Banks In Pakistan Face Rs 600 Billion Hit As Yields Surge 150 Bps: Report

(MENAFN- IANS) New Delhi, April 13 (IANS) Pakistan's banking sector is staring at a sharp balance sheet hit as a surge in bond yields is expected to wipe out over Rs 600 billion in revaluation reserves within a single quarter, a new report has said.

A report in The Express Tribune said a rapid shift in the fixed-income market has eroded the cushion banks had built in recent quarters, effectively resetting the sector's balance sheet strength.

Moreover, secondary market yields rose by around 150 basis points between December 2025 and March 2026, triggering a sharp fall in the value of government securities held by banks and resulting in large mark-to-market losses, it said.

The report also estimated gross revaluation losses at about Rs 685 billion (Pakistani rupee).

After adjusting for existing reserves, the net impact translates into a deficit of nearly Rs 95 billion across major banks.

Among lenders, Pakistan's United Bank Limited (UBL) is expected to be the most impacted, with an estimated post-tax hit of Rs 117 billion to its book value.

Meanwhile, Habib Bank Limited (HBL) and National Bank of Pakistan (NBP) could see losses of around Rs 54 billion and Rs 45 billion, respectively.

The report warned that risks to the sector have 'increased materially' in the current rising yield environment, with any further increase in interest rates potentially eroding Common Equity Tier-1 (CET-1) capital ratios and forcing banks to adopt more conservative capital and dividend policies.

The pressure stems largely from mark-to-market adjustments on banks' sizable holdings of government debt.

The yield spike has also been driven by increased reliance on short-term liquidity support, with the State Bank of Pakistan's open market operations now financing around 24 per cent of domestic debt.

In addition, over 50 per cent of the country's public debt is now linked to floating-rate instruments, increasing the transmission of interest rate volatility to bank earnings and capital, according to the report.

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