The State Bank of Pakistan (SBP) has released its half-yearly performance review for the banking sector, covering the period from January to June 2024.

The report highlights several key trends and challenges that shaped the banking industry's performance during the first half of the year.

According to the SBP, the banking sector's balance sheet saw a notable expansion of 11.5% during this period.

The increase in government borrowing from banks and a slight dip in loan recoveries from the private sector contributed to this growth. Bank deposits also rose by 11.7%, with a significant share coming from savings and current accounts.

However, the review also pointed out that non-performing loans (NPLs) increased during the six-month period, signaling a potential risk to financial stability.

Despite this, banks managed to maintain profitability due to gains in non-interest income, such as fees and trading profits on government securities, even as shrinking net interest margins negatively impacted their core earnings.

The SBP's report highlights that the gradual recovery in economic conditions is expected to ease pressure on financial markets in the coming months. However, it also identifies major concerns that could affect the banking sector going forward.

These include the ongoing energy crisis, fluctuations in commodity prices, and instability in the exchange rate, which experts believe could pose significant challenges in the second half of the year.