Pakistan’s banking sector saw minor changes in February 2026, with a small rise in deposit returns and a sharper decline in lending rates. These trends have directly affected banking profits, narrowing margins across the sector.
According to the State Bank of Pakistan (SBP), the weighted average return on deposits increased slightly by 7 basis points to 5.04 percent, up from 4.97 percent in January. Despite this increase, deposit returns remain lower compared to February 2025, when they stood at 5.46 percent.
Meanwhile, weighted average lending rates across scheduled banks dropped to 11.02 percent, falling 37 basis points from the previous month and 139 basis points lower than the same period in 2025. The wider gap between rising deposits and declining lending rates caused the banking spread to shrink to 5.98 percent, compared to 6.41 percent in January 2026. This narrowing of the spread has put pressure on banking profits.
In inflation-adjusted terms, lending rates eased to 8.12 percent, reflecting softer price pressures. Real deposit returns fell to 1.94 percent from 2.14 percent, showing that savers still earn limited returns despite the nominal rise.
In simple terms, banks are paying slightly more to savers while charging significantly less to borrowers, which reduces profit margins. Analysts say that lower lending rates and higher deposit payouts are directly affecting banking profits, making it harder for banks to earn from traditional interest income.
Economists suggest that this trend reflects the central bank’s efforts to encourage borrowing and investment. However, it also highlights the challenges faced by banks in balancing competitive deposit rates with profitability.
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Overall, February 2026 shows a banking environment where borrowing costs are easing, but depositors continue to earn modes
