crash in gain on securities, which evaporated from Rs520.72 million in Q1 2025 to a mere Rs66.23 million this quarter. Compounding the damage, the bank swung to a net loss of Rs29.69 million on derecognition of financial assets, reversing a gain of Rs50.97 million recorded in the corresponding period.
| Non-Markup Income Component | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Fee & Commission Income | Rs304.17m | Rs228.10m | +33.35% |
| Foreign Exchange Income | Rs91.83m | Rs72.37m | +26.90% |
| Gain on Securities | Rs66.23m | Rs520.72m | -87.28% |
| Derecognition of Assets (Net) | (Rs29.69m) | Rs50.97m | — |
| Other Income | Rs31.93m | Rs24.78m | +28.83% |
These losses were partially offset by a 33.35% surge in fee and commission income, which climbed to Rs304.17 million, alongside a 26.90% rise in foreign exchange income to Rs91.83 million.
Expenses and Provisioning
Dragged down by the steep drop in non-core gains and shrinking core margins, total income contracted by 21.81% to Rs4.70 billion from Rs6.01 billion in Q1 2025. Operational overheads compounded the pressure, rising amid an inflationary environment as operating expenses climbed 8.11% to Rs2.94 billion.
Crushed between falling revenues and rising costs, profit before credit loss allowance nosedived by 46.58% to Rs1.75 billion. However, a silver lining emerged from credit provisioning, where a reversal of credit loss allowance and write-offs net widened to Rs357.13 million from Rs117.99 million in the prior year, providing a meaningful cushion to the bottom line.
Bottom Line
Profit before taxation nonetheless registered a steep 37.94% decline, settling at Rs2.11 billion. After accounting for a proportionally lower taxation charge of Rs1.10 billion (down 39.09% year-on-year), the bank closed the quarter with a net profit after taxation of Rs1.02 billion.
About The Bank of Khyber
The Bank of Khyber (PSX: BOK) is a provincial government-owned bank headquartered in Peshawar, operating across Pakistan with a growing network of branches. The bank offers a comprehensive range of Islamic and conventional banking products and services to retail, corporate, and institutional clients.
