Bank of Punjab Weighs Share Buyback as Profits Hit Record High

September 18, 2025 (MLN):

The Bank of Punjab (PSX: BOP) has indicated that it may consider a share buyback if its stock continues to trade below intrinsic value, though management’s current preference remains rewarding investors through dividends. A combination of dividends and repurchases could also be explored in the future.

This update came during BOP’s corporate briefing session for 1HCY25, where the bank posted profit after tax (PAT) of Rs6.8 billion (EPS: Rs2.1), up from Rs4.8 billion (EPS: Rs1.5) in the same period last year — the highest half-yearly operating profit in its history.

For 2QCY25 alone, earnings reached Rs4.8 billion (EPS: Rs1.45), marking a 55% YoY and 175% QoQ increase. Alongside results, the bank announced an interim cash dividend of Rs1 per share, its first since listing in 1991, enabled by recent regulatory approvals.

Outlook and Strategy

Management projects sustained net interest income (NII) growth in 2HCY25, supported by deposit mix improvements, asset repricing, and a focus on asset quality. They expect interest rates to be nearing a bottom, projecting a maximum further cut of around 125bps by 1QCY26, with 100–150bps easing likely in the near term.

The bank also reaffirmed its strong commitment to Islamic banking, confirming that its comprehensive conversion plan has been submitted to the Punjab government, with a goal to complete the transition well before the December 2027 deadline.

At current levels, BOP’s stock is trading at forward P/B multiples of 0.6x for CY25E and CY26F, which management believes highlights a compelling long-term value proposition.

Financial Performance

• NII: Rs35.8bn in 1HCY25, driven mainly by term deposit repricing and robust low-cost deposit growth.
• Growth Drivers: 25% from MDR removal on public deposits; 75% from improved current account balances, innovative deposit products, and stronger trade & cash management.
• Deposits: Up 23% YoY to Rs1.95tr by June 2025, expected to exceed Rs2tr by year-end, targeting Rs2.5tr within three years.
• Deposit Mix: Current account share at 24%, above the 22% target; average low-cost deposits up 40%.
• Advances: Rs777bn in June 2025, with ~33% in SME and agriculture, 77% of which are under first-loss guarantee schemes.
• Asset Quality: 93.5% of loans insured, only 6.5% unsecured; just 0.4% flagged for potential provisioning.

Investment Portfolio

BOP’s portfolio is balanced with:

• 53–54% floating-rate PIBs (avg. maturity 2.5 years),
• 17–18% fixed-rate PIBs (avg. maturity 2.7 years),
• 23–24% in T-Bills.

Floating PIBs are earning a spread of ~80bps, while the overall investment book yields close to 12%.